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Election results expected to have little effect on US economy


Election results expected to have little effect on US economy


The Democratic party’s success in the US Congressional elections has economists and
investors trying to work out which business areas will benefit and which will lose out. However, most analysts do not believe that this will lead to a major makeover of economic policies.

The Democrats have a long wish list, but near the top – and possibly achievable – is raising the minimum wage for American workers which has not changed in over nine years. The economy was not a crucial issue in this election. Economic growth is slowing and is predicted to be 3.4% this year and 2.9% in 2007.

Unemployment is forecast to rise along with the budget deficit. The central bank, the Federal Reserve, which is a main driver of US national economic policy is isolated from the partisan debates.

Analysts said the market still believes Fed chairman Ben Bernanke and his policy makers can create the circumstances for a soft landing for the US economy in 2007.

Just before the election, the government announced a fall in the unemployment rate to 4.4% of the working population and the creation of 230,000 new jobs in the previous three months, but those figures were barely mentioned in election coverage.

Big changes to President Bush’s tax cut policies are also thought to be unlikely and that cheered the financial markets. But as one economist pointed out, in previous mid-term election years it really has not mattered who won the election stocks almost always rallied in November and December.

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