How the economy will win if Republicans sweep the midterms

Political forecasters have busied themselves for months trying to figure out how the Washington agenda will change if Republicans win the Senate in Tuesday’s midterms and control both houses of Congress for the next two years. The best news for businesses, however, isn’t what will happen during the 114th Congress, but what won’t happen.

No matter how convincing a Republican sweep may be, the GOP still won’t have a filibuster-proof majority in the Senate, which means the next two years will entail the same sort of do-little divided government we’ve had for the last four. President Obama will pursue the same set of policies, with the same lackluster results.

“Obama’s legislative priorities will continue to be ignored or defeated in Congress as they have since 2011,” writes Thomas Mann of the Brookings Institution. “The underlying reality of presidential-congressional relations will remain the same.”

Tune in: Midterm Mixer with Katie Couric and David Gregory, 11 p.m. EST on Nov. 4

One thing will be very different, however. If Republicans are fully in control of Congress, they’ll need to show voters they can be trusted with the nation’s business—if they have any hope of regaining the White House in 2016, that is. Destructive stunts such as shutting down the government (Republican playbook, c. 2013) or threatening another default on U.S. debt (c. 2011, 1995) would give Hillary Clinton or whoever the Democratic presidential contender is in 2016 an enormous campaign gift. Voters deeply distrust both parties and are motivated these days largely by an impulse to punish whichever one seems to screw up the most. Just ask Obama.

Do no harm

Winning the Senate, in fact, could cause more trouble for Republicans than playing the familiar role of sideline heckler. Voters expect the party in power to do something tangible that improves their own prospects, which might be irrational, but nonetheless dominates elections. One reason Democrats are on their heels in this year’s midterms is a failure to fix a sluggish economy. If Republicans have to answer the same frustrations in 2016 (when the election map favors Dems much as it favors the GOP this year), all of this year’s gains could be reversed.

That would make it extremely foolish for Republicans to do anything that threatens the economy. When the government shut down last year for 16 days because Congress wouldn’t pass spending legislation, Americans blamed Republicans over Democrats by a margin of nearly 2 to 1, and the GOP’s favorability ratings sank to record lows. Republicans also got the blame when Congress waited until the last second to approve a new federal borrowing limit in 2011, risking default on U.S. debt and sending the stock market into a six-month tailspin. If such antics occur while Republicans control both houses of Congress, it could be political suicide for the party.

Republicans show signs of getting the message, with new House Majority Leader Kevin McCarthy saying the GOP goal in 2015 will be “restoring competence in government.” Even Sen. Ted Cruz, the Republican bomb-thrower and de facto envoy to the Tea Party, has proposed a serious legislative agenda that focuses more on accomplishing Republican goals than thwarting Democratic ones.

Business leaders have complained bitterly about Washington infighting that harms growth, leaves urgent problems unresolved and makes the United States a global laughingstock. In particular, CEOs cite the uncertainty that comes from not knowing what the government’s tax and spending policy will be more than a few months ahead of time, along with a lack of interest in funding infrastructure and other things that typically enhance the nation’s competitiveness.

If the Republicans do control Congress next year, the first test of their newfound interest in competent government will come around March, when the federal borrowing limit will need to be raised again. Each extension of the borrowing limit has become a ritualized battle between small-government conservatives who believe the economic pain of budget ultimatums are worth it, and just about everybody else.

There will still be a determined band of hard-core House Republicans next year who want to repeal Obamacare, repeal it some more, and after that, repeal any remnant of Obamacare that hasn't already been repealed. They're likely to make -- all together now: repealing Obamacare -- a condition of passing a debt-ceiling extension, as they have in the past. The outcome of those negotiations will demonstrate whether the GOP's most conservative bloc is wagging the whole Republican party or just the tail.

Businesses have other priorities beyond Congress doing no harm, including tax reform that would lower and simplify corporate rates, immigration reform that would make it easier to hire foreigners and trade liberalization. There will be a lot of jabbering over those issues, but major moves on any of them are unlikely given that both parties will be thinking more about winning in 2016 than taking care of business in 2015. If the do-nothing government simply does nothing destructive, it will be a sign of progress.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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