What a divided Congress means for retail and the economy

Midterm election results could affect retail’s policy priorities

Results of the 2022 midterm elections stunned Washington wonks, pollsters and government officials alike, but did the “red wave” predictions merely overestimate the average American voter?

While Republicans are inching closer to a narrow majority in the House, forecasts of a larger margin of victory fell short. With the recent news of Catherine Cortez Masto, D-Nev., holding on to her seat, the Senate will remain under Democrat control for the 118th Congress. The margin of control will be determined by the December runoff election in Georgia between Democratic Senator Raphael Warnock and Republican candidate Herschel Walker. Let’s explore what a divided Congress means for our economy and the retail industry’s policy priorities.

The House voted today on leadership

Congress returned this week for new member orientation and began the process of selecting the respective party’s leadership. Should Republicans maintain their current margin and secure a majority, Representative Kevin McCarthy, R-Calif., will become the next Speaker of the House, Representative Tom Emmer, R-Mich., will be the next Republican Whip, and Rep. Steve Scalise, R-La. will become Majority Leader.

For Democrats, the most interesting question at play is if Speaker Nancy Pelosi, D-Calif., will choose to continue to lead the party or step down. With so much uncertainty, all we can definitively say is that this year’s midterm election results fall drastically short of what a first-term president historically faces.

Policy priorities remain

NRF’s RetailPAC continued to play a critical role in building relationships with new candidates and returning incumbents. RetailPAC contributed over $150,000 to congressional races during the 2022 cycle, supporting 83 candidates; initial results show that 80% of RetailPAC-supported candidates won their election. Retailers also made their voices heard in 2022, sending over 5,000 messages to Congress about retail’s policy agenda.

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A flip in a House majority with a divided Congress could potentially affect several key issues facing retailers. NRF’s priorities continue for the remainder of the 117th Congress and into next year, including addressing organized retail crime by advocating for passage of the INFORM Consumers Act and building support for the Combatting Organized Retail Crime Act, reforming credit card swipe fees and promoting greater competition by supporting passage of the Credit Card Competition Act, and avoiding a rail strike by calling on Congress to intervene, if necessary.

NRF also continues to support providing permanent protections for workers who came to the United States as children by codifying the Deferred Action for Childhood Arrivals program, as well as extending expired tax credits that allow retailers to deduct depreciation and amortization from net interest payments.

Potential actions

The 118th Congress will convene on January 3, 2022. With a new Congress comes new legislative priorities. A divided Congress will limit the Biden administration’s reach in pushing major policy priorities. That likely means an increase in executive actions and rulemaking proposals at federal agencies to advance pieces of the administration’s agenda that cannot win congressional approval.

We expect Congress to remain focused on China, including trade and national security. There is room for a bipartisan consensus on addressing crime and community safety across the nation. And, if Republicans win the majority in the House, we expect legislation to combat rising energy prices by expanding domestic energy production.

House Republicans may also begin investigatory activity through oversight powers in committees. We expect some of these actions will benefit retailers by slowing down some new federal workforce regulations in the areas of unionization, overtime pay rules and the status of independent contractors.

Additionally, we could see the House introduce new legislative proposals that scrutinize companies’ plans and policies to address environmental, social and governance goals.

Buckle up and hang on tight — the 2024 presidential race will begin soon and it’s going to be an interesting two years on Capitol Hill.

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