Perhaps there’s one thing that most voters—Democrat, Republican, and Independent—can agree on: gridlock is bad. The dysfunction of deeply divided government, writ large in the 118th Congress’s struggle to elect a Speaker, does a disservice to all Americans.
And yet, there’s one thing that thrives on governmental gridlock: the market.
Historically, the stock market likes to see a relatively even split between red and blue on Capitol Hill. To the extent that 2023’s expected recovery from a Bear Market benefits the U.S. economy as a whole, it may be a silver lining to the turmoil we see on the House floor.
But what about Republicans’ threats (largely from the “Freedom caucus”) to oppose raising the debt ceiling, potentially precipitating another government shutdown, and/or defaulting on the National debt? Don’t lose any sleep over these rumblings—historically, they’re hollow.
Legislators’ desire to stay in power (and continue to be paid) tends to outweigh their impulse to burn the house down, taking their influence and livelihood with it (assuming, of course, that we’re dealing with rational actors). To borrow from Shakespeare, their apocalyptic threats are most likely much ado about nothing…
So, whereas our current case of gridlock isn’t cause for celebration, it may not be all bad. Whereas “Main Street” has good reason to condemn it, Wall Street may actually be breathing a sigh of relief.