As the 2024 US presidential election approaches, analysts at Wells Fargo Investment Institute are projecting a likely split Congress, which could significantly influence economic policies and legislative action. The election, scheduled for November, follows President Joe Biden's withdrawal from the race, leaving Vice President Kamala Harris as the Democratic Party's nominee.
Former President Donald Trump represents the Republican side. This shift has made the race much tighter, reflecting new dynamics that may complicate the control of Congress. Scott Wren, Senior Global Market Strategist at Wells Fargo Investment, emphasized in recent communications with clients that polling trends since Biden’s exit indicate a competitive environment.
The potential for one party to secure a majority appears slim, with any single-party control anticipated to be quite fragile. Wren noted, "The highest probability outcome is a divided Congress. However, should either party manage to occupy both chambers, such dominance is likely to be very thin." The dichotomy of policies between the Democrats and Republicans is marked by stark contrasts.
However, Wren highlighted that both parties face intraparty divisions that further complicate the legislative landscape, making the passage of substantial legislative efforts less likely. Despite evident differences, there is a mutual tendency among both parties to advocate for increased spending, yet they diverge significantly on tax policy.
Wren remarked that in the event of a split Congress, substantial alterations to the tax code seem improbable, although there's a potential to extend the 2017 tax cuts, given that Congress can revisit earlier compromises from this year on various issues. Trade policies, especially concerning new import tariffs from China, play a crucial role in the divide, as noted by Wren.
With little common ground on regulatory changes, economic issues like housing affordability, the overall cost of living outside of housing, immigration policies, and various regulations become focal points of contention between the candidates. In summary, the upcoming election not only affects who might lead the country but also has significant implications for the direction of economic policy and legislative achievements in a potentially divided Congress.
Wells Fargo Investment, a subsidiary of Wells Fargo, highlights these uncertainties as critical to watch leading up to the elections..