By Shashank Pattekar, International Banker
Democrats won majorities in both houses of the US Congress, the Senate and the House of Representatives, during the November 3 midterm elections. Living costs and the US–Israeli war with Iran were prominent concerns among American voters. According to exit polls conducted by research firm SSRS on behalf of major news organisations, almost nine in ten identified living costs as a crucial or major influence on their vote.
Responding to those cost-of-living concerns, Suzan DelBene, chair of the Democratic Congressional Campaign Committee (DCCC), outlined the party’s commitments. “House Democrats will fight to lower costs, make health care affordable for every American, and end the reckless war in the Middle East,” DelBene promised in a November 4 statement. “We know how precious the trust given to us by the voters is, and as soon as the 120th Congress gavels into session—we get to work.”
Although Democrats’ congressional majority gives them significant control over which spending bills advance, Republican President Donald Trump still retains his veto over legislation. Delivering on their promises, therefore, will require successful negotiations with the president over key issues, including healthcare funding, tariff changes and military spending. Indeed, the outcome of those negotiations could have profound implications for American household bills, as well as for trade, energy and borrowing costs globally.
Healthcare is central to Democrats’ affordability programme. House Democratic Leader Hakeem Jeffries has pledged to restore larger federal subsidies for people buying their own health insurance under the Affordable Care Act (ACA). Those subsidies cover a share of households’ health-insurance bills, so the pledge aims to reduce the amount they spend on insurance.
According to research organisation KFF, the loss of enhanced ACA support at the end of 2025 “sharply increased” what people have had to pay towards premiums. “The total cost of marketplace insurance also is on the rise, with insurers seeking a median premium increase of about 15% for 2027,” the independent health-policy research organisation stated in an October 6 assessment. “While the remaining tax credits will protect most enrollees from the full impact of next year’s premium hikes, those with higher incomes who are no longer eligible for financial assistance would have to pay the full costs.”
Those higher healthcare bills have competed with households’ spending on necessities. In a KFF survey published in March, 55 percent of people who renewed their ACA coverage said they were cutting, or planned to cut, spending on food or basic household items to afford coverage and care.
Alongside his ACA subsidy proposal, Jeffries has pledged to reverse spending cuts to Medicaid, the public health-insurance programme funded by federal and state governments that serves low-income people. The proposed relief for Americans would therefore require Democrats to negotiate with Trump to restore federal healthcare funding.
Democrats’ efforts to lower household bills will also include challenging the tariffs Trump levied on imported goods, which US importers pay at the border, thus adding to the costs of supplying American shops and factories.
Democrats’ efforts to lower household bills will also include challenging the tariffs Trump levied on imported goods, which US importers pay at the border, thus adding to the costs of supplying American shops and factories.
“We find that for every percentage point increase in average tariffs, consumer goods prices increase by about a quarter of a percent after one year,” Federal Reserve Bank of New York economists Mary Amiti and Sebastian Heise, with Columbia University Professor of Economics David E. Weinstein, noted in an October 6 study of non-oil consumer goods prices and markups—the amount producers charge above production costs. “Roughly two-thirds of the effect arises because tariffs raise the prices of imported consumer goods. The remaining third arises indirectly: tariffs increase the prices of goods made in the U.S. because producers pay more for imported parts and materials, and because producers raise their markups when competing imports cost more.”
Post-election reports suggest consensus has not yet formed on how broadly they should repeal Trump’s tariffs. Indeed, Democrats have even backed tariffs previously to protect selected US industries. For example, the administration of former Democratic President Joe Biden increased duties on Chinese-made electric vehicles to 100 percent in 2024.
Democrats’ tariff plans face another obstacle in Trump’s veto power, which may ultimately limit the success of meaningful tariff amendments. “The swing in Congress, the results of the election, are very unlikely to have a significant impact on the president’s trade agenda and the tariffs that are in place,” Blake Harden, managing director for trade policy at Ernst & Young’s Washington Council office, explained to Reuters. “This is because there is so much trade authority within the executive branch that’s been delegated by Congress.”
Democrats’ approval will be required for legislation funding federal departments and agencies, giving them a bargaining tool in talks with Trump. Much of the post-election analysis identifies these negotiations as an opportunity to seek tariff concessions. Their pledges also affect the budget: Larger healthcare subsidies increase spending commitments, while tariff cuts remove some of the tax currently charged on imports.
The US government already spends substantially more than it collects in revenue. According to the Congressional Budget Office (CBO), the federal budget deficit totalled an estimated $2 trillion in fiscal year 2026, $218 billion more than in fiscal year 2025. “Although revenues rose by $169 billion (or 3 percent), outlays rose more—by an estimated $386 billion (or 6 percent),” the CBO added in its October 8 preliminary review of the 2026 fiscal year. “Outlays increased for net interest on the debt, major benefit programs, defense, and education, among others.”
Government bond yields—that is, the returns demanded by investors—help determine the cost of new borrowing.
Borrowing to cover that deficit also adds additional interest payments to the government’s spending bill. Government bond yields—that is, the returns demanded by investors—help determine the cost of new borrowing.
“Several forces are pushing yields higher in advanced countries, including: the oil price shock, persistent inflation, stronger investment demand, and higher expected future growth linked to AI. But fiscal fundamentals are central,” the International Monetary Fund’s (IMF) Fiscal Affairs Department director, Rodrigo Valdés, and deputy director, Era Dabla-Norris, noted in an October 15 blog post. “In major advanced economies, high debt, spending pressures, and the prospect of large bond issuance in the years ahead are putting upward pressure on the yields investors demand to hold longer-term bonds. Higher benchmark yields in major economies can also spill across borders, worsening debt dynamics elsewhere.”
The budget decisions facing Democrats and Trump also influence what other governments pay to borrow dollars, with borrowing rates generally priced against US Treasury yields plus an additional return demanded by investors. The World Bank’s October 2 analysis found that this additional return narrowed between late February and mid-September, partially offsetting higher Treasury yields.
After the Democratic victory, the US 10-year Treasury yield fell by 0.06 percentage points to 4.89 percent on November 4, as lower oil prices and expectations of limits on additional US spending encouraged investors to buy Treasuries. Saudi and Qatari government bond prices issued in dollars also rose, implying lower yields on that debt. Investors have already been repricing US and foreign government borrowing ahead of Trump and the incoming Democratic majority reaching a spending agreement. Global borrowers will thus be keen to follow Washington’s forthcoming budget decisions under the new Congress.
Democrats are also seeking to use Congress’s spending powers to end the US–Israeli war with Iran, with Senate Democratic Leader Chuck Schumer reaffirming that pledge on November 4. Starting in January, their majorities will control which military funding bills advance, giving them greater influence over financing US operations.
Brent crude futures fell by 8.7 percent on November 4, as traders responded to the prospect of stronger congressional opposition hastening an end to the war. If hostilities end sooner, businesses globally could reasonably expect lower fuel prices to materialise. Shares in Indian airline IndiGo, for example, rose the following day as investors anticipated lower fuel bills and stronger profits.
Nonetheless, those anticipated fuel savings will largely depend on reducing disruption to oil production and transport. “A recovery in Middle East oil supply was well underway in September, with Gulf crude oil exports approaching pre-war levels,” noted the International Energy Agency’s (IEA) “Oil Market Report” (OMR), published on October 14. “However, the recent escalation in attacks on regional energy infrastructure and tanker traffic is threatening to derail further gains. At the same time, record tanker rates raised crude delivery costs and eroded refinery margins.”
Democrats’ opposition to the war with Iran also brings military assistance to Israel into the congressional funding debate. Their majority gives them greater influence over future assistance and the conditions attached to it. Lasting relief for fuel users, however, also requires military and diplomatic decisions to be taken by Trump, Israel and Iran; changing the degree of US financial support alone does not ensure safer oil production and shipping from the Persian Gulf.
Ultimately, much depends on how successfully Democrats can negotiate with Trump to implement their agenda. Josh Lipsky, the Atlantic Council’s vice president and chair of international economics, suggested on November 4 that, with major showdowns ahead over funding the government and lifting the debt ceiling, “Don’t be surprised to see some deals in the coming year” that increase spending and deficits.
That warning makes the financing of any agreement with Trump central to the election’s economic outcome. Democrats must negotiate both the scale of the household assistance and how it is covered—through fiscal revenues, cuts in other spending or borrowing.
Their pledges on tariffs and the Iran war address another source of relief: reducing the import and fuel costs that businesses and consumers pay. Lasting improvements in living standards require progress on those costs alongside an agreement on financing household support.