Elections U.S. mid-term justified a rejection of the policy pursued by President Obama. By taking control of the House of Representatives by winning 60 seats, Republicans reflects discontent voters on the recovery policy, reform of health insurance or energy policy.
What are the economic impacts of this policy change?
Historically this phenomenon of gridlock, which means the loss of majority in Congress for President in place, is good for financial markets. The situation is based on the experiences of 1986 under Reagan, Clinton in 1994 and 1998 as well as the latest Bush. Changes in assets, particularly those risky, tend to be more important. This expectation can be enhanced by the second policy of quantitative easing by the Fed, which led to failure to have a global impact on the monetary policies of other countries, must first allow a resumption of U.S. activity. The most important link is based on bonds as risk-free assets. Investors evaluate the opportunity cost of changing the amounts invested in bonds to defer to risky assets as assets. In short, the new liquidity by the Fed may émissent the gap in performance between these two types of assets and thus increase the opportunity cost keep the bond portfolio. The impact of this trade strengthens U.S. gridlock. Tax measures desired by President Obama targets levels of taxation on capital gains and dividends q ui have been reduced under the Bush presidency.
The consequences of this policy change are not only historical criteria, they can be very important on many current issues and international. The Republican Party is made up of members more often free traders as protectionists , a notable difference from the Democratic Party. We can expect a recovery GREEMENTS of a commercial particularly with partners in South America or South Korea. We can all expect a resumption of trade agreements.
The most important thing is to come. Obama's policy rests for several weeks on a refusal to extend the increase public deficit by increasing spending, conversely many Republicans who supported this proposal. As noted by Robert Shiller, conditions to borrow at low rates have never been better for many years . Insist on fiscal consolidation with an activity low economic requiring new spending is not the solution, the United States and Europe. The issuance of debt indexed to nominal GDP should encourage structural investments in education, research and infrastructure. In this sense, the "new" Congress can encourage this desire to increase spending to ensure economic growth more adapted to future years. Changes that remain exposed to the President's veto in place. Reform on Medicare may not be as easily change before the next term, under-provided that the successor to Obama is a Republican. Finally the federal budget attract much attention and should be the source of the most stormy discussion as the oppositions between parties are important. Finally, the U.S. refusal to establish, or to escape to a policy of environmental regulation internationally can substitute for structural investments in innovation to reduce the different emissions. These innovations require private investment, or support of the public sphere in new spending. In sum, these policies could destabilize and policy coherence of the President Obama . A balance internally and externally to find rest. This gridlock may be more important for eighty years.
