The Democrats regained control over the House of Representatives on Nov. 6, having obtained a 218-seat majority. Government gridlock is officially back, and future economic growth projections are looking brighter.
Normally, when the president and both houses of Congress are controlled by the same party, they tend to screw things up. A split Congress means that the government can’t make unilateral decisions that invariably hinder economic growth.
For a Republican president, the market historically does best when Congress is divided. The S&P 500 averages a 12 percent annual return, and considering this stock market index is comprised of 500 large cap companies, it’s generally accepted as a good indicator of economic health.
Consider further that when congressional Republicans forced a government shutdown during the Obama administration, concessions were eventually made and our economy continued its recovery.
Now, House Democrats get to turn the tables to keep the Republican executive in check. House Democrats will take a page from the Republican playbook by using obstruction as their primary political strategy.
Preventing a trade war will be the natural result of a Democrat party that has taken enough abuse over the past decade. From a government shutdown to former President Barack Obama’s failed Supreme Court nominee Merrick Garland, Democrats haven’t forgotten Republican obstruction. It’s time the Democrats pull back on the reins and grind this government to a halt.
While the Tax Cuts and Jobs Act provided a stimulus to the markets, tariffs threaten to undermine the economic benefits of the TCJA. Tariffs are a controllable market risk, unlike the Federal Reserve raising interest rates, Italy defaulting on its ballooning debt or North Korea nuking its southern neighbor for instance. Tariffs are an unforced error.
House Democrats will hopefully steer this nation clear of those self-inflicted wounds under the assumption that the likelihood of those tariffs being enacted has significantly decreased.
Both investors and businesses were concerned that our “Tweeter in Chief” would tariff this country’s economy into a recession. Thankfully, however, President Donald Trump’s campaign promise to levy taxes on our trade neighbors to the north and south was merely smoke and mirrors.
“President Wheel-n-Deal” put his deal-making expertise into action, and the North American Free Trade Agreement was renamed the United States-Mexico-Canada Agreement — confirming his “America first” policy in name only.
To his credit, the USMCA also updated the free trade agreement between the U.S., Canada and Mexico to include intellectual property protections for American businesses, which warranted a collective sigh of relief.
While Mexico and Canada conceded to intellectual property protections, China is holding out. The president’s trade war with China, our biggest trade partner, has devolved into a prolonged quagmire, and investors are uneasy.
For context, this soured relationship between the two biggest economies all started when Trump pulled out of the Trans-Pacific Partnership in 2017. The withdrawal signaled to China and to the world that enough is enough. The World Trade Organization was supposed to be the arbiter of good faith free trade, mending mutually beneficial partnerships in the process, but it has instead given China free reign to sidestep legal provisions.
The WTO has repeatedly turned a blind eye to China’s protectionist policies that are well outside any definition of good faith. China has shaken down American businesses for intellectual property like it’s the Russian mafia.
The U.S. has lost trillions of dollars over the past two decades in stolen intellectual property. China has reaped all the benefits of free trade while passing on the costs to other countries.
Trump has rightfully lambasted both China and the WTO. This rogue nation definitely needs to be punished for its actions. Levying tariffs, however, isn’t the right solution. Threatening tariffs is one thing, but actively going back and forth with retaliatory tariffs is going to torpedo our economy. The president has chosen the latter as a matter of policy.
The threat of an escalating global trade war has rattled investor confidence, and markets have been volatile as a result. Trump’s policies are putting America in harm’s way. There’s a long list of losers in this trade war, and American companies, investors and workers are at the top of the list.
While gridlock means that legislators may not be able to pass much needed infrastructure bills, Trump will also have a tougher time enacting tariffs. Democrats taking control of the House is a blessing in disguise. Legislators won’t accomplish much, but no harm can be done to an economy that is already humming along. America rejoice — gridlock has returned.
Patrick Gagen is a 21-year-old mass communication and finance senior from Suwanee, Georgia.