Analysis of the Mid-Term Elections

Polarized Electorate, Divided Government: What to Expect With the 118th Congress

Republicans appear to have won a narrow House of Representatives majority; control of the Senate remains undecided as of November 9, 2022.

While pundits forecast a Red Wave sweeping across the country, voters delivered a different message.

The narrow majorities in both chambers suggest America remains divided, and compromise will be needed to overcome policy gridlock.

Lame Duck Preview

• This month, both the House of Representatives and Senate will return for a “Lame Duck” session, a period of policymaking –lasting through the end of the year –that will include lawmakers who will not be returning for the next Congress.
• Of note, Democrats anticipate Republicans demanding concessions in exchange for their support for raising the statutory debt limit when the federal government is set to hit its debt ceiling in 2023. Democratic leaders have discussed utilizing the budget reconciliation process this year to preempt any issues next year, but such actions would require Democratic unity and speed to pass a new budget with reconciliation instructions on the debt limit and subsequently pass a reconciliation bill increasing the debt limit itself.

Congress and the Biden Administration will seek to address a host of issues in the coming two years. 

• Funding the government –and avoiding a highly disruptive shutdown –will depend on the level of unity among Congressional Republicans
• Republicans Seek to Increase National Security Funding; Exercise Oversight of Awards to Ukraine
• Education issues are ripe for reform, following rising costs and the impact of the COVID-19 pandemic on students and schools, but education policy has become a frontline for partisan politics.
• The GOP is champing at the bit to boost fossil fuels, but the party recognizes that clean energy needs to be part of the equation.
• Democrats and Republicans remain polarized on environmental policy, limiting the likelihood of any real progress.
• Expect Republicans to aggressively direct U.S. foreign policy priorities and create tough votes for Democrats ahead of the 2024 presidential elections –especially on China.
• Temperatures will run high on health issues, with no break in the fever anytime soon.
• The business community’s perspective roars back into labor and employment policymaking…caution: more partisan tension ahead!
• Republicans ready to rally for reform, but tweaking taxes will be tricky for tax-writers; Treasury to take on targeted tax tasks
• Biden officials will continue pursuing “worker-centric” trade policies, while Republicans push for traditional deals that lower tariffs on American-made exports.
• House Republicans will seek to undo some signature Democratic infrastructure wins of the past two years.

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Since 1995, Policy and Taxation Group has been the leading advocacy group working to reduce and eliminate estate tax, gift tax, and generation skipping transfer tax while blocking increased income tax and capital gains taxes, the creation of a wealth tax, and other hostile tax policies that punish hardworking taxpayers and success.

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