- The split nature of Congress will make it difficult to get new bills passed.
- While the extended Child Tax Credit pulled millions out of poverty, the 118th Congress will make it difficult to reinstate.
- Some Republicans are ready to examine cuts to Social Security.
Who was elected is far less important than what they do with power.
Other than a few outstanding votes and a recount or two, the midterm elections of 2022 are in the record books. Who made it into office is far less important than what those representatives will do and how their decisions impact the American people.
When it comes to the economy, we can't say that the past is the best predictor of the future, but we can say that it points to what will "probably" happen as we move forward. With that in mind, here's what we believe the midterm election results will mean for your wallets.
1. Your investments will temporarily be in for a bumpy ride
A 2010 Yale University study found that Americans have a brighter outlook for the economy when their political party is in power. And outlook is everything because it determines how investments are made and what happens to the stock market.
This is where things may get tricky for a while. No party won both chambers of Congress. Democrats retained control of the Senate, while Republicans carried a slight majority in the House of Representatives.
The split means we're left to suspect that very little is going to be accomplished politically over the next two years. It's possible that after the 118th United States Congress is sworn in on Jan. 3, 2023, the picture will become clearer, and the market will steady.
Here's a hopeful statistic: In 17 of 19 midterms since 1946, the market did better in the six months following the midterm than it performed in the six months leading up to it.
While history is on our side, don't panic if warring political parties slow market recovery.
2. The price of gasoline probably won't fall dramatically
Despite the hardship faced by everyday people at the pump, oil companies recorded record profits. For example, in the second quarter of this year alone, BP posted profits worth $8.5 billion, its largest in 14 years. ExxonMobil's profits hit $17.9 billion, its largest quarterly profit ever. Between BP, ExxonMobil, Chevron, Shell, and TotalEnergies, Big Oil earned a jaw-dropping $55 billion in one quarter. At the same time, hundreds of millions of people around the globe saw much higher gas prices.
In response, President Biden proposed a windfall tax on oil companies. It will be difficult to get such legislation passed in the current political climate, however. If Biden's proposals can't make it through Congress due to partisan grandstanding, they won't make it to law. And if they don't make it into law, we'll continue to pay more than we should for gasoline.
3. Monthly Child Tax Credits are likely to disappear for good
Expanded health coverage and reinstatement of monthly Child Tax Credits are among the Biden administration's goals. With the political split in Congress, passing either bill into law becomes far less likely. Despite the major impact they had in lifting American children out of poverty, you might have seen the last of monthly Child Tax Credit checks hit your bank account.
4. Social Security and Medicare will be eyed
Shortly before running for Senate Republican leader, Sen. Rick Scott proposed allowing Congress to vote every five years on whether to renew Social Security, Medicare, and other federal spending programs. If Scott can gather enough colleagues to support his proposal, it will lead to financial anxiety among the millions of Americans who count on those benefits. Sen. Joe Manchin went so far as to call Social Security an "entitlement program."
What happens in next month's Georgia runoff election could determine the fate of this idea. If Sen. Raphael Warnock wins, Democrats will have 51 votes and will not need Manchin to protect Social Security or Medicare benefits. While it's highly unlikely either will be cut during the next congressional season, it's worth keeping an eye on as we move forward.
As challenging as it is to predict the behavior of those hungry for power and prestige, we do know that there are things we can do for ourselves, without help from Washington. They include:
- Paying down debt.
- Ensuring that we have emergency savings accounts in place sufficient to carry us through tough times.
- Continuing to invest. It's when the market has dropped that we can pick up the best bargains.
No matter what happens during this congressional session, we will survive. And the good (somewhat maddening) news is, there's another election coming up in two short years.
Alert: highest cash back card we've seen now has 0% intro APR until 2025
This credit card is not just good - it's so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2024 The Ascent. All rights reserved.