Democrats’ control of both chambers may leave U.S. policies on tariffs, Iran and immigration largely intact, Moody’s Analytics Chief Economist Mark Zandi said, because the measures rely on executive action.
Zandi said the policies depend on executive action and may continue after the congressional shift. He warned that keeping them could restrain growth and heighten pressure on inflation and interest rates. Before the election, he had flagged price pressures, a soft labor market and geopolitical risks. He also tied a significant share of growth to artificial intelligence activity and said its economic gains depended on stock valuations, leaving the outlook exposed to downside risks.
Annualized U.S. growth for the third quarter was 3.4%, and consumer spending climbed 3.8%. The consumer price index rose 3.7% in September from a year earlier, while inflation-adjusted average hourly earnings fell 0.7% over the same period.
Debt-limit talks could give Democrats an opening to seek policy concessions. The national debt was about $40.5 trillion, and the fiscal 2026 deficit was nearing $2 trillion, or about 6.1% of gross domestic product.
Goldman Sachs Chief Economist Jan Hatzius identified expanded health benefits and restored spending as possible Democratic demands, along with reversing tariffs and limiting Iran policy. Gary Cohn, a former head of the National Economic Council under President Donald Trump, said lawmakers could codify tariffs in a deal, constraining a future president’s ability to undo them by executive action.
Bloomberg reported Democrats would fall short of the votes needed to override a presidential veto. Former Singapore Foreign Affairs Permanent Secretary Bilahari Kausikan cited Trump’s response to losing the House in his first term as a precedent for policy continuity in an earlier account of a possible standoff between President Donald Trump and Congress.
RSM Chief Economist Joseph Brusuelas left his outlook unchanged after the election, projecting expansion of about 2.5%, above trend, and putting recession risk at 15% over the next 12 months.
