After a campaign season that feels like it lasted for decades, the election is over and, essentially, nothing has changed: President Barack Obama won a second term and somewhat decisively; the House of Representatives is still firmly in the hands of the GOP: and the Senate is comfortably in the hands of the Democrats.
Does any of this really matter as far as the economy is concerned? In some respects, the election will have an impact but, in many ways, the vote only affects the big economic issues indirectly. For most of the last year, we have tirelessly tried to point out that presidents may get much of the blame or credit for what is happening in the economy, but their power is very limited. Congress is charged with decisions on taxing and spending.
The number one issue now is the impending fiscal cliff, and the latest election outcome could be either good news or very bad news. Congress now has a little less than two months to figure out what to do with the issue or they will essentially plunge the U.S. back into a recession that could last for a solid year. The betting is that they do something, but the details are very murky.
On the positive side, this is the Congress that will exists next year and that makes it far less of a lame duck than had been expected. If the Senate had gone to the GOP, there may have been a stronger temptation to stall and force the next Congress to deal with the mess. Now, the same people will be in charge next year as are in charge now and they have to find a solution or take the blame.
The negative side is that this is the same Congress that has been incapable of making a decision on this or any other debt/deficit issue, and there is possibility of more acrimony and hostility than before. Democrats are riding a high and may not feel the need to compromise. The GOP is feeling frustrated and may not be willing to back off either. The few moderates left in Congress have almost no power and influence as most of the new players are more ideologically motivated than the people they replaced.
-Armada Corporate Intelligence