Former Trump senior economic adviser Steve Moore argued on Tuesday, the day voters in Georgia head to the polls for the Senate runoff elections, that a Democratic sweep could lead to the Dow Jones Industrial Average dropping by 1,000 points.
“I looked at the evidence of what’s happened in the last 60 years or so with respect to the stock market in terms of three different scenarios: One is Republicans control everything in Washington, the second scenario being Democrats control everything in Washington, the third being divided control of power and in general the best scenario for economic growth has been when you have divided power,” Moore said.
“The worst scenario over the last 50 or 60 years is when Democrats have control over all the levers of power so I would think the historical record is pretty clear on this, that a Democrat sweep tonight would be bad for markets,” he continued.
The Georgia races will determine control of the Senate. If both or one of the Republicans win, the upper chamber can serve to check Democrats’ legislative agenda. If both Democrats win their dogged fights, Vice President-elect Kamala Harris can cast a tie-breaking vote.
Moore acknowledged on Tuesday that he doesn’t think Democrats will gain control of the Senate, but noted that it was possible given the “races are looking pretty close.”
Biden has pledged to impose new taxes on corporations and wealthy individuals earning more than $400,000 annually, but he will almost certainly face a GOP roadblock if the Democratic candidates in the Georgia Senate races lose on Tuesday.
Biden has repeatedly said he would roll back President Trump's 2017 Tax Cuts and Jobs Act and raise the corporate tax rate to 28% from 21%, restore the top individual tax rate to 39.6% from 37%, tax capital gains as ordinary income, cap deductions for high earners, expand the Earned Income Tax Credit for workers over the age of 65 and impose the Social Security payroll tax on wages above $400,000. Without a Democratic-controlled Senate, those tax hikes are likely off the table.
But should the runoffs end with a Democratic victory, the incoming president will have more leeway to implement his agenda, which includes higher income tax rates, an expansion of the payroll tax for Social Security, new tax credits and fewer deductions, as well as another round of massive government spending.
“The other thing to look at is, people are calling this the $2 [trillion] to $3 trillion Senate races and that’s because I do believe that if Democrats win these two races they will feel that they have a mandate from voters to move forward with a pretty left agenda and that will start with a big, big stimulus plan in January,” Moore said.
The $900 billion coronavirus package, which was significantly smaller than the House Democrats’ $2.2 trillion stimulus bill voted on in October, will send a $600 direct stimulus payment to most Americans, along with a new round of subsidies for hard-hit businesses, restaurants and theaters.
Many Democrats have favored raising coronavirus stimulus payments to Americans to $2,000 from $600. The bill to increase the size of the checks was approved before Christmas in the stimulus package passed by the House of Representatives by a narrow margin.
Senate Majority Leader Mitch McConnell has said Democratic leaders sought to push through a package that would vastly increase the national debt and provide money to families that are not in dire need of aid.
FOX Business’ Megan Henney contributed to this report.