The midterm elections could paralyze a key instrument of Trump's agenda for the US economy

History suggests that the Republican party would lose control of the House but keep the Senate in the midterm elections, according to Steve Rattner, the CEO of Willett Advisors.
"Every single arrow points to a significant Democratic victory in the fall," he said.
Rattner is basing his forecasts on the historical relationship between a president's approval ratings and the number of seats his party keeps at the midterm elections, and the number of Republican lawmaker retirements.
The implication for Trump's economic agenda, which has so far produced the biggest tax overhaul in decades, is that his administration would lose its ability to achieve any similar feat through legislation, Rattner said.

The pollsters, the pundits, the betting sites, and even President Donald Trump's Twitter account are just a few of the sources for predictions for the 2018 midterm elections.

But Steve Rattner is transfixed on his charts.

The former private-equity investor and Task Force on the Auto Industry is predicting that Democrats will take control of the House of Representatives while the GOP retains the Senate.

"The data just seems unbelievably compelling," Rattner told Business Insider in a recent interview.

The implication for Trump's economic agenda, he said, would be a glass-half-full-half-empty situation that would paralyze Trump's ability to achieve anything through the legislature.

"He would not be able to get a bill passed — essentially, all legislation would probably stop," Rattner said.

"If this were a couple of decades ago, the two sides would recognize that they have to work together and they'd produce a bunch of compromise legislation. In this environment — and this is what you saw under Obama after he lost control of Capitol Hill — I think it's more likely that legislation would just simply stop."

Trump, however, would still have administrative apparatus under his control. The Environmental Protection Agency, for example, has moved to roll back fuel efficiency rules enacted by the Obama administration.

Trump would also retain the power of his pen, through executive orders.

The flipside is that a future president could undo those actions with strokes of their own pen. So far, Trump has signed 54 executive orders on average per year, the highest number since Jimmy Carter was president, according to data compiled by the University of California Santa Barbara.

The charts

First is the correlation between a president's approval rating and the number of seats his party loses during the midterm elections. The lower the approval rating was, the more seats were lost. And, only three times since the Civil War has a president's party gained seats during a midterm election.

The red boxes on the chart below represent a midterm election, plotted by the president's approval rating and the number of House seats gained or lost. Based on Gallup's approval rating, at 39%, Rattner sees the GOP losing as many as 60 seats.

The other factor that Rattner believes plays to Democrats in this election cycle is the number of resignations from the Republican party. The chart below shows that Republicans are exiting Congress not just in greater numbers than Democrats, but at a rate not seen since at least the mid-1970s.

Rattner further observed that the majority of incumbents — 85% on average — are reelected, adding to his view that the exodus of Republican lawmakers would be costly in November.

"Every single arrow points to a significant Democratic victory in the fall," Rattner said.

"Trump will be able to continue to try to do things administratively," he said. "But his ability to do anything legislatively — to pass another tax bill, for example — will be zero."