The 2018 elections are over and the result was rather predictable for a change. Pundits were proven correct and we ended up with a split election. Democrats rode their suburban strength to take back the House, and Republicans harnessed their base in the more rural states where the Senate battles were fought and picked up two seats in the Senate. This split decision has led to two very different narratives about how 2019 will play out.
The first narrative is that Democrats in the House will double down on being the anti-President Trump party and conduct aggressive oversight, including pursuing impeachment of the President. This will be based on what Democrats will paint as a damning report by Special Counsel Robert Mueller. At the same time, Democrats will have their eyes on the big prize of winning the White House and will do everything in their power to preclude President Trump from notching any legislative wins that could help him win reelection.
Infrastructure has long been viewed as the
If this narrative plays out, the legislative outlook is grim, with showdowns at every turn to conduct even the most basic legislative tasks necessary for operating the government. There are arguments against this narrative. Part of the underlying thought behind this narrative is that the Democratic majority is made up of liberal firebrands, which, admittedly, are getting a lot of attention. This ignores the fact that the great majority of the seats that were actually flipped from Republican control to Democratic control were won by moderate Democrats, who ostensibly want to get something done.
The other problem with this narrative is that while the Democratic base may not realize that impeaching the President does not remove him from office, Democratic leadership in the House and Senate does realize this. Absent a new, verifiable and extremely serious allegation, it is unfathomable that more than a small handful of Senate Republicans would vote to remove the President. Frankly, it’s hard to even imagine a plausible scenario where enough Republicans in the Senate would vote to remove the President. The situation would likely lead to a depressed Democratic base and an enthused Republican base, and could backfire in spectacular fashion against the Democrats. The historical reference point for this is 1998, where coming out of the impeachment of President Clinton, Republicans lost seats in the House.
If this narrative plays out, the best opportunities for cooperation are infrastructure and paid family leave. Infrastructure has long been viewed as the lowest-hanging fruit for bipartisanship, but due to the costs and fundamental difference in approaches (direct spending vs. tax incentives) it has never even really gained momentum. This could obviously have a big impact on the equipment leasing and finance industry if it were to come to bear. Paid family leave is a favorite of Ivanka Trump, Rick Santorum and most Democrats, including the many working mothers who were newly elected in 2018. This wouldn’t have an outsize impact on our industry, but would impact it nonetheless.
If the second narrative is correct, don’t expect Kumbaya to become the new national anthem. Democrats will still be conducting oversight over the Trump Administration, and the parties have fundamental differences in the realms of taxation and the regulation of financial services that make any significant movement in those areas unlikely.
In short, if it looks like the gridlock narrative is carrying the day, prepare yourself and your business for a tumultuous two years, with showdowns over subpoenas, likely government shutdowns and debt ceiling drama. Historically, none of these have been positive for consumer confidence and the economy. If the second narrative is looking more likely, then the next two years are likely to be less tumultuous, and opportunities exist for ELFA members. Which narrative ends up playing out is entirely governed by both parties’ calculations on what helps them in the 2020 elections, which in case you weren’t aware, started Nov. 7, 2018.
The first narrative is that Democrats in the House will double down on being the anti-President Trump party and conduct aggressive oversight, including pursuing impeachment of the President. This will be based on what Democrats will paint as a damning report by Special Counsel Robert Mueller. At the same time, Democrats will have their eyes on the big prize of winning the White House and will do everything in their power to preclude President Trump from notching any legislative wins that could help him win reelection.
Infrastructure has long been viewed as the
lowest-hanging fruit for bipartisanship, but it
has never really gained momentum.
If this narrative plays out, the legislative outlook is grim, with showdowns at every turn to conduct even the most basic legislative tasks necessary for operating the government. There are arguments against this narrative. Part of the underlying thought behind this narrative is that the Democratic majority is made up of liberal firebrands, which, admittedly, are getting a lot of attention. This ignores the fact that the great majority of the seats that were actually flipped from Republican control to Democratic control were won by moderate Democrats, who ostensibly want to get something done.
The other problem with this narrative is that while the Democratic base may not realize that impeaching the President does not remove him from office, Democratic leadership in the House and Senate does realize this. Absent a new, verifiable and extremely serious allegation, it is unfathomable that more than a small handful of Senate Republicans would vote to remove the President. Frankly, it’s hard to even imagine a plausible scenario where enough Republicans in the Senate would vote to remove the President. The situation would likely lead to a depressed Democratic base and an enthused Republican base, and could backfire in spectacular fashion against the Democrats. The historical reference point for this is 1998, where coming out of the impeachment of President Clinton, Republicans lost seats in the House.
An Alternative Narrative
The second narrative is that Democrats realize that America is yearning for their elected representatives to fix what is broken about Washington and recognize that they can’t maintain their majority and win the White House running solely against something, they need to be for something.If this narrative plays out, the best opportunities for cooperation are infrastructure and paid family leave. Infrastructure has long been viewed as the lowest-hanging fruit for bipartisanship, but due to the costs and fundamental difference in approaches (direct spending vs. tax incentives) it has never even really gained momentum. This could obviously have a big impact on the equipment leasing and finance industry if it were to come to bear. Paid family leave is a favorite of Ivanka Trump, Rick Santorum and most Democrats, including the many working mothers who were newly elected in 2018. This wouldn’t have an outsize impact on our industry, but would impact it nonetheless.
If the second narrative is correct, don’t expect Kumbaya to become the new national anthem. Democrats will still be conducting oversight over the Trump Administration, and the parties have fundamental differences in the realms of taxation and the regulation of financial services that make any significant movement in those areas unlikely.
In short, if it looks like the gridlock narrative is carrying the day, prepare yourself and your business for a tumultuous two years, with showdowns over subpoenas, likely government shutdowns and debt ceiling drama. Historically, none of these have been positive for consumer confidence and the economy. If the second narrative is looking more likely, then the next two years are likely to be less tumultuous, and opportunities exist for ELFA members. Which narrative ends up playing out is entirely governed by both parties’ calculations on what helps them in the 2020 elections, which in case you weren’t aware, started Nov. 7, 2018.
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EL&F magazine article
Federal Insight
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2019