New Majority Situation in the US House of Representatives Could Slow Growth

The Republican takeover of the US House of Representatives could slow economic growth in the United States, suggests the ifo Institute’s historical analysis of data gathered since 1861. “Economic growth averaged about 4.2 percent per year when the President and the majority of representatives in both chambers of Congress belonged to the same party,” says ifo researcher Niklas Potrafke. “Under a divided government, when Congress was not held by the President’s party, the figure was only 2.6 percent per year.”

When the House of Representatives and the presidency were controlled by different parties – as is currently the case – the gap was especially wide (2.8 percentage points). The House of Representatives has the power to introduce budget and tax legislation and has several regulatory powers with regard to the President. While the Senate cannot introduce budget and tax legislation itself, it has more regulatory powers than the House. “Since the Republican majority in the House of Representatives can influence policy decisions, it could reverse some of the expansive economic policy typically instituted by the Democrats. To what extent these historical patterns repeat themselves will become clear over the next two years,” Potrafke says.

The study compared periods of divided government with periods when the President’s party held the majority in both houses of Congress. Between 1861 and 2021, the United States had one party controlling both Congress and the presidency in 89 years and a divided government in 72 years.