Although democrats won majorities in the House and Senate in Tuesday’s midterm elections, the shift in power could change how Washington approaches tariffs, energy prices, and regulation and dealers could feel the effects. On today’s edition of CBT Live, Dan Varroney, Founder of Potomac Core and Author of Rethinking Economic Growth, breaks down what the results could mean for auto dealers.
According to Varroney, voters made it clear they want change on affordability and prices. Wage growth of about 3.2% year over year is trailing inflation of about 3.7%, which limits what customers can afford to spend at dealerships. He adds that the Federal Reserve will need to hold the line on interest rates at its meeting next month and energy prices have to come down. Further, Democrats campaigned on ending the war, and the War Powers Act gives Congress a way to compel the president to end it, he said.
Tariffs, energy, and housing leave room for negotiation between the White House and Congress, Varroney said, noting that the president is a dealmaker. Regulatory and permitting reform could benefit dealers and small businesses, although he worries Congress will go “to the max” on oversight. EV incentives and emissions standards may remain sticking points unless included in a broader deal, he said, noting that political uncertainty is at its highest point since the Obama administration, while regulatory agencies wield outsized power.
Ultimately, Varroney said Republicans missed the message because they ignored polls that flagged affordability and tariffs as problems and offered no concrete proposals. History shows divided government works when both sides compromise. Varroney pointed to Reagan after the 1982 midterms and to the Gingrich-Clinton compromise. Moving forward, he said Democrats must deliver rather than refuse to negotiate, which he said would be a mistake for them and hurt the country.