US Mid Term Elections: November 6 is Here!

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Why are the US mid-term elections and why are they relevant to us in India? The reason goes deep and given that it is about the world’s most powerful nation, economically and militarily, the implications are not often immediate but may be significant.

The cornerstone of the U.S. Constitution is the system of checks and balances, a system that spreads power around in order make sure that any one deliberative body doesn’t get despotic. To that extent, the legislative body of the US known as US Congress has two chambers — The House of Representatives and The Senate.

The House of Representatives also known as the ‘Lower Chamber’ has 435 voting members and 6 non-voting members. The Senate or the ‘Upper Chamber’ has 100 members, two each from each State of the US.

  • The House of Representatives has the duty of passage of legislation called ‘Bills’ and initiate impeachment proceedings against Federal officers. The Speaker of the House is the third most important post in the US after the President and the Vice-President. The Republican party holds a majority in the House now. All 435 seats in the house are up for contest in these mid-term elections.
  • The Senate or the Upper Chamber has advisory powers and has to ratify the Presidential appointments. The Senate also has the power to conduct impeachment trial of Federal officers. It also ratifies international treaties. The Republicans hold a majority in the Senate too. Of the 100 Senate seats, 35 are up for election in the mid-term.

Similar to India, Bills passed by both the Lower Chamber and the Upper Chamber become law and are sent to the US President for approval.

What’s at stake

Since Donald Trump’s presidency has been marked by ‘America First’ and ‘Make America Great Again’’ slogans , its policies have been clearly oriented towards these objectives. While there has been support on these from white right wingers, there have been a number of detractors too who feel that the policies of the administration are not in keeping with America’s core values of Liberty, Equality, Justice, Diversity, etc.

Trump has also been actively indulging in trade wars renegotiating a number of trade pacts entered into with nations by his predecessors. Stricter immigration laws are being sought to be implemented but are seemed as discriminatory towards certain religions and races. Gun control has been a key thorny issue apart from a wide variety of local tax exemption related noises.

Women have been particularly agitated by the present dispensation’s views on various issues like abortion, LGBTQ rights, environment and gender discrimination. Huge demonstrations signifying the power of women have been a regular feature during the last two years of Trump’s tenure. And then of course, there is the Russian intervention in earlier elections, the Saudi journalist’s murder etc to contend with and one is not clear about what stance is being taken by the liberal nation’s premier.

These elections are therefore being seen as a referendum on the Trump Presidency for all practical purposes.

Current Situation

The Democrats are hopeful about taking over the House of Representatives, in which they currently hold 195 seats to the Republicans’ majority of 240. They need to gain 23 seats to reach the majority mark of 218.

On the other hand, American analysts feel the Republicans are in a good position to strengthen their grip on the Senate, where they currently hold a thin majority — 51 of the 100 seats.

The Democrats may reduce the lead of Republicans in the Senate too and may end up with 50 seats. However, in this scenario, the Vice President who is a Republican is entitled to vote and this will tilt the scales in favour of the Republicans.

But if the Democrats do take control of the House of Representatives, the Trump administration will find itself shackled on various fronts. There are calls for impeachment of the President already and if this does happen, we will find that the last two years of Trump will end up in fighting bitter battles and he might not be able to further his agenda.

Europe and Beijing probably hope for a strong Democratic showing for his explicit contempt for the earlier policy stance and his partisan views on virtually all issues impacting bilateral nation treaties.

Impact on India

The immediate impact on India might filter through the capital markets – lower yields and crude etc – while in real terms, the impact may be limited. The key issues include steel tariffs, sanctions on Iran, sanctions on countries that buy weapons from Russia and immigration visas. Almost all of those depend more on executive branch actions, at least this year, than on legislative ones and  therefore the  immediate real impact is muted.

For India, Trump’s move to do away with the H4 visa, which allows spouses of H1B visa holders to legally work in the USA, has been a huge blow. Similarly, tighter restrictions on the issue of H1B visas and the latest move to deny citizenship rights to a child born in the US to parents who are not citizens of the US are also seen as hitting at the immigrant Indian population in the US.

And since in both the chambers of US Congress, the Republicans are in majority, all the proposals of the President have a good chance of becoming law without too much of a hindrance.

The latest elections may change all that. If the Democrats do come in, expect the dollar to weaken considerably and risk assets may get support immediately. Expect huge volatility!

Keep watching this space!




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