After this momentum-shifting election, we are trying to discern what this means to the economy in general and the mergers and acquisitions market in particular. This well written article prepared by Morgan Stanley has done as good of a job as any I have seen. Gary Wulf sent this to us. Thanks Gary.
On Election Day, United States voters spoke with unmistakable certitude. Republicans rode an antiincumbent,
anti-Washington and Tea Party-driven wave to retake the House after four years in the minority, netting at least 61 seats, easily clearing the 39 needed for control. With several states too close to call as of Wednesday morning, the Senate will remain in Democratic hands. However, Republicans also managed significant gains there as well, netting at least 6 seats to reduce the Democratic advantage to 51-47, with 2 races still undecided as of Wednesday morning. This watershed election heralds a return to a divided government where Democrats and Republicans will be forced to deal first with each other if they are indeed going to deal with America’s problems.
After the existing Congress completes business in the November/December “lame duck” period, the 112th Congress will take the reins in January. The conventional wisdom is that a divided Congress will produce very little in the way of legislative accomplishment. However, the inherent risk in doing nothing is a weak legislative record on which to run for re-election. President Obama and Congress will surely be mindful of this, as the 2012 election looms. That risk is even more pronounced in the current environment where the electorate clamors for solutions.
Thus, it is quite possible that after the dust settles and the two sides have had time to stake out their
positions in the new Congress, both parties may realize that to govern effectively, they must agree on something. While agreement is likely to remain elusive in many areas where the chasm is simply too wide to bridge, limited compromise could be found in a few areas, including energy, tax, trade and immigration.
This report provides a look ahead, introducing the new leadership team that will likely control the houses of Congress, previewing the “lame duck” legislative period, and examining the issues that will drive the agenda in 2011 and beyond.