So what should we learn from the midterm election?

I thought it might be fun to take a good look at the midterm election results and think about how they might affect Hilton Head Island residents. In the words of President Barack Obama, “(he) wasn’t on the ballot but his policies were.”

So how did election night feel, Mr. President? The pundits and talking heads, even the ones on Fox News, didn’t see the magnitude of voter dissatisfaction with the White House or Congress. According to exit polls, the major driver of dissatisfaction was the state of our economy.

After nearly six years of recession and tepid recovery, American voters spoke, and the message is we want a more pro-growth set of policies coming out of Washington. With the control of Congress squarely in Republican hands now that they control 52 seats in the Senate and 244 seats in the House of Representatives, the most seats held by Republicans since Herbert Hoover, they control the political agenda. But life in Washington is complex, and in the U.S. Senate, it is even more so. Remember, it takes 60 votes to avoid a filibuster and 67 votes to override a presidential veto. That is further confused by the fact that the 2016 presidential election cycle will kick off in approximately one year, and Washington is likely to shut down again until November 2016. Lawmakers’ window of opportunity will only be open for a short time and much needs to be done.

So what will Congress go to work on that might directly impact us here on Hilton Head?  First, there’s the low-hanging fruit, which includes approving the Keystone XL pipeline, which will result in immediate job creation and eventually lower gas prices here on the island. The Keystone XL pipeline has bipartisan support in the Senate that could override a presidential veto if it came to that. Second on the agenda is the prospect of actually passing a federal budget. While the direct impact of the passing of a budget will be difficult to localize here, the national confidence level in our system will increase and uncertainty diminish. The third area, which actually has some bipartisan support in the Senate, is tax reform. While efforts will be limited at this point to corporate reform, this work will likely have a positive impact on equity markets and as such produce a wealth effect here on Hilton Head. 

žOther areas of finding some middle ground include immigration reform and granting new authority to negotiate trade agreements. Again, while these issues do not have any direct impact on our local economy, the more Congress and the president can do to minimize uncertainty will calm the nerves of locals and put our national economy back on the road to normalcy.

Where we shouldn’t expect much to change is an area that has been the prime target for Republicans: the Affordable Care Act. Hopefully, both parties will see that this is a no-go issue for the Obama administration and not push this one too hard. There are certainly tweaks that can be made around medical devises, repealing the employer tax and a redefinition of full-time work to 40 hours. Based on the fact that the ACA has resulted in an additional 1 million Americans being insured and premium increases for 2015 being well under projections, this may be an issue for 2016 and beyond.

In closing, it is important to recognize that the new Republican-controlled Congress may have a short fuse on making its influence felt. In 2016, the election map favors Democrats in the Senate. All of these issues taken together represent a wonderful opportunity for the United States, South Carolina and Hilton Head to return to solid growth and a more “normal” economic environment.

 

lihu Spencer is a local amateur economist with a long business history in global finance.  His life work has been centered on understanding credit cycles and their impact on local economies. The information contained in this article has been obtained from sources considered reliable but the accuracy cannot be guaranteed.