Voters in the United States turned out in large numbers to cast their ballots in the midterm elections on Tuesday. With issues such as the economy, abortion rights, and the future of President Joe Biden's policies all front and center.

For the incumbent Republican party, which was seeking to maintain its narrow majority in the House and Senate, the red tsunami that was predicted is looking far less likely.

By the conclusion of election night, Republicans were on course to gain back control of the house, but Democrats hung on to many tight seats, thus averting the slaughter pundits and polls had expected. Election outcomes from the midterms will shape a new Congress that might significantly alter the current economic situation in the US, as we’ll explore below.

The timing and procedures for counting votes vary by state, so it will likely take several days before the overall picture is clear.

The issues

According to polls, the economy, abortion rights, crime, and immigration are among Americans' top priorities right now. The US, like many other nations, is having trouble controlling inflation, which is stuck at 8.2 percent, almost a 40-year high. The US Federal Reserve has sharply increased interest rates as a consequence, increasing the cost of loans, credit cards, and mortgages, which is understandably hurting homeowners especially.

The economy was a major campaign issue for the Republican Party, and President Biden was squarely and often singled out for criticism.

Meanwhile, exit surveys found that abortion rights were a top issue for Democratic voters, as the Supreme Court of the United States reversed a constitutional right to abortion earlier this year. Thus, the matter was returned back to the individual states for further consideration.

Since then, thirteen states in the United States have prohibited abortions in their entirety.

The Democratic Party expected a surge of votes motivated by their fury about the problem based on a national exit survey conducted by NBC that found that 46% of women were "angry" and 20% were "dissatisfied" with the new abortion laws.

Financial and Economic Impacts of the Midterms

Tax Implications

After oil firms made record profits due to rising gas prices this year, President Joe Biden hinted last week that he would be looking to impose a windfall tax on their earnings. Republicans, generally speaking, would be less likely to approve of any windfall tax on oil company profits, as they are usually more in favor of tax cuts as much as possible.

The Debt Ceiling

The debt ceiling was last raised in December 2021, therefore the Treasury will potentially reach it sometime in 2023. This implies it will need to be increased once again to keep the $24 trillion US Treasuries market functioning smoothly and to fund government operations.

The Democrats and the Republicans seem to be on the verge of a clash here, because as a condition for raising the ceiling, House Republicans have hinted that they may demand major cutbacks in spending.

The markets might take a hit if the government ends up being split and if the tense situation persists. When this happened before, under the Obama administration, the United States' AAA credit rating was lowered by Standard & Poor's and the stock market plunged more than 5%.

National Credit Card

When it comes to spending, Democrats have signaled their intention to prioritize extending health coverage and child care tax credits, two items from President Biden's budget strategy announced in 2021 but not yet enacted into law. This might be put on hold if the Republicans win or if Congress remains deadlocked.

It has been pointed out by a number of economists that a Democratic win may lead to a more robust government budgetary reaction in the event of a recession, while a Republican victory would make it more likely that Republicans would avoid expensive relief programs.

Entitlement Programs

Long-term funding for popular programs like Social Security and Medicare has become a political flash point over the years. Analysts warn that because of how carefully everyone is watching the matter, even the discussion of potential adjustments might affect consumer confidence.

In a speech delivered on Tuesday in Hallandale Beach, Florida, President Joe Biden warned that Republicans "are coming for your Social Security and Medicare in a big way."

President Biden spoke at the event, where he discussed the Inflation Reduction Act, which was just passed and would reduce the cost of Medicare prescription drugs for seniors.

But if the Republicans win the election, Biden said, they could try to block such improvements because of their opposition. He also warned of threats to Social Security from proposals by several Republicans, including Florida Senator Rick Scott and Wisconsin Senator Ron Johnson. Both legislators have said they have no ill will toward the initiative.

The Fed

More and more lawmakers are speaking out against the Federal Reserve’s rapid interest rate rises to combat inflation. Elizabeth Warren, Sherrod Brown (D-OH), John Hickenlooper (D-CO), and others have urged Federal Reserve Chair Jerome Powell to moderate the pace of rate rises.

The Republican Party is now actively participating. Top Republican on the Banking Committee, Senator Pat Toomey, urged Powell last week to hold off on purchasing government debt if market conditions continue sluggish. After the elections, there will be increased scrutiny from both parties.

On to 2024

Now that midterm voting is winding down, both parties' emphasis will shift to the 2024 presidential race.

Donald Trump has hinted that he will make a "big announcement” in the coming days, raising the possibility of a rematch of the 2020 election. While Trump remains the presumptive nominee, he seems to be becoming anxious about the development of his young protégé, Ron DeSantis.

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