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A “divided Congress” could slow the US economy

A “divided Congress” could slow the US economy

US House of Representatives

US President Joe Biden has lost his Democratic majority in this chamber of the US Congress. According to the Munich Ifo Institute, this will have an impact on the country’s economic growth.

(Photo: dpa)

Berlin In the last election, the Republican Party won the majority in the US House of Representatives. According to a Leibniz Institute for Economic Research (ifo) study, US economic growth could shrink due to new reservations.

Based on data going back to 1861, ifo researcher Niklas Potrafke said on Monday: “Economic growth averaged 4.2 percent a year when the president and a majority of representatives in both houses of Congress were from the same party.”

So far, the researchers have observed the opposite trend when there were different majorities in the Senate and House of Representatives: “Under divided governments, when Congress did not support the president, it was only 2.6 percent per year.”

The gap was especially wide at 2.8 percentage points when the majority of the House of Representatives was against the president. This is because the House of Representatives can independently take initiatives on budget and tax laws, thus leaving many of the controlling functions over the President.

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The Senate, on the other hand, cannot take its own initiative when it comes to budget and tax laws, but it has more control functions than the House of Representatives. “There could be a decline in the expansionary economic policy typically employed by Democrats because Republicans can influence political decision-making with their majority in the House of Representatives,” Potroffke says.

The next two years will show how historical patterns have repeated themselves.

Read more about American politics here:

After midterm elections in November, the opposition Republican Party won a majority in the House of Representatives. In this way, they could make it significantly harder for US President Joe Biden to govern until the next election in 2024. On the other hand, Biden’s Democrats managed to maintain their majority in the Senate, the second chamber of the Parliament.

The study compares periods of “divided government” with periods when the US president’s party held a majority in the House and Senate. From 1861 to 2021, according to Ifo, US government corresponded to 89 years of unitary government and 72 years of divided government.

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