Midterm elections are over, with the Democrats saving slim control of the Senate, but the House of Representatives to Republicans.
The election results have repercussions for the national economy and you, but there were also smaller statewide ballot measures that could affect pocketbooks.
For example, a victory for Medicaid expansion in South Dakota will make health care available to 42,500 more Americans next year.
Here’s a roundup of what the midterm election results mean for people across the country.
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Medicare expansion gets a win
Forty-two thousand five-hundred. That’s about how many South Dakotans will be offered Medicare coverage next year after more than 56% of voters said yes to expanding the program.
The win makes South Dakota the seventh Republican-controlled state in the past five years to expand the low-income insurance program at the ballot box, and now leaves only 11 states that haven’t expanded Medicaid: Texas, Florida, Georgia, Pennsylvania, North Carolina, South Carolina, Alabama, Tennessee, Mississippi, Kansas, Wyoming, and Wisconsin.
Wisconsin is the only non-Medicaid-expansion state that doesn’t have a coverage gap, though. All low-income residents in the state have access to either Medicaid or subsidies to help them purchase private coverage through the Affordable Care Act exchange. Lawmakers in North Carolina supported Medicaid expansion during the 2022 session, but the state’s two legislative chambers couldn’t agree on the specifics.
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Because not all states have expanded Medicaid, more than 2 million low-income Americans fall into what is called the “Medicaid gap.” Those people are too poor to qualify for subsidies for health insurance through the Affordable Care Act exchange, but earn too much to qualify for Medicaid.
“It will help people afford screenings and other health care issues that are preventive, instead of going to the ER (emergency room), which costs more money,” said Doug Sombke, president of South Dakota Farmers Union., “It’ll lower premium costs, too, because the population’s healthier.”
South Dakota’s rural communities have also been bleeding health care facilities, especially in the past few years, that can’t afford to stay open, and Sombke said he hopes this will stop that.
Social Security cuts?
Social Security cuts were floated around in a late-stage Republican budget proposal in anticipation of the party securing control of the House and the Senate. The proposal called for raising the age at which you can begin to collect Social Security benefits to 70, from 67.
The authors of the proposal said the cuts were aimed at making Social Security “solvent” for a longer period of time.
This comes as the historic cost-of-living-adjustment for 2023 could push up the depletion date for a trust fund that pays Social Security benefits to retirees, disabled people and their dependents.
A June report published by the Social Security Board of Trustees found that the funds will be depleted by 2035.
Since Republicans will not have control of the Senate, it’s unlikely that cuts to Social Security benefits will materialize, said Alicia Munnell, director of the Center for Retirement Research at Boston College. But even if the GOP had gained control of both chambers, President Joe Biden indicated he would have prevented any cuts from occurring.
“Bottom line is, nothing’s going to happen in the next two years, with a divided Congress,” Munnell said, referring to Social Security changes.
If a recession comes, don’t expect stimulus
If a recession comes next year, as most economists predict, Americans may be on their own.
“If the U.S. enters a recession in 2023, a divided Congress will struggle to pass a fiscal stimulus bill, which will leave the Federal Reserve as the main institution responsible for setting economic policy in the country,” said Brian Gardner, Stifel’s chief Washington policy strategist.
And we already know from Fed Chairman Jerome Powell that the Fed is firmly focused on pushing inflation back to its 2% target, from 7.7% in October, even if it’s “painful for the public that we serve,” Powell said in September. Powell said allowing inflation to run even hotter would, in the end, be even more painful.
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On Wednesday, Goldman Sachs added another quarter-point interest rate hike to its May forecast, which raises its overall expectation for the Fed’s short-term benchmark federal funds rate to reach a range of 5% to 5.25% next year, from 3.75% to 4% now. Goldman doesn’t forecast any rate cuts next year.
Instead, Morgan Stanley says people will have to rely on items already in the U.S. budget that decrease revenue and increase spending in a downturn without additional action from Congress. Those include Supplemental Nutrition Assistance Program (SNAP, commonly referred to as food stamps), unemployment insurance and Medicaid.
Stocks could defy history
Even though the stock market typically rallies after a midterm election, there’s been nothing typical in this economic cycle, and investors may want to keep holding value stocks over growth stocks, said John Lynch, Comerica Wealth Management’s chief investment officer.
Since 1950, the average return for the broad stock market benchmark Standard & Poor’s 500 index in the 12 months after a midterm election is 15%, surprisingly with no down years, but “the current global environment, with all its challenges, suggests next year may prove an exception to the rule,” he said.
The big difference is that most economists predict a recession.
“A major reason for the strong equity market in the third year of the presidential cycle has been the lack of recessions,” Lynch said.
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A Strategas Research Partners study shows that from 1929 through 2021, the third year of a presidency has never experienced recession, perhaps because a sitting president has typically lost seats in Congress and quickly embraces economic polices favorable for reelection, Lynch said.
Plus, monetary policy has typically been supportive of the economy by a president’s third year. Since 1960, the Fed has eased rates by an average of 1.18% during a president’s third year, while raising rates by an average of just 0.98%, Lynch noted.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here