With split Congress, prospect for economic deals looks dim

WASHINGTON >> President Donald Trump floated the idea Wednesday of partnering with the newly Democratic-led House on two ideas that could prove popular with voters: Increasing spending on America’s infrastructure and limiting drug prices.

Yet the poisonous atmosphere in Washington, mandated federal spending limits and a potential duel over the government’s borrowing authority make it difficult to achieve any deals that would boost economic growth.

Over the next two years, with Democrats controlling the House and Republicans the Senate, most economic and market analysts foresee mainly entrenched gridlock. Many think the two sides will mostly maneuver for public favor while looking toward the 2020 presidential election year.

At a news conference, Trump reiterated his desire to reach some agreement on infrastructure spending — to rebuild roadways, rail stations or airports, for example — among other priorities. But to achieve any real breakthrough, he would have to compromise with Democrats who won office largely by opposing his plans to restrict immigration, his efforts to repeal the Affordable Care Act, his deficitfunded tax cuts and his opposition to gun control in the aftermath of mass shootings.

That said, most economists don’t think a stalemate in Congress would necessarily depress growth. The $20 trillion U.S. economy — the world’s largest — relies far more on the health of the global economy and the willingness of consumers and businesses to spend rather than on any government actions.

Nor do market analysts think stock prices will suffer. In fact, major stock averages soared Wednesday in the wake of the elections. In part, that’s because Tuesday’s vote caused no major surprises, in part because the prospect of little or no major congressional initiatives means lawmakers won’t stand in the way of a robust U.S. economy.

“While you might see further gridlock if the Democrats take the House, that doesn’t mean it would tip the boat and slow growth,” said Beth Ann Bovino, chief U.S. economist at S&P Global.

Economists at Bank of America concluded, “We expect a divided government to lead to a legislative logjam in Washington, DC in the next Congress, limiting policy actions to passing the budget with modest spending increases and raising the debt ceiling.”

Trump would still have discretion on some key economic issues. His trade war with China and his drive to reduce regulations are two of them. The president has managed to pursue those priorities without Congress’ involvement, though his updated trade agreement with Canada and Mexico would need congressional approval.

But the new Democratic-led House could thwart Trump’s plans for more tax cuts, a wall along the border with Mexico and a 5 percent budget cut to Cabinet departments. But the Democrats’ own agendas would also likely meet with defeat.

At his news conference, the president suggested that he could work with Democrats on such priorities as boosting infrastructure spending and reducing the costs of prescription drugs. He also said he’d consider raising other tax rates to pay for a middle-class tax cut, though he didn’t offer any details.

Yet Trump made clear that if House Democrats pursue him with investigations involving his 2016’s connection to Russia or financial ethics allegations, he would drop his willingness to seek cooperation on legislation involving the economy or other issues.