Wednesday, November 03, 2010

Yes, Gridlock Is An Improvement

As expected, the Republicans made massive gains particularly in the House of Representatives, but also the Senate. As a result, they now have a mojority in the House, and has reduced the Democratic majority in the Senate to a level way below the needed 60% majority needed to overcome filibuster.

Is this good or bad for the U.S. economy? Historically, divided government has often been associated with economic strength, such as in the period of 1995-2001, so most economists believe that this is a good outcome, as bad decisions will be blocked.

But some argue that since this also means that good decisions are blocked, this is nevertheless bad news. However, this alternative view presumes that under the old majority, good policy changes would have been implemented. And as it happened, they weren't. Instead, only bad decisions like the "stimulus" and the flawed healthe care reform were passed.

While no policy changes is worse than positive changes, it is less bad than negative changes. And since a re-election of the old Congress would have meant more negative changes, the new gridlocked Congress is an improvement.