Why Businesses Should Be Optimistic About the Midterm Results
With the dust mostly settled on the 2018 midterm elections, now is a good time to consider how the outcome will impact businesses across the country.
Although it’s a long shot, immigration reform is a possibility. For years, American businesses have advocated for an immigration system that allows more workers with in-demand skills to legally work in the U.S., but fundamental differences between the chambers made agreement effectively impossible. A Republican House that fundamentally opposed any increases in immigration was never going to compromise with the Senate, which was more sympathetic to business interests.
But after the midterms, the priorities of both chambers are no longer incompatible. Many House Democrats are eager to provide legal paths to citizenship for unauthorized immigrants who have lived and worked in the U.S. for years, while a swath of senators want to be responsive to their business-minded constituents who desperately need workers in key areas like tech, health care, and agriculture.
It’s difficult to predict exactly what form legislation would take. One version is a compromise whereby House Democrats get legal paths to citizenship for populations like Dreamers, Republicans get concessions for businesses to hire more legal immigrants, and the president gets just enough border security funding to secure his signature.
Another version—which many consider a pipe dream—is a more sweeping package that both boosts the total number of legal immigrants and shifts the criteria for residency toward immigrants who would benefit the U.S. economy. Precedent for such a bill can be found in a 2013 package which sailed through the Senate with 68 votes, but never cleared the House. Had it passed, the bill would have been a shot in the arm for the American economy, boosting GDP by 5.4% and raising productivity by a full percentage point over two decades.
Infrastructure has long been fertile ground for bipartisan compromise and could gain traction in the next two years. In late 2015, Congress passed the Fixing America’s Surface Transportation (FAST) Act with bipartisan support—maintaining spending for our nation’s highways and providing a modest boost to transit spending. FAST Act funding expires in 2021, which means this Congress or the next will have to take it up.
One possibility is a bill that boosts our nation’s investment in rail and transit systems, cutting down on the time workers spend commuting and the costs of getting goods to market; makes our energy systems more resilient, mitigating the economic damage caused by weather-related disasters; and modernizes roads to accommodate the coming autonomous vehicle revolution.
A compromise on infrastructure faces major obstacles. The first is finding common ground on how to pay for this higher investment, although the outgoing Congress has shown a repeated appetite for taking on more debt. A second challenge is a fundamental disagreement between parties on how to fund infrastructure, with Democrats generally preferring direct spending, and the president and Republicans favoring subsidies to encourage more development. A large-enough bill may have room for both.
Then there is health care. Not only is Obamacare safe for at least the next two years, but three states passed Medicaid expansions, making over 300,000 low-income people eligible for health insurance. And while Medicare for All is a nonstarter under a Republican Senate and president, this Congress could pass bipartisan bills aimed at lowering costs and stabilizing insurance marketplaces.
In particular, a bipartisan Obamacare stabilization package, like the one introduced by senators Lamar Alexander and Patty Murray in 2017, could get another look. A stabilization bill could include a host of meaningful adjustments, like the reintroduction of cost-sharing payments, more funding for enrollment outreach, and increased availability of low-cost, high-deductible catastrophic plans. A stabilization package like this would expand the number of people covered by health insurance, while also lowering prices and slightly pushing down federal deficits.
Many researchers have pointed out that healthier workers are better workers, but businesses will be most pleased by the reduced health insurance premiums that come with maintaining Obamacare and instituting an associated stabilization package. As health costs can directly eat into profits, businesses will benefit from any bill that reduces the cost of providing insurance to employees.
Partisan division means that American companies shouldn’t bank heavily on progress. But if Congress can find its way to compromise on any of these priorities, businesses will reap the rewards for years.
Benjamin Harris is the executive director of the Kellogg Public-Private Interface at the Kellogg School of Management and was the chief economist to former Vice President Joe Biden.