{"text":[[{"start":5.36,"text":"The writer is the Rene M Kern professor of practice at Wharton School, chief economic adviser at Allianz and chair of Gramercy Funds Management"}],[{"start":14.56,"text":"Now that they have flipped control of the US Congress in a dramatic fashion at last week’s midterm elections, Democrats face the challenge of how to deploy their new clout."}],[{"start":23.8,"text":"If they wanted a reminder of the difficulty of the task at hand, the current turbulence in stock markets has provided it. The Democrats not only have to navigate possible presidential vetoes of their economic policies but avoid fuelling long-term instability in markets."}],[{"start":39.36,"text":"They will need to convince investors that they can work with President Donald Trump to deliver growth and improve affordability; take a smart stance on AI safety, financial stability and fiscal sustainability; and facilitate US global leadership. And all this while navigating a structurally uncertain domestic and global landscape."}],[{"start":59.4,"text":"The importance of the task is underscored by how sensitive the economy is to the stock market. The bull run, which passed its four-year anniversary last month, has supported the economy by boosting wealth and, therefore, the spending power of the better-off segment of the population; facilitating funding for companies’ investment and employment plans; and attracting global capital."}],[{"start":80.72,"text":"While the AI trade has stumbled, quite a few investors seem comfortable viewing this as a buying opportunity for the “rotation trade” rather than a reason to exit the market."}],[{"start":90.24,"text":"To turn this hope into reality, the Democrats will need to deliver on four fronts. First, restrain administration policies that, over the past two years, have created significant investor unease, such as the attacks on the autonomy of the Federal Reserve and the volatile use of tariffs."}],[{"start":107.24,"text":"The former is easier now that the Democrat-controlled Senate will be able to block blatant political appointees to the Fed board. This reduced risk of the weakening of the central bank’s political autonomy could also open the way for Jay Powell, the former chair, to step down from the Fed board before his term officially runs out in January 2028 if he so desires. Tariffs will require deals with the president but Democrats might be aided in making the case for less use of such levies by the clear concerns over inflation among the electorate."}],[{"start":136.96,"text":"Second, facilitate a step increase in growth potential in ways that enhance living standards, reduce inequalities of opportunity and help address secular challenges such as climate change. This includes avoiding stifling AI, whether its frontier development or in its diffusion throughout the economy."}],[{"start":156.16,"text":"While it’s right to want to moderate the administration’s “let it rip” approach to AI, this should be done constructively and carefully, given the technology’s potentially crucial contributions to economic wellbeing and national security. Rather than banning data centres, for example, Congress and state governors need to focus on their safe development while engaging with tech leaders and other corporate executives to boost the labour-enhancing aspects of AI over job displacement."}],[{"start":183.72,"text":"Such engagement is also important for the third area: enhancing AI safety, financial stability and fiscal sustainability. As I argued in a recent joint article with Alex Imas and James Manyika in Foreign Affairs, public-private partnerships hold the key to formulating the needed standards, regulation and governance for AI safety. Similarly, they help minimise the risk of repeating the Biden-era regulatory over-reach."}],[{"start":209.96,"text":"The new Democratic-controlled Congress will also need to work with the Administration to address structural budget deficiencies that put pressure on expenditure, erode flexibility and make the fiscal regime less growth-friendly. This will involve particularly tricky trade-offs in health, where Democrats’ desire to expand access to affordable healthcare must be matched with sufficient revenue generation or cuts elsewhere."}],[{"start":233.44,"text":"The more the Democrats succeed in these areas, the greater the scope for progress on the global stage. By demonstrating policy predictability and engagement, the US still has an opportunity to restore its standing as a global leader capable of informing and influencing better outcomes elsewhere."}],[{"start":250.8,"text":"For Democrats, this is not just about translating their dramatic midterm wins into strong, multiyear outcomes for the economy and markets. It’s also about ensuring their victory isn’t fleeting and positioning the party for the bigger prize in the 2028 presidential election."}],[{"start":267.1,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794210507_2204.mp3"}