Automatic translation: Originally published in Finnish 10/11/2026, 05:54 GMT. Give feedback here.

The Democrats took control of both the House of Representatives and the Senate in the midterm elections, and the voters' message was clear: the economy must work for the average citizen.

The economic picture is not flattering. The share of wages and other labor income in national income is at its lowest in the 80-year history of statistics, and mortgage rates of around 7% prevent many from buying their own home. An average of 137,000 jobs have been created per month in recent months, but hiring has slowed down, and many cannot find full-time work in their own field.

US: Mortgage applications and interest rates

Source: LSEG

What Democrats cannot do

In this election, too, the promises were grand but impossible, as many of Congress's voters' wishes are not implementable by legislators. Congress's key tools, taxes and spending, are slow processes, and President Trump still holds a veto power that the Democrats cannot override. For example, a vote to repeal Canadian tariffs is being prepared in the Senate, but a broader restriction of the president's tariff authorities will likely be left to the next administration. Congress is hardly able to quickly end the war in Iran, which is crucial for energy prices. The price of gasoline may remain high even after the end of the war, as it is determined on the global market. Neither can Congress influence interest rates, as those are decided by the Fed.

What Democrats can do

One of the first goals for House Democrats is to reverse the Medicaid cuts and healthcare subsidy reductions implemented by Trump last year. The new Congress will convene on January 3, and the party is preparing a 100-hour and 100-day program for the occasion. Also on the table are raising the minimum wage and strengthening the position of labor unions. Following the election defeat, some Republicans may be more willing to cooperate. This is already signaled by the bipartisan-supported easing of permit processes, which could increase energy supply and decrease prices.

At the state level, or locally, there is more leeway. Democrats won the governorship and a majority in both chambers of the state legislature in at least six states. For example, the new governors of Texas, Ohio, and Georgia promised to restrict the construction of data centers. Meanwhile, Michigan's new governor plans, among other things, to establish a body to oversee drug price increases and introduce a USD 5,000 tax credit for family caregivers.

As I wrote last week, from an economic perspective, a blue wave primarily means tighter regulation and supervision, not an economic turnaround. For the markets, the key factor is that a Democratic-majority Senate will reinforce the Fed's independence. There are risks, too. If the expansion of subsidies is not funded, it could accelerate inflation and increase the deficit, which would push interest rates up further. Some economists consider narrowing the deficit to be the most effective way to curb inflation. Restricting data centers, on the other hand, could slow down the AI boom, which has driven both the economy and the stock market. At worst, it would strike at the very voters who are demanding the restrictions. The sharp decline of the Nasdaq last Thursday showed that the market is taking the risk seriously.