For the best part of two years, Donald Trump has had complete control of the US government.
asserted
Trump → have → government
The midterm elections could knock out one, if not two, of the pillars supporting that dominance.
uncertain
elections → knock → dominance
But will elections he labelled “the most important in our lifetime” have any practical consequences?
asserted
he → label → consequences
If the polls are right, there will be a Democrat “blue wave” giving them control of the House, with a chance of also gaining a slim majority in the Senate.
asserted
polls → give → Senate
Republican majorities in both congressional chambers have been two of the three pillars that have allowed Trump to reign almost unchecked.
asserted
Trump → allow → pillars
The elections, however, won’t touch the other, more central, foundation of his second term – one made even more powerful by decisions of a US Supreme Court he stacked with conservative judges: His executive power.
asserted
he → touch → judges
Trump has wielded that authority with abandon, aided by a supine Congress and an administration staffed by sycophantic enablers.
asserted
Trump → wield → enablers
They have allowed him to assume authority over matters that, constitutionally, lie with the legislature.
asserted
that → allow → legislature
If the Democrats are as successful as the polling suggests, Trump’s executive authority, including the power to veto bills enacted by Congress (unless the Democrats were able to acquire or negotiate a super-majority in the Senate, which is unlikely) won’t be directly affected.
uncertain
which → suggest → Senate
‘If we didn’t win, I veto everything.
asserted
I → win → everything
I’ll be vetoing, vetoing…and then at some point, we’ll probably make deals.
asserted
we → veto → deals
It might, however, be limited or influenced - either by measures that Trump sees as popular and that might remove political baggage for the Republicans in the lead-up to the 2028 general elections, or by threats to the funding of his administration.
uncertain
that → limit → administration
Democrat control of the House would allow them to cancel funding for some of Trump’s programs and withhold funding for anything new Trump wants – like the 44 per cent increase in funding, to $US1.5 trillion ($2.1 trillion), that he has sought for the “Department of War”.
asserted
he → allow → War
Or they could simply let all funding for the government run out, which will happen on December 11 unless Congress agrees and Trump approves a new budget bill.
uncertain
Trump → let → bill
There also leverage in the US debt ceiling, although voters tend to take a dim view of those who wield it.
asserted
who → tend → it
The current debt ceiling, raised in July last year, is $US41.1 trillion.
asserted
ceiling → raise → July
It will probably be reached towards the middle of next year on current trends, with an actual default date (after US Treasury resorts to “extraordinary measures”) early in 2028.
asserted
Treasury → reach → 2028
Debt-ceiling brinkmanship could pressure Trump into agreeing to at least some Democrat demands, like the restoration of the subsidies in the Affordable Care Act that his administration cut last year.
uncertain
administration → pressure → that
Trump has vowed that he will be “Mr Veto” if Republicans lose control of Congress: “If we didn’t win, I veto everything.
asserted
I → vow → everything
I’ll be vetoing, vetoing,” he said in an interview published this week.
asserted
he → veto → interview
He went on, however, to say “and then at some point, we’ll probably make deals.”
asserted
we → go → deals
The Democrats do have a potential pathway to enact at least some of their legislation, assuming they can either obtain a majority in the Senate or, as they have done on occasion during this term, attract some Republican support.
asserted
they → have → support
For markets, the likely outcome of the election – regardless of how the Democrats fare in the Senate – is, thanks to the presidential veto power, a gridlock where nothing much of substance occurs between now and the change of administration in early 2029.
asserted
nothing → fare → 2029
Historically, the lead-up to the elections has produced double-digit falls in share prices ahead of the big post-election bounce.
asserted
up → produce → bounce
This year, while prices have fallen from their peak a month ago, when they were up 15 per cent year-to-date, they are still about 10 per cent higher than at the start of the year.
asserted
they → fall → year
The bond market tends to be less affected by midterms, although it - like the sharemarket - tends to do best when there is gridlock and therefore reduced potential for major policy moves.
asserted
it → tend → moves
Markets don’t like uncertainty.
asserted
Markets → like → uncertainty
They price in risk, which is reduced when there’s a stalemate within Congress or between Congress and the White House.
asserted
which → price → Congress
The other thing that might make this election different for financial markets is the degree of concentration within the sharemarket, and the blow-outs in US budget deficits and federal government debt that Trump has presided over.
uncertain
Trump → make → that
About 40 per cent of the value of the sharemarket and most of its gains this year are now focused on stocks directly involved in the boom in artificial intelligence, with a similar level of contribution to America’s GDP growth.
asserted
cent → focus → growth
Anything detrimental to the AI sector would threaten sharemarket stability.
asserted
Anything → threaten → stability
Trump has had a laissez-faire approach to AI.
asserted
Trump → have → AI
The Democrats will try to impose some level of regulation and safety protocols on the sector.
asserted
Democrats → try → sector
The bond market would see a gridlock as lowering the risk of further increases in government spending and in the deficit of 6 per cent of GDP and net government debt that has just passed 100 per cent of GDP, although investors will be wary of the Democrats’ aspirations for increased medicare and other social spending, and its implications for America’s already unsustainable deficits and debt.
asserted
investors → see → deficits
While Trump’s domestic agenda might be curtailed if the Democrats gain control of at least one of the congressional chambers, he will retain the executive powers that he has wielded beyond what has been regarded as their normal constitutional limits, as well as his authority over American foreign policy.
uncertain
what → curtail → policy
It is improbable that he will allow Congress to reassert its responsibility for tariffs or its exclusive power over declarations of war.
asserted
Congress → allow → war
Indeed, it is more likely, if his domestic agenda is stymied, that he will double down on tariffs and military actions abroad.
asserted
he → stymie → tariffs
Threats of denial of funding won’t have any influence over his trade policies, although they might limit what the Department of War might be able to execute.
uncertain
Department → have → War
It is improbable that Trump will allow Congress to reassert its responsibility for tariffs or its exclusive power over declarations of war.
asserted
Congress → allow → war
It is more likely that he will double down on tariffs and military actions abroad.
asserted
he → double → tariffs
…and 16 more, not listed.
The Aporia
