Midterms: What Does an Overhauled Congress Mean for Gas Prices, Healthcare, Tariffs?

Hey everybody, it's Gene Marks, and welcome to this week's episode of the Paychex THRIVE Week in Review. This is where we take some news out of the current news and we report on it to you and also explain how that impacts your small business and mine.

Now, before we get started, it's never too late to think ahead when budgeting for your business. So, did you know that there will be 53 weekly pay periods in 2027? 53! How about the difference in total number of pay periods depending on when your first weekly payday is in the new year. The Paychex Payroll Calendar answers those questions, plus how to plan for the three-paycheck months and offers guidance on what might be the right pay period for your business.

So, check out go.paychex.com/yecalendar. That's P-A-Y-C-H-E-X forward slash Y-E calendar. The link is in the show notes.

Now let's get into this week's show. And of course, the big news is the midterm elections, and it did not go well for President Trump and for the Republicans. Voters delivered an astonishing rebuke to President Trump and his party on Tuesday, stripping Republicans of congressional control amid widespread frustrations with the economy and elevating a new class of Democratic lawmakers to power.

The backlash was more stunning than many analysts predicted, with voters taking out their anger over the war in Iran, the high cost of gasoline and groceries, alleged government corruption, and what many saw as overtly aggressive immigration enforcement. The government themselves found that 9 in 10 voters said the cost of living was a crucial or major factor in their thinking on how to vote, according to results from a poll in the Wall Street Journal of more than 79,000 registered voters.

Now, the media can dissect this over the weeks and the months to come, but the most important thing is how does this impact your small business and mine? What can we expect in the 120th Congress when they take their session in January? What do you think that will do, and where do you want to be? So let me give you some thoughts on where that's going to happen.

For starters, there will be stalemate now in Washington. The president already said, he said this before the election, that he will be Mr. Veto. He is you know facing the same issues that presidents Bush and Obama faced before him, losing Congress in the midterms and having like the President Obama once famously said, he was gonna … he has a pen and he has a phone. And I think that President Trump will be doing the same thing.

So, we can expect no major legislation to be coming out of Washington that will be impacting the economy and businesses over the next two years. In fact, the next two years is really going to be a time where both parties position themselves for the more important presidential elections in 2028.

So, when it comes to your business, the legislation that passed in 2025 for taxes, that's going to be the last big legislation that you're going to be seeing. Although the country really does need more healthcare reform and, of course, immigration reform, those kinds of things can only happen with congressional power legislation that's both a compromise between both the president and Congress, and no one is expecting that to happen.

Now, in addition to that, it is very likely that, it is very likely Congress will be investigating the president, particularly under calls of corruption. So, that is going to certainly be distracting them from doing any other types of legislation, as well. One thing might be of interest is with a Democrat-controlled Congress, it's possible that they might change their rules to allow a filibuster so that, or to disallow the filibuster, so that legislation can be passed on more of a 51-seat vote rather than needing a two-thirds of majority.

But just the bit the big takeaway, for starters, I'm gonna get into some other issues in a second, is that Congress is really not gonna be doing much. Remember, for any bill to become law, you know, both the president has to sign off on it and Congress, of course. The president can veto and Congress can override that veto by two-thirds vote. For most issues, the Congress does not have that two-thirds majority that would override a presidential veto, which basically means that Congress can pass as many laws as they want, but they're going to be stopped at the president's desk.

Now, there are a few things that could get in the way. The first is tariffs. Tariffs have been very, very unpopular among a lot of businesses, and they have impacted relationships with some of our best trading partners like Canada and Mexico, and the president has really had a real a real thing about tariffs over the past two years. Well, he has implemented tariffs under certain laws, as we know, one of his biggest tariffs under the Emergency Powers Act was overturned by the Supreme Court. He is still moving forward with other tariffs, as well. And really, even amongst his own party, tariffs have been unpopular.

So, when we look at potential legislation that could pass, could actually override a presidential veto, the tariff issue is the one issue that I think that it really could happen, which means that if the president continues down his path of implementing tariffs, and again, this is not to discuss whether or not it's right or wrong or whether you agree or not, the issue is that will Congress step in and do something about it?

And now, because of the Democrats' power in Congress, and because there are a number of Republicans that are against tariffs, it is not inconceivable that Congress could vote to overturn some of the president's tariff legislation or tariff actions that he wants to take through legislation in the last two years of his term. So. keep an eye out for that. If your business is affected by tariffs, there really could be a bit of a silver lining in this, a little bit of bright light for you, because it could rein the president in on doing this.

The other thing is oil prices and the war going on in Iran. Oil prices have impacted all of us across the country. It's not just the price of gas at the pump, but also, you know, the price of petroleum and petroleum-based products are in many of the things, the materials that businesses sell, and we have all seen significant increases in those prices, particularly because of the war in the Middle East.

Now, again, I'm not saying whether you agree or disagree with the war in the Middle East, but what will happen is that Congress can take away the funding of this war. So, the president still has the ability to wage war. He is the Commander-in-Chief of the military, but whether or not Congress gives him the money to implement the war, that's a whole other story. And again, because the Democrats, the opposition party, control Congress, they will hold back those purse strings, which will severely limit the president's ability to wage war. That would begin in January. He still has another two months to do whatever military operations he wants to plan and to do until then, which means oil prices are going to remain volatile.

But with the president hindered and unable to get the funding needed to move forward with this war after January could bring an end or a compromise to this war if we haven't, if there isn't a military outcome, and therefore that could bring more stability to oil prices, petroleum costs, and overall inflation.

Having said that, not a lot that Congress can do when it comes to controlling inflation. We've talked about this on podcasts in the past that a lot of inflation has do not just with the price of oil or supply chain, but just you know government spending and the amount of money that's circulating in the system, among other factors, are contributing to the rise spending.

And even with a Democratic-controlled Congress, not a whole lot is gonna happen on that front over the next two years, which means that although you can expect to see inflation probably be tempered a bit because the war in the Middle East would be tempered, I think that you're still gonna see elevated levels of inflation, three to four percent in my estimate over the next two years, and that's something that we have to prepare for.

Which brings me to the next thing that affects small businesses and businesses of all sizes, which is interest rates. The prime rate right now stands between 7.5 and 8%, depending on where you're looking at. The Federal Reserve declined to increase interest rates in their last meeting, but that option still is out there.

Congress nor the president really has control over what the Federal Reserve does, it really depends on how the economy is doing. If the economy is speeding up too much, or if inflation is getting too high and the Federal Reserve does depend, does want to rein things in, they could increase interest rates again. If the economy, which has been relatively strong, stays at that level and if interest rates are tempered a little bit, the Fed won't take many actions over the next two years. Regardless, that is the Fed's doing. That is not the president's doing, and that is not Congress's doing. So, the Fed itself is going to make those decisions on interest rates.

Where do I think interest rates are going to go? I think they're mostly going to stay around the same levels over the next two years. I think they the days of 0% interest and 2% mortgages are way behind us, and I don't believe that we're going to be seeing them anytime soon, regardless of who has power in Washington, which basically means you can expect as a business to be paying interest rates anywhere in that seven to 9 percent level for business financing, and depending on what your credit history is. Those rates are pretty average among historical interest rates in this country over the past hundred years. The rates that we were all excited about over the past few years when they were below three percent, four percent, those were really somewhat abnormal.

So, the interest levels that we have right now, I think we're gonna be sticking with it, which basically means, regardless of it was power in Congress or the White House, we are going to continue to look at three to four percent inflation and we are gonna continue to look at interest rates in the seven to eight percent era, uh, area. So, if you're making your plans for the next two years, those are things that you want to take into consideration.

Again, we do have big issues with immigration. We do have big issues with taxes still. We do have big issues with government spending and the future of Social Security. I would not expect those to be addressed by Congress over the next two years. I think that you will see Congress passing bills that are going to take a stab at those issues, but it's unlikely that the president is going to sign off on those bills or that there will be enough to override his vetoes.

Now, local impact will be significant. There were many states that saw continued, you know, even more Democrats elected to their state legislatures and to as governors, as well. So, if you are a business that's operating in traditionally blue states like California, Illinois, New York, and others, you can expect to see continuing regulations and things that are, you know, over the workplace environment and some economic regulations as well, like minimum wage.

So, depending on your state, you want to keep a close eye on your state regulations. Those will probably have more of an impact on you over the next two years than anything coming out of Washington. You want to stay close to your advisors, talk to Paychex to make sure that you're on top of your HR and your payroll. So, all of that is good.

So, what is the biggest takeaway from the election for me as a business owner, and for you as a business owner or manager or leader? It's this: You're not gonna see a lot impacting your business over the next two years, which really means that you should be turning off your TV, shutting down your internet, not going to the news sites, and it's tough for me to say that because I'm part of the media, but really this is a period where you're gonna prepare for the years after 2028 because those will be big changes because there will be a presidential election then. This basically means you don't have to worry about any significant national legislation impacting your business.

What you want to be concerned about over the next two years is your business. Assume inflation is going to stay relatively around the rates that we're at now, maybe a little bit lower. Assume that interests are going to also be around the same. And assume that the economy will continue to be relatively strong, barring any other type of big issue that affects markets. You can assume all those going forwards and run your business without really being distracted by what's going on in Washington?

I know for a fact that our political leaders in Washington are really going to be doing the same thing. The next two years isn't going to be about legislation. It's going to be about posturing and preparing for 2028 because the 2028 elections, whoever does win the White House and whoever does control Congress will have more of an impact on businesses and the economy for the years following that.

But like all the cycles here in the U.S., this was one just one election. The next one's going to come up in two years. So, what you want to do is keep your head down, run your business, and prepare for that election in 2028.

My name is Gene Marks, and you have been watching or listening to this week's episode of the Paychex Thrive Week in Review. Remember, you want your year-end compliance to be in order, and Paychex can really help. Go to go.paychex.com/yecalendar to know everything you need to know to be prepared for all the compliance issues that you will face in HR and payroll in 2027.

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Again, thanks very much for watching or listening. We'll see you again next week with more news that impacts your small business and mine. Take care.

My name is Gene Marks, and you've been watching or listening to the Paychex Thrive Week in Review podcast. A few things to take away. First of all, if you are in need of HR or payroll help in your business, consider Paychex. Go to paychex.com/meetpaychex. That's P-A-Y-C-H-E-X.com forward slash M-E-E-T-P-A-Y-C-H-E-X. Please follow this podcast on your podcast platform or on YouTube if you are enjoying the content so you stay up to date on our latest episodes.

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Hope you found this information helpful. I'll be back with you next week with more news that impacts your small business and mine. My name is Gene Marks. Thanks so much for watching or listening. Take care.

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