Election Watch 2026

The likelihood that Republicans retain their narrow House majority is low, given the usual midterm penalty for the president’s party and the president’s low job approval rating. Redistricting will benefit Republicans but is unlikely to fully offset the party’s low favorability.

Fiscal
Republicans likely attempt to use reconciliation to achieve targeted spending goals and tax cuts, but narrow majorities and wide budget deficits curtail ambitions. Fiscal drag from cuts to Medicaid and food assistance programs would take effect after the midterms as scheduled. Small growth in annual budget spending continues.

Transportation and energy
Continued Republican control after the midterms could lead to Democrats accepting the current permitting reform package and passage during the lame duck session before the next Congress is sworn in. If permitting legislation is unable to pass in the lame duck period, Republicans are likely to propose similar legislation next year knowing that Democrats will have lost their negotiating leverage. A continued push away from renewable energy sources, such as solar and wind, is likely from the administration though a bipartisan bill could minimize the negative impacts to those industries. Renewable energy tax credits that survived the One Big Beautiful Bill Act will be tough to repeal, and fees and taxes on EVs are unlikely, though they will continue to be negotiating points. Fiscal energy and transportation policies would be possible for Republicans to accomplish in a partisan fashion via reconciliation; however, larger policy decisions will need to be bipartisan in order to clear the 60 vote threshold in the Senate.

Trade

Unlikely to see Republicans mount a challenge to the president's trade agenda, consistent with the first two years.

Debt limit
Fewer fireworks over raising the debt ceiling under unified Republican control of government, even if some members demand deeper spending cuts under reconciliation as part of any agreement.

Artificial intelligence (AI)
The priorities in President Trump’s National AI Legislative Framework continue to be brought up in Congress; however, the need for 60 votes in the Senate means success is unlikely. Federal preemption of state AI laws will still be a policy priority for Republicans.

Housing
Republicans would oversee implementation of the bipartisan 21st Century ROAD to Housing Act. The agenda would likely emphasize supply expansion, streamlined permitting, manufactured housing, financing reforms, and a possible increase in the capital-gains exclusion for sales of primary residences.

Democrats face a tougher uphill climb in the Senate where they would need a net gain of four seats to obtain a 51-seat majority. Recall that VP Vance remains the tie-breaker in a 50-50 Senate. Battleground states held by Republicans include Alaska, Iowa, Kansas, Maine, Ohio, North Carolina, and Texas. Battleground states held by Democrats include Michigan and New Hampshire.

Fiscal
Partisan differences complicate budget appropriations and effectively remove the possibility of using reconciliation to achieve fiscal goals. There is higher risk of government shutdowns and debt limit brinkmanship, but some potential for bipartisan agreement to postpone planned spending cuts to social programs in exchange for higher defense spending. Potential for 5% increases in the annual budget.

Transportation and energy
A bipartisan permitting package becomes trickier if it does not pass in the lame duck session. While still possible, the changing of committee chairs means the new chairs will want to have their input, and are unlikely to accept the deal as written. Additionally, the longer the package takes, the more the focus will turn toward the 2028 presidential election. Both parties will be reluctant to cut large deals close to the election, and the candidates vying for their parties’ nomination will have their own goals and policy platforms. A divided Congress would likely preserve more environmental safeguards, and a point of bipartisanship could be around making data-center developers bear grid and infrastructure costs. Nuclear energy is likely to retain bipartisan support.

Trade
Substantive Democratic efforts to challenge the president's trade authority are not likely to reach the Senate floor for a vote. House Democrats are likely to increase oversight on the administration's use of tariffs, including more frequent hearings with US Trade Representative Jamieson Greer.

Debt limit
Greatest potential for conflict over lifting the debt limit likely brings deadline down to the wire as in earlier episodes, rekindling concerns over technical default risk.

Artificial intelligence (AI)
House Democrats would exercise oversight of AI companies. Legislation on data-center permitting and electricity costs has moved beyond a conceptual stage: the House Energy and Commerce Committee advanced a package in August. A divided Congress could therefore pursue a narrower bipartisan deal that speeds permitting while assigning more grid-upgrade costs to data-center developers, although final enactment remains uncertain.

Housing
Republicans would oversee implementation of the bipartisan 21st Century ROAD to Housing Act, but a divided Congress would make the path bumpier. The agenda would likely emphasize supply expansion, some permitting reform, manufactured housing, and financing reforms.

The potential for a Democratic sweep has increased since the start of the Iran war and as the president’s job approval falls further. In the Senate, Democrats are likely to retain all of their existing seats and flip North Carolina. Additional gains would require current Democratic polling advantages in toss-up races to sustain a massive ad blitz in the final weeks of the campaign. A Democratic majority in the Senate would constrain legislation without the consent of the minority except for judicial appointments, presidential nominations, and budget reconciliation.

Fiscal
Democrats use reconciliation in an attempt to postpone or reverse Medicaid and food assistance cuts enacted to fund 2025 tax cut package. President Trump would likely veto such a package, but it could serve as a starting point for negotiations. Republicans agree to compromise on increased defense spending, leading to wider deficits and less fiscal drag. Democratic push for higher taxes likely faces insurmountable obstacles. Potential for 5% increases in the annual budget.

Transportation and energy
Democrats pass legislation focused on restoring tax credits for energy efficiency and renewable energy, which will likely be vetoed by President Trump. The potential for a bipartisan compromise still exists after partisan attempts fail. Democrats may also hold oversight hearings on energy companies in an attempt to discern the reason for the rising costs of energy and to persuade voters that it is largely due to the Trump administration’s actions.

Trade
Without a veto-proof majority, Democratic challenges to the president's trade agenda are unlikely to become law. If US Trade Representative Greer were to leave his position, his replacement would require a confirmation vote in the Senate, which becomes much more complicated in a Democratic Senate.

Debt limit
Debt limit deadline forces agreement between White House and Congress on a package of increased defense spending and postponed cuts to social programs enacted in the 2025 tax cut legislation. Democrats will likely float the idea of getting rid of the debt limit entirely. This is likely still a low probability occurrence; however, President Trump has previously called for the removal as well.

Artificial intelligence (AI)
Without a veto-proof majority, Democratic priorities are unlikely to advance. However, there will be interest in passing messaging legislation designed to protect American workers and hold AI companies accountable for the actions of their platforms. If polling continues to find Americans' opinion of AI souring, this will likely become a potent issue in the Democratic presidential primaries with candidates who are sitting senators introducing anti-AI legislation.

Housing
The Trump administration would continue to oversee implementation of the bipartisan 21st Century ROAD to Housing Act; however, Democrats will have the ability to pursue additional affordability measures. These could potentially include restrictions on large institutional landlords and stronger tenant protections. Measures beyond the enacted supply-and-finance package would still face President Trump's veto unless negotiated as a bipartisan compromise.