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November 6 – U.S. Mid-terms Preview

Oh, U.S. mid-terms. The Super Bowl for political nerds has finally gone mainstream! Suddenly, everyone is asking: what’s going to happen on Tuesday and what does it mean? With over $5.2 billion spent on this election by candidates alone, the 2018 U.S. mid-terms are a big deal. So, Google-search no more, McMillan Vantage has you covered.

What are the U.S. mid-term elections?

While the U.S. President has a 4-year term, House members serve two-year terms. The mid-terms are a way for the American people to cast judgment on the performance of Congress (the House and the Senate), which is at the half-way point of a President’s term and make changes if they want.

Who is on the ballot?

  • The House of Representatives: all 435 seats.
  • The Senate: 35 out of 100 seats. Members serve 6-year terms. Every two years, one-third of Senate seats are contested.
  • Governors: 36 State and 3 Territorial gubernatorial elections are included in this mid-term election. They don’t vote in Congress, but they can be influential, much like our provincial Premiers.

What typically happens in mid-terms?

For over a century, every U.S. President’s party has lost seats in the mid-terms. But there are three notable exceptions:

  • FDR in 1934, who picked up nine seats in each of the House and Senate, following his sweeping “New Deal” reforms in the midst of the Great Depression;
  • Bill Clinton in 1998, who gained five seats in the House, in the run up to his impeachment proceedings during his second term; and,
  • George W. Bush in 2002, right after 9/11 and at the start of the war in Afghanistan, who managed to pick up eight House and two Senate seats.

We’re talking about a handful of seat gains, compared to losing dozens of seats, which is the norm. Even Obama lost 69 seats in his first mid-term. If history is our guide, it’s more likely Trump will lose seats than gain. But, if we have learned anything about elections in the past few years, it’s that history is not always an accurate guide.

What does Congress look like right now?

House of Representatives (435)
Republican Democrat Vacant
235 193 7*

 

* Of which, 5 were previously Republican and 2 Democrat

Senate (100)
Republican Democrat Independent
51 47 2

Trump cannot afford to lose even one Senate seat to keep legislation moving. But, remember, only 35 of those 100 seats are up for election. Of those 35, only 9 are currently Republican and they are expected to hold. But 10 of the 26 incumbent Democrats are in states that Trump won in 2016. It will be much harder to flip the Senate than it appears at first glance.

The House, however, may present more opportunity for the Democrats to make gains and the polling appears very tight. Fivethirtyeight.com has modelled only 193 seats as solidly Democrat, which is break-even. Another 15 seats are “likely Democrat” with a 75% chance of winning. The shakedown has to be in the 34 seats that pollsters are calling toss-ups. To get to 218 seats for a majority, the Democrats need to hold their 193 seats, win the 15 “likely” seats, and snatch just 10 of those 34 too-close-to-call seats. Certainly do-able, but keep two things in mind before you bet on a “blue wave.” First, polling in the 2016 election was systemically wrong. Shockingly wrong. And second, President Trump has been campaigning hard. He just finished 11 rallies in 8 states in the last week alone in an effort to get his base out to vote.

Why does this matter to Canadians?

If Trump maintains control of Congress, his legislative agenda continues to move forward unencumbered. Immigration, trade, social policies and national security would continue much the same as we’ve seen for the past two years until the presidential election in 2020.

If he loses control of either part of Congress, however, it will become more difficult for Trump to fulfill his commitments. And that means USMCA may be in jeopardy. While some Democrats are neutral or won’t oppose USMCA, if the Republicans lose control of the House, the legislative process will become far more complicated.

And then there is the omnipresent question about investigations and impeachment. If Democrats take control of one of the chambers, they could turn up the heat on the Russia probe. The impeachment process is initiated in the House by a majority vote before it goes to the Senate for a two-thirds supermajority vote.

What else is on the ballot?

Americans don’t just elect representatives on Tuesday. The 2018 mid-terms will see over 150 ballot measures in dozens of states. Some to watch include:

  • Californians may vote to repeal gas taxes;
  • Washington state residents may adopt a $15/ton carbon tax;
  • Arizonians may vote for their state utilities to derive 50% of electricity from renewable sources by 2030;
  • Recreational cannabis could become legal in Michigan and North Dakota;
  • Idaho, Nebraska, Utah and Montana all have Medicaid coverage measures; and,
  • Minimum wage could be increased in Arkansas (to $11 by 2021) and Missouri (to $12 by 2023).

Want more insight into how Tuesday’s mid-term election may impact your business? Let us know!



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