Very quickly, this post seeks to offer a brief response on how it seems the midterm elections will go across the U.S., partly in relation to a post I had written previously in the aftermath of the last federal government shutdown (http://boycottcorporatemedia.blogspot.com/2013/11/the-agony-of-federal-budgetary_4.html). In regard to that circumstance, my prognostications do not seem to have entirely borne themselves out. The federal government continues to fail to get anything meaningful accomplished concerning fiscal policy management. On the other hand, thanks, in part, to some irrational exhuberance on the part of global financial markets in the face of a sluggish American recovery (not to mention a borderline deflationary economy in the EU and slowing Chinese growth)and, in part, to a decline in global crude oil prices driven by aggressive American exploration for shale oil and gas, the employment picture in the U.S. seems to be tangibly improving! Absent some concerted efforts by the federal government to get its fiscal house in order and undertake the sorts of investments, particularly in transportation and communications infrastructure, to bolster short term aggregate demand and improve long term American economic performance in the next Congressional session, I cannot see how this situation will continue, however - the world is heading for another economic downturn, possibly to be punctuated by a crash in equity prices. The temporary, speculation-driven recovery of housing prices will falter, promoting the resumption of a long term downward correction in the American housing sector, supported by impending efforts by two Republican houses of Congress and a strangely compliant Democratic administration to dismantle the government sponsored structural, secondary market supports for wider home ownership (why does it seem to me that the only policy area Obama and Congressional Republicans appear to enjoy a consensus on is the need to dismantle the residual instruments supporting federal housing policy?!). Finally, the impending economic decline will reinvigorate Republican efforts to radically restructure federal entitlement programs (Social Security and Medicare), in an effort to open up new sites for speculative investments by Wall Street high rollers, eager to play around with the retirement savings of tens of millions of Americans! With respect to this last prediction, I, at least, hold out hope that the Republican Senate will lack a veto-proof majority to enact any major fiscal policy creativity in relation to federal entitlements - the Democrats will have lots of ammunition to play around with in 2016, when Hillary marches back into the White House and insurgent Democrats rescue one if not both houses of Congress on the platform that it is worthwhile to save Social Security from Republican innovation.
It suffices to say, I find it improbable at best that the midterms will not usher in a Republican Senate, under the bellicose leadership of gentleman tobacco plantation owner Mitch McConnell (no, Democrat Alison Lundegan Grimes is not going to unseat the Senate Minority leader in Kentucky). In regard to the other major contests, I remain rather satisfied that the Republican Party will end up with enough of an advantage at the end of the day even if Democrats Kay Hagan of North Carolina and Jean Shaheen of New Hampshire win their contests, something that seems probable at the moment.
Assuming the Republican Party remains incapable of marshaling a veto-proof majority in the Senate, nothing of any consequence in fiscal policy will happen until after the 2016 elections (unless, as suggested, the Obama administration and Republican congressional leadership, for some peculiar reason, decide that it would be a great idea to scrap Fannie Mae and Freddie Mac, an idea with which Obama, for some bizarre reason, appears enamoured), which will almost certainly bring another Democratic into the White House and win back at least one house of Congress for all of one session (there is no way that any Democratic gains in 2016 are going to survive the 2018 midterms). There will be no great plans for entitlement reform enacted. The Patient Protection and Affordable Care Act will not be stricken from federal law. There will, almost certainly, be new and unprecedented theatrics in the quest to arrive at a federal budget and in the extension of the debt ceiling, at which point Republican Congressional leaders will bow to the administration at the risk of driving the country in default. In short, nothing new will happen of any relevance to the lives of everyday Americans. Further, even when the Democrats strut triumphantly back into control in Washington two years from now, I have every expectation that they will be utterly incapable of generating an actual domestic policy agenda with aggressive, countercyclical fiscal management on the table. Emphatically, we are living in an age in which the U.S. federal government finds it impossible to get out of its own way when it comes to achieving anything meaningful that might benefit the economic well being of the majority of Americans. I think the larger point that will present itself once the new Republican Congress finally does come into power is that the direction of domestic policy initiative in the American political system is shifting away from Washington in the near term and toward the state capitals, and this is not an unwelcome outcome!
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