The Georgia runoff election is finally here, and with two senate seats at stake, control of the Senate is on the line. As part of the regular election cycle, Democrat Jon Ossoff dukes it out against Republican David Perdue. Meanwhile, Democrat Raphael Warnock and Republican Kelly Loeffler stand opposed in the fight for now-retired Republican Johnny Isakson’s seat.
The quirks of election law that got us here are unusual, but nevertheless significant. Decisions made in the Senate can affect everything from taxes to relief bills, so which party ends up with the majority will undoubtedly have a direct effect on your wallet. Here’s how things could play out if either party is in control.
No Matter Who Is in Control, It Won’t Have Much Effect on Stock Performance
Republican control of the Senate does not equate with better stock market performance, according to Robert R. Johnson, Ph.D., professor of finance at the Heider College of Business at Creighton University in Omaha, Nebraska.
“The idea that Republicans are the party of business is certainly not borne out by the empirical data,” he said. “From 1929 through 2019, the annual returns of the S&P 500 during a Democratic presidency was 14.68%, almost double that of a Republican presidency at 7.59%.”
Johnson said that Federal Reserve actions, rather than who has control of the White House or Senate, are the best indicator of how the markets will perform, even if there is a temporary disruption. “The bottom line is that if you have a long-term time perspective, don’t worry about the influence of politics on the markets,” he added.
Another Stimulus Check May Arrive in 2021
Mitch McConnell would maintain his position as Senate majority leader if Republicans stay in control. Though he claimed last year that passing a second stimulus bill by the end of 2020 would be a Senate priority – famously stating “let’s get this done” – he ultimately served as the hold-out who prevented stimulus payments over $600 from passing the Senate in December.
President-elect Biden has indicated that a third stimulus check is on his agenda following his inauguration, and if Democrats are in charge of the Senate, it’s very likely Americans could see bigger payments soon.
If the President and Senate Are From Different Parties, It’s Likely No Major Changes Will Occur
If the upcoming Biden presidency is paired with a Republican-led Senate, Wall Street analysts said that this split will likely translate to no major changes for taxes, climate policy or healthcare, The Washington Post reported.
Taxes Will Likely Rise Under a Democratic Senate
If opposing parties control the Senate and the White House, it’s possible that no significant legislation will pass, but now that former Vice President Joe Biden has been elected, if Democrats take control of the Senate, this could have implications for your taxes, said Dan Simon, retirement planning advisor at Daniel A. White & Associates in Middletown, Delaware.
“It is likely that we will see an increase in taxes across the board to fund massive government spending,” he added.
Taxes Would Probably Remain Low Under a Republican-Controlled Senate
If Republicans maintain power in the Senate, taxes wouldn’t be as likely to rise, Simon said, though at the time he spoke with GOBankingRates in November, it wasn’t yet clear whether Joe Biden had won the election.
“A Republican-controlled […] Senate would likely strive to move forward with their current agenda of keeping taxes low and focus on consumer-driven economic expansion by putting more money in the working person’s paycheck,” he said.
More From GOBankingRates:
- 19 Effective Ways To Tackle Your Budget
- Are You Spending More Than the Average American on 25 Everyday Items?
- 30 Important Money Habits for Your Financial Future
- Guns and 32 Other Things You Definitely Do NOT Need To Buy During the Coronavirus Pandemic