Connect with us

Economics

Both chambers of America’s Congress may flip in November

Published

on

Listen to this story.
Enjoy more audio and podcasts on iOS or Android.

Your browser does not support the <audio> element.

AMERICANS WILL elect 471 federal officials in November: 435 members of the House of Representatives, 34 senators, a vice-president and a president. These contests are overshadowed by the impending rematch between President Joe Biden and Donald Trump, his predecessor, which will be pitched as a struggle between democracy and autocracy (and amplified by a projected $3bn in campaign spending). Seven months of this promises to be wearing.

Cast your eye down the ballot, however, and something exotic is in the offing. At the moment, Washington is divided by the thinnest of margins. Democrats control the Senate by just two seats out of 100. Republicans control the House of Representatives by five out of 435 (a margin that will shrink to four once Mike Gallagher of Wisconsin retires next month).

After the election, control of both chambers could flip. In the Senate, the seats contested this year are in extremely favourable states for Republicans. In the House, by contrast, Democrats campaigning against the chaos of Republican leadership may wrest back control. A double flip would be quite a feat of political gymnastics: it has never happened before.

Senate terms last six years, and only one-third are contested every two years. The mix this year is unkind to Democrats. Joe Manchin, the West Virginia senator who managed to remain the Democratic representative of his Trump-loving state, is retiring. His seat will almost certainly be filled by a Republican, leaving the starting-point for the race at, in essence, 50-50.

Of the seven competitive Senate races this cycle, all are now held by Democrats. Five are in presidential battleground states (Arizona, Michigan, Nevada, Pennsylvania and Wisconsin). They are winnable by Democrats, but none comfortably (see chart). In Montana and Ohio Mr Biden is likely to lose, but the incumbent Democratic senators, Jon Tester and Sherrod Brown, must prevail if the party is to retain control of the chamber. They are the last remaining Democrats holding statewide office in their respective states. Adding to the Democrats’ headaches, Larry Hogan, a popular Republican ex-governor of ordinarily deep-Democratic Maryland, plans to run for its Senate seat.

Chart: The Economist

Republican incumbents, meanwhile, look comfortable. The two that Democrats have the slightest chance of upsetting are Ted Cruz of Texas and Rick Scott of Florida—neither of whom represents states that Mr Biden will be seriously contesting. Overall, then, the maths look troubling for Democrats. They will need to play perfect defence to get to a 50-50 Senate (and hope that Kamala Harris remains vice-president to break ties in their favour).

True, the Democrats managed this feat in the midterms of 2022 (actually gaining one seat, in Pennsylvania). They expect to retain their fundraising advantages. And the candidate-quality issues that hurt Republicans in previous elections may recur. In Arizona, for example, Kari Lake, an election-denying demagogue who in 2022 lost her bid for governor against a weak Democratic challenger, will probably be the party’s Senate candidate. In Pennsylvania Dave McCormick, the presumptive Republican nominee who lost an expensive Senate primary in 2022 to a celebrity doctor, Mehmet Oz, is dogged by allegations of carpet-bagging over his private-jet travel to his mansion in Connecticut.

The House elections are not so tilted against the Republicans as the Senate elections are against the Democrats. But Democrats have a more credible case for taking the chamber than the Republicans do for keeping it, for a number of reasons.

First, Republican stewardship of the House has been chaotic, even by the low standards of Congress. Last year, for the first time in American history, Republican hardliners deposed their speaker. Last week one of their ranks, Marjorie Taylor Greene, introduced a motion to depose the current speaker. More ordinary forces also militate against Republicans. Democrats are expected to outspend them. And there are over a dozen Republicans in districts that voted for Mr Biden; there are only five Democrats in Trump-friendly districts.

Chart: The Economist

The possible flip-flopping of the chambers may seem odd when American politics are so nationalised and polarised. Split-ticket voting—in which people vote for presidential candidates of one party and congressional candidates of another—has gone from common to exceptional. In roughly one-third of the Senate races held in the presidential-election years of 1992, 1996 and 2000, voters opted for a presidential candidate of one party and a senator of the other. In 2016 there were no such cases. And in the 33 elections held in 2020 the sole exception was in Maine.

Split congressional districts have also declined precipitously. Before 2000 well over 100 districts typically had representatives belonging to a different party from the voters’ presidential preference. By 2020 this had declined to a record low of 16.

But as American politics have calcified into two mutually loathing teams of nearly equal size, legislative majorities that were once enduring have become narrow and unstable. Between 1932 and 1994, Democrats controlled the House for all but four years. Since then the chamber has flipped party control five times. Minor fluctuations—small shifts in turnout, the entry of a third-party candidate—can be decisive.

A double flip would matter for more than just novelty. Republican control of the Senate would mean that Mr Trump, if he regains the White House, would have a far easier time confirming his most outlandish potential nominees. Mr Biden, if re-elected, could find that his nominees to fill judicial vacancies were refused.

Republican senators are, for the moment, more internationalist than their House colleagues, so aid for Ukraine could pass through a differently divided government. But on the whole, divided government tends to be inimical to serious legislating—as experienced in the tug-of-war between President Barack Obama and the Republican-controlled Senate after 2015.

The competition for Capitol Hill has not yet attracted a great deal of public interest. Perhaps it should. For all the attention that Americans pay to the question of their next president, they devote surprisingly little to whether or not he will be able to do much from his perch.

Economics

Germany’s election will usher in new leadership — but might not change its economy

Published

on

Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

Germany is 'lacking ambition,' investor says

Continue Reading

Economics

DOGE attacks a bastion of Republican internationalism

Published

on

Elon Musk has joined a war of ideas under the guise of a budget fight

Continue Reading

Economics

In Texas, vaccine-choice activists are ascendant

Published

on

Amid a measles outbreak they are lobbying for more “medical freedom”

Continue Reading

Trending