Update 823 — Trump Rolls to Second Term
Fed Rate Cut 25bp; Powell Defiant on Trump
Supported by 56 percent of working-class voters, themselves 57 percent of the electorate, and taking down the Blue Wall, Donald Trump won the presidential popular vote majority for the first time, en route to a 295-226 electoral college margin (on current count) and four more years in the White House. The GOP has regained the Senate with at least 53 seats; the House majority, and a GOP trifecta, remain in the balance.
Final results and a full analysis will follow in due course. But much will be made of yet another change election, with 64 percent percent of Americans saying the country is moving in the wrong direction, high prices still felt, and much of voters’ anger and disillusionment directed at elites and economic conditions, a top voting issue this cycle.
In this week’s update, we review the election results thus far, including how some of the candidates we endorsed have fared, and the immediate economic policy implications. We also cover the Fed’s move yesterday to lower interest rates by 25 basis points and Powell’s refusal to step aside if Trump asks him to resign.
Good weekends all…
Dana
Election Update
In what came as a surprise to many, Donald Trump was able to pull off a quickly-called and decisive victory this week to secure a second term in the White House. The next few weeks, months, and years will likely be filled with varying opinions and finger pointing as to why Harris was not able to secure a victory in what had been expected to be anyone’s race going into election day.
Given our focus on economic policy, we have paid particular attention to the role that the economy played in swaying voter sentiment. According to exit polling following the election, 32 percent of voters cited the economy as their number one voting issue, and 80 percent of these voters chose Trump. Similarly, two-thirds of voters rated the economy as “not so good” or “poor” — around 70 percent of them voted for Trump.
These polls could explain Trump’s gains in support from working-class voters, which increased marginally but critically to 55 percent — his highest margin with these voters in his three presidential races — despite Harris’ focus on building up the working- and middle-class. Though it may be too early for conclusions, this trend likely carried through to House and Senate races, in which many Republicans out-performed expectations.
Below, we offer an overview of elections in the House and Senate, with a special focus on candidates that 20/20 Vision endorsed this election cycle. We also offer a provisional analysis of policy implications in our key issue areas of focus, many of which will negatively affect the very people who supported Trump and the GOP’s economic plan.
Control of Congress
The first chamber to be called for a Party was the Senate, for the Republicans after Senator Brown’s loss in Ohio. Republicans are currently leading in the House, but a Democrat victory is still possible.
- NBC News has the House at 201 Democrats and 212 Republicans with 5 blue flips and 6 red flips.
- The New York Times has Democrats at 199 and Republicans at 211.
- AP has Democrats at 199 and Republicans at 211.
For continuity, we are using the AP News Election Results, which has 15 Lean D seats not yet called and 10 Lean Republican seats not yet called. If all races fell along these numbers, Republicans would hold 221 and Democrats would hold 214 House seats in the 119th Congress.
Status of Candidates Endorsed by 20/20 Vision
U.S. Senate
This election cycle, we endorsed 7 candidates for Senate. While Republican control of the Senate is set, their margin of control is still in question. Senators Jon Tester (D-MT) and Sherrod Brown (D-OH) both lost their re-election bids. Senator Jacky Rosen (D-NV) is riding a razor-thin margin, leading by just 1.3 percent. Representative Elissa Slotkin (D-MI) won her Michigan Senate race by just 0.3 percent, and Angela Alsobrooks will be the first Black woman to represent the state of Maryland in the U.S. Senate. Representative Andy Kim (D-NJ) won the New Jersey Senate race and will be the first Korean American to ever serve in the U.S. Senate. The Senate sits at 53-45, with only Nevada and Arizona yet to be called.
U.S. House of Representatives
Control of the House has not yet been determined, though many Republicans have already declared victory on social media. AP currently has the House at 199 Democrats and 211 Republicans, with 25 seats still to be called. This election cycle we endorsed 34 House candidates. The status of those endorsed races are as follows:
- Holds – This election cycle we endorsed mostly challengers, with some critical House incumbents. Of the elections where we endorsed 18 races saw no party flip with 9 incumbent democrats who held on, two Democrats who kept Open D seats, and seven Democratic challengers who failed to flip districts.
- Flips – So far three of our endorsed candidates flipped seats in New York. John Mannion was the first flip of the night in NY-22, Josh Riley won by 1 percent in NY-19 and Laura Gillen flipped her district in NY-04. Curtis Hertel lost the Open-D seat in MI-07.
- Not Yet Settled – We are still waiting on a number of our endorsed races. Five of them are in California and all are leaning Republican, with the Republican candidates leading by between 0.4 and 10 percent in each race. IA-01 is one of the closest with Christina Bohannan down just 796 votes or 0.2 percent. Republicans also lead in AZ-01, NE-02, and AK-AL. Democrats lead in CO-08, OR-05, and OR-06.
Political and Policy Implications of the 2024 Elections
Trump’s election to a second Presidential term, along with a Republican majority in the Senate and a possible Republican majority in the House, raises the question of the ramifications for progressive ideals and policy. Notably, despite our previous mention of Trump’s success in gaining support from working-class voters, his policies will likely hurt a majority of the base that turned out in his favor. Below, we explore the consequences of this year’s election on a few of our priority issues in economic policy assuming Trump and the GOP follow through with proposals made thus far.
Fiscal Policy
Next year, fiscal policy will be front and center as Congress considers the expiration of individual and estate provisions included in the Tax Cuts and Jobs Act (TCJA) – legislation Trump got passed under reconciliation at the beginning of his first term. Many legislators are viewing next year’s expirations as an opportunity to engage in tax reform beyond the scope of the TCJA, and a Republican win likely signals Trump will move forward with an expensive slate of tax/fiscal proposals he laid out on the campaign trail.
The original tax giveaways passed through the TCJA, including permanent provisions like a cut in the corporate tax rate from 35 percent to 21 percent, have already added almost two trillion dollars to the national debt. Trump’s new slate of fiscal proposals, which could cost more than $10 trillion over 10 years according to the CRFB, includes:
- extending and expanding expiring provisions of the TCJA,
- eliminating federal taxes on tip income,
- eliminating federal taxes on overtime wages,
- eliminating federal taxes on Social Security income, and
- lowering the corporate tax rate to 15 percent for domestic manufacturers.
When asked how he expects to finance his $10 trillion economic plan, Trump proposed offsetting the high cost of these tax cuts with sharp increases in tariffs. Many economists have warned that this strategy will drive higher costs for consumers, uncertainty for companies that import materials/goods, and even destabilize our international trade agreements while inciting retaliation. Furthermore, tariffs would likely fail to generate enough revenue to offset the entire cost of his economic plan.
While this slate of proposals would likely fail to get the 60 votes necessary to end a Democratic filibuster in the Senate, especially in the absence of real offsets, Republicans plan to turn to the reconciliation process — which allows a measure to clear the Senate with 50 rather than 60 votes — if they can secure a House majority, giving them a path to pass a tax bill with simple majority votes in the House and Senate.
Not only are Trump’s proposals fiscally irresponsible as the national debt continues to grow rapidly past the recent benchmark of $35 trillion, but they could also have severe implications for tax fairness and income inequality. The TCJA was dramatically skewed toward the wealthy, with the top one percent of earners expected to receive an average tax cut of $60,000 in 2025 compared to $500 in expected savings for the bottom 60 percent. According to the Institute on Taxation and Economic Policy (ITEP), Trump’s latest proposals would be further skewed to the wealthy, with the top one percent expected to receive an average annual tax cut of $36,000 while the lower 95 percent of the income distribution is expected to see an average tax increase of around $1,500.
While Democrats like Vice President Harris worked to highlight these risks, noting the disparity in tax rates paid by wealthy individuals and corporations and those paid by working Americans like teachers, nurses, and firefighters, many Trump voters still cited his economic/fiscal plans as a main driver of their support. This is representative of a significant disconnect between economic perceptions and realities that can be seen across the full range of this year’s elections, which helped fuel Trump’s popularity with working-class voters.
Workers Rights
Despite Donald Trump’s considerable gains in union support, Trump’s proposed policies and track record suggest that he would not be a friend to the labor movement. During his first term, Trump curtailed government protections for federal employee unions, supported Right to Work laws, and made pro-corporate appointments to the Department of Labor and the National Labor Relations Board. On the campaign trail, Trump admitted that he likes to fire striking workers, and Project 2025 includes a proposal to reform overtime pay that would result in workers being eligible for far less overtime pay even as Trump has proposed eliminating taxes on it.
Corporate Power
Corporate consolidation can hamper innovation, hurt small businesses and workers, and increase prices for consumers. President Biden made competition a central focus of his administration, taking a whole-of-government approach to tackling corporate consolidation across the American economy. The Biden administration appointed bold antitrust enforcers, including Lina Khan at the Federal Trade Commission and Jonathan Kanter at the DOJ Antitrust Division, who have led their agencies in increasing scrutiny of proposed mergers and acquisitions that would only consolidate industries further.
Wall Street views the Trump victory as the opening of the flood gates for a period of vigorous mergers and acquisitions in sectors across the economy, from the financial sector to the pharmaceutical sector. Proposed deals, including Kroger’s proposed acquisition of Albertsons which is currently under review by a federal judge, could see federal challenges recede, and the strong antitrust enforcers of the Biden administration could see their positions in jeopardy.
Industrial Policy
Trump has made clear on many occasions that he plans to gut President Biden’s efforts to encourage the green transition. This includes eliminating the pro-clean energy provisions of the Inflation Reduction Act, canceling funding for clean energy projects, and eliminating regulations meant to further incentivize the shift away from fossil fuels. Trump has taken particular aim at EVs, even as one of his biggest supporters, Elon Musk, owns one of the largest EV manufacturers in the world. While many have expressed hope that the green transition will continue, Trump’s second term will undoubtedly provide an immense stumbling block to the movement.
Period of Reflection for Democrats
With control of the White House and Senate going to Republicans and control of the House hanging narrowly in the balance, it is crucial that Democrats spend the coming weeks and months critically reflecting on the strategic and policy decisions made over the election cycle, listening to the American people, and addressing shortcomings.
The economy remained a top issue for voters throughout the election cycle. A key focus of this reflection must be on reshaping Democrats’ economic priorities and messaging. While the Biden administration led a strong economy, the value of near-two percent inflation and strong jobs reports fail to translate for the nearly 40 percent of American families who faced difficulties paying their bills last year.
Fed Cuts Rate by 25 BPs
The Federal Reserve announced yesterday afternoon that it will cut interest rates by 25 basis points (BPs). The highly-anticipated decision came at the conclusion of the Federal Open Market Committee’s (FOMC) November meeting on Thursday.
The decision comes as the economy remains strong, as inflation has cooled almost to the Fed’s two percent target, and as the labor market remains solid but is tempered from its overheated state. As Federal Reserve Chair Jerome Powell noted in his press conference following the FOMC’s meeting, GDP rose by a strong annual rate of 2.8 percent in the third quarter of this year. Meanwhile in the labor market, monthly job gains have slowed from the past year averaging 104,000 per month over the past three months and the unemployment rate has risen over the past year, but has edged down to a low 4.1 percent in October.
Importantly, Powell noted that inflation as measured by the Fed’s preferred inflation gauge, the personal consumption expenditures price index, has fallen significantly over the past two years – with prices rising by just 2.1 percent in September – just above the Fed’s 2.0 percent target. He highlighted, however, that core inflation – which strips out food and energy prices – showed that prices rose by a “somewhat elevated” 2.7 percent.
The FOMC began raising the federal funds rate from near zero in early 2022 in an effort to combat rising inflation. Committee officials raised rates to the 5.25 to 5.5 percent range last July in its most aggressive series of rate hikes since the 1980s and opted to hold rates steady until its previous meeting in September. At that meeting, the FOMC cut rates by 50 BP, bringing the interest rate to the 4.75 to 5.0 percent range. Yesterday’s decision will bring the interest rate down to the 4.5 to 4.75 percent range.
Given that the FOMC believes that core inflation remains somewhat elevated, progress in reducing the restrictiveness of monetary policy to a neutral level may be quite gradual if this stickiness in core prices persists. Powell said, “Nothing in the economic data suggests that the committee needs to be in a hurry. The right way to find neutral is carefully, patiently.”
Ahead of this week’s meeting, Senators Elizabeth Warren (D-MA) and John Hickenlooper (D-CO) sent a letter to Fed Chair Powell urging FOMC members to cut interest rates by 50 BPs this month. Although the Fed has yet to see inflation at its two percent target over the prior twelve-month period, cutting rates by at least 50 BPs in the FOMC’s one remaining meeting this year could avoid unnecessary pain for the labor market and avoid any risks that a higher-interest-rate environment could bring to the financial sector.
Election Implications for Inflation, Fed Independence
This week’s FOMC meeting took place on the two days immediately following the general election, which saw Donald Trump decisively elected President for a second term. Trump’s proposed mass deportations, tariffs, and erosion of the Fed’s political independence could increase inflation to as high as 6.0 to 9.3 percent in 2026, according to estimates by the Peterson Institute for International Economics.
Yesterday, Powell said that in the near term, the election “will have no effect on our policy decisions” as Committee officials don’t speculate on what policy changes will come, let alone what economic effects those policies will have. Specifically, he said that the FOMC is not able to predict at this point whether and to what extent Trump’s policies will impact the Fed’s achievement of its dual mandate. Increased inflation due to Trump’s policies would likely require the FOMC to adjust its monetary policy
During his first term, Trump clashed with Powell after he appointed him to chair in 2018 and claimed that he had the right to fire him, even tweeting “…who is our bigger enemy, Jay Powel (sic) or Chairman Xi?”. Earlier this year, Trump baselessly accused Powell of considering rate hikes geared to help Democrats in the coming election, even as Powell consistently ignored calls by Congressional Democrats to lower rates over the year prior. When asked if he believes the president has the power to fire or demote him and whether the Fed has determined the legality of a president demoting at will any of the other governors with leadership positions, Powell responded “Not permitted under the law.” When asked if he would resign if asked to do so by Trump, Powell simply responded “No.”
While Democrats have made their concerns clear in letters and questions to Powell at congressional hearings, they have consistently respected the independence of the Fed. Trump said in June that he would let Powell serve until the end of his current term which concludes in 2026, but his allies have reportedly drafted and floated plans to reduce Fed independence.
The FOMC meets next to determine the fate of interest rates on December 17 and 18.