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The 2026 midterms shifted control of Congress to Democrats, giving the party majorities in both the House and Senate. Business leaders should carefully consider the dynamics of this adversarial policy environment in Washington, with Congress gaining greater leverage over funding, nominations, oversight, and the legislative agenda. Major legislation would still face a presidential veto, but Democratic control of both chambers could increase pressure on the administration, slow nominations, and give Congress more influence in negotiations over must-pass legislation.
Divided government means policy change is more likely to come in the form of executive action and agency rulemaking. The administration can continue to advance its policy priorities through executive authorities, particularly on trade, tariffs, immigration, and regulation, while a Democratic Congress can use hearings, investigations, appropriations, and other tools to challenge or constrain those actions. Democrats will also keep an eye to 2028, looking to make the case to voters by putting forward policy proposals on healthcare, affordability, tax, AI, data centers, energy, and the environment. So even though the president can use his veto power, business leaders must be aware this will shape the debate regardless. Congressional oversight could also create additional exposure for some companies, particularly where activities intersect with the administration’s initiatives or priorities.
The geopolitical environment is likely to remain a source of continuity as well as uncertainty as congressional control alone is unlikely to fundamentally redirect trade or foreign policy. Strategic competition with China, pressure on supply chains, technology restrictions, energy volatility, and conflicts outside the country will continue to affect business decisions. Regional instability can quickly spill into energy markets, shipping routes, sourcing, workforce safety, and market access, adding another layer of risk to an already complex operating environment.
For C-suite leaders, the challenge will be to distinguish political friction from changes that materially alter the economics of the business while preparing for greater oversight, continued executive action, and a geopolitical environment that can quickly affect sourcing, investment, market access, and growth.
Contents
Regulatory landscape
The midterm blue wave will have Democrats running both chambers of Congress come January. Look for Democrats to call for policy reforms that contrast sharply with the Trump administration but, without a filibuster-proof Senate majority, sweeping changes are unlikely.
While enforcement actions and monetary fines have generally decreased over the last two administrations, recent high-profile penalties highlight ongoing regulatory priorities. These fines often stem from repeated compliance failures, unaddressed issues, or unmet regulatory commitments, particularly involving national security concerns and legal violations. This underscores that companies still face sustained scrutiny in critical risk areas.
Businesses are likely to see increased congressional oversight as Democrats have expressed concerns about certain executive actions and recent rulemakings from the Trump administration. Both the House and Senate are expected to hold more hearings and increase congressional inquiries.
AI regulation is one area that’s likely to get a lot more attention. Expect hearings and inquiries focused on AI governance, transparency, and risk management in response to growing concerns about the technology’s impact across society and the economy. This scrutiny will probably reach beyond just government agencies to businesses using AI, with higher expectations around accountability and human oversight, especially in sensitive sectors.
In the absence of federal regulations, states are moving forward with their own rules, especially around AI, data privacy, environmental protections, and sustainability reporting requirements. California has enacted a pioneering framework for independent verification of AI systems, setting standards that other states like New York and Connecticut are beginning to follow with their own AI legislation. California has also introduced landmark climate disclosure laws, and Illinois has enacted legislation requiring third-party audits and transparency for AI systems used in hiring. This decentralized flurry adds layers of complexity for companies to navigate.
Alongside these developments, populism remains a persistent undercurrent affecting regulatory and legislative agendas, keeping political and policy environments dynamic and unpredictable. Geopolitical uncertainty, too, continues and will be a defining feature for companies navigating risk and opportunity through 2027 and beyond.
What does this mean for your company?
- Expect increased congressional oversight, including more investigations, hearings, and information requests for federal agencies as well as businesses.
Heightened regulatory focus on AI governance is likely, emphasizing transparency, risk management, and responsible human oversight.
State-level regulatory activity will continue to expand, especially around emerging technologies, data privacy, sustainability, and environmental regulations, creating a more complex and varied compliance landscape. Prioritize strengthening compliance programs and closely monitoring regulatory developments to navigate this evolving environment effectively.
Modernizing compliance through automation and advanced technology is critical. Leveraging these tools can help your company manage growing regulatory demands more efficiently, demonstrate responsible governance, and mitigate risks related to cost-cutting or program adjustments.
Regulatory change tends to take time to materialize. Take this opportunity to improve regulatory change management capabilities and build strong, adaptable compliance frameworks ahead of intensified scrutiny.
Reputational risk is an increasingly important driver of compliance, with businesses needing to demonstrate accountability and build trust with regulators, customers, and stakeholders.
AI adoption and business transformation
Lawmakers on both sides of the aisle want the United States to be the global leader in AI, but the parties have different approaches to regulation. Since the administration controls regulatory agencies and the presidential veto, the president is likely to remain in the driver’s seat. At the same time, business leaders should keep in mind the administration is aware of what appears to be growing public support for stricter regulation of AI, and current events will play a role in the debate next year.
All in all, we expect compromise, most likely around measures such as these:
Guardrails to protect children
Zoning rules for data centers
Rules for monitoring and “sandboxing” frontier AI systems
Requirements for reporting incidents and conducting independent investigations
Know-your-customer (KYC) rules for AI products (to keep out malicious actors)
Holding organizations and perhaps individuals accountable for harmful AI activity
What unites these measures is that industry could support them, the public would likely approve, and they could help address many of the risks currently making headlines.
In part because of such measures, we expect AI’s positive impact to become more apparent. AI may cause productivity rates, GDP growth, and hiring all to surprise on the upside. In particular, the job market for recent college graduates could heat up. This entry-level talent often has the AI savvy and flexibility that many companies will be looking for.
What does this mean for your company?
- Be ready to be reasonable. These measures could help grow trust in AI with society and your stakeholders without slowing innovation down. Consider adopting many such “reasonable” measures (such as guardrails for minors, KYC, and transparent incident reporting) even before policymakers act and be ready to meet the rest.
Update your AI strategy. AI’s advances and adoption will likely accelerate this year. Your company could benefit from an AI strategy that can leverage these advances to drive new growth and dig new moats even as you maintain your legacy business.
Reboot your narrative. Unrealistic, pessimistic AI forecasts have been dominating headlines. It’s time for business leaders to explain to their stakeholders, including employees and customers, how your AI can make their everyday lives better.
Capital, deals, investment strategy
A Democratic House and Senate marks a strong check on the administration after two years of unified government. The headline isn’t sweeping legislation. Little of substance beyond “must-pass” legislation like government funding is likely to pass, the president can veto what he opposes, and the staff running the major regulatory agencies won’t turn over.
Significant tax reforms also remain difficult to realize in this divided government setup. Instead, expect targeted tax provisions around pressing issues like AI taxation, corporate tax, and wage equity as possible late additions to broader must-do legislation. Be on the watch as well for possible bipartisan populist measures that might become law.
Democrats now control both chambers’ oversight machinery: subpoena power, hearing schedules, and confirmation leverage over agency nominees. At the same time, they’ll have limited ability to challenge executive orders and tariffs that courts have, in some cases, questioned.
Divided government is likely to result in a much slower legislative pace, though not a real drop in overall volatility. Congressional Democrats can pass legislation, but the president can veto anything he opposes, which could mean less legislation gets enacted. Day-to-day market swings driven by executive branch actions and headlines will likely persist. Capital allocation stays difficult when company leaders don’t know what tomorrow’s going to hold, and a fully divided Washington does little to change that underlying uncertainty or reduce record levels of federal borrowing.
The more important dynamic to consider perhaps is beyond the two-year horizon. With an eye toward 2028, look for the Democratic House to begin drafting proposals and holding hearings on topics such as carried interest, accelerated depreciation, and incentives for energy and infrastructure. Potential changes are unlikely to become law now but could form a template for after the 2028 elections. Companies will want quiet influence in shaping those frameworks while still working to cooperate with the party that currently holds the presidency. Meanwhile, watch the dollar. Gridlock read abroad as instability can pressure the currency, FDI, and cross-border capital flows.
On antitrust, the picture stays mixed. Federal agency enforcement activity has reduced, but expanded congressional oversight could mean more investigative hearings. State attorneys general have been increasingly active, and multistate remedies may become more complicated as states take different approaches to enforcement. Regulation has also become more complicated across international borders. Those geopolitical shifts are likely to continue no matter what happens in Congress.
What does this mean for your company?
- Senate control over confirmations can stall appointments and prolong uncertainty at agencies that directly shape regulations, enforcement, and deal approvals.
M&A and transaction timelines may face added friction, since regulatory posture—not new law—drives approvals, and any new executive branch political appointments will have to gain the approval of a Democratic-led Senate.
With Washington stalled, large states could increasingly set de facto national standards on key regulatory issues.
Infrastructure, data centers, energy, grid capacity
A Democratic House and Senate ushers in a shift in the political dynamic and presents a legislative check on the current administration after two years of unified government. For companies planning major infrastructure projects though, the broader economic backdrop will likely remain the same: power demand is rising, driven by AI, data centers, advanced manufacturing, and electrification. That’s adding strain to the US power grid and contributing to rising utility bills in some areas. Energy affordability featured heavily in this election cycle, and access to reliable power has become a key operational concern for companies pursuing major infrastructure projects.
Both parties have an interest in prioritizing affordability and reliability even as they continue to differ on how to expand capacity and modernize the grid system. With a divided government, companies shouldn’t expect major legislation to be passed as the president would likely veto any Democratic legislative priorities. That doesn’t mean Democrats don’t have options though.
With control of both chambers, Democrats will have greater ability to set hearing agendas, issue subpoenas, shape appropriations, and influence who gets confirmed to key roles in the executive branch. That could increase pressure on agencies and regulated sectors to focus more on clean energy, transmission, storage, grid modernization, and consumer cost protections while also creating more scrutiny for energy and infrastructure companies.
At the same time, energy may be one of the few areas where narrower compromise between both parties remains possible. Business leaders should plan for a world where federal policy may be slow to change, while prices and affordability could be driven by state governments and regulations, regional grid operators, and executive-brand rulemaking.
Even in a divided government, tax policy will remain central to project economics. Democrats will likely have more ability to protect clean energy and manufacturing credits and to shape how those incentives are implemented through appropriations and oversight.
What does this mean for your company?
- A divided government will limit sweeping legislation, so many of the near-term effects may come through oversight, appropriations, confirmations for political appointments, and agency action rather than new laws.
Greater Democratic control of hearings and subpoenas could increase scrutiny of energy, emissions, infrastructure, and related corporate practices, especially for companies tied to large projects, public funding, or regulated sectors.
Energy may remain one of the more workable areas for narrower compromise, particularly where grid reliability, affordability, nuclear power, domestic manufacturing, transmission, and selected permitting changes intersect.
Companies should keep a close watch on which incentives remain available, which ones come with added requirements, and how those shifts affect the cost of generation, storage, transmission, and other energy-related investments.
Cybersecurity
Cybersecurity has been an area of bipartisan concern, but divided government’s still likely to pose a challenge to federal legislation regarding disclosures, enforcement, or AI safety. The administration’s approach to cybersecurity often differs from that of Congress, including congressional Republicans, which complicates matters further. Even so, administration officials in key positions will continue to shape federal enforcement priorities and regulatory activity without congressional involvement.
Senate control gives Democrats influence over who can get confirmed to key roles in the executive branch so expect increased scrutiny for cyber nominees and officials appearing before Senate committees. A potential top-to-bottom review of the Cybersecurity and Infrastructure Agency (CISA) could examine how leadership turnover and workforce changes and losses have affected readiness. AI evaluation and security are also likely to draw more hearings, oversight, and discussion as debate continues over model alignment assessments, independent evaluators, model vulnerabilities, and possible industry self-regulation.
Several cyber policy issues remain unresolved. The Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) is at the final-rule stage but has not yet been published or taken effect. The protections provided by the Cybersecurity Information Sharing Act of 2015 have been extended through December 11, 2026, but their longer-term future remains uncertain. An August 12 presidential memorandum established a program for vetted US companies to support federally authorized cyber operations against foreign transnational criminal organizations. Questions about implementation, funding, and oversight remain.
Cyber policy pressures are also developing beyond Congress. States are developing their own approaches to AI security and safety while no standard or benchmark are universally accepted in the US or internationally.
Several federal cyber support and accountability mechanisms have been reduced or discontinued even as threats continue to evolve. Federal funding that supported no-cost services through the Multi-State Information Sharing and Analysis Center (MS-ISAC) has ended, potentially limiting cyber resources for state and local entities facing increasingly sophisticated threats, including from nation-state actors. At the same time, federal pressure on technology and software providers to strengthen secure-by-design practices has lessened. The Cyber Safety Review Board is no longer operating, removing a dedicated public-private mechanism for examining major incidents and issuing lessons learned. These shifts are unfolding amid heightened geopolitical tensions, increasingly interconnected IT and operational technology environments, and AI-enabled threats that can move faster than traditional defenses, creating risks that extend beyond data loss to disruption of critical operations and services.
What does this mean for your company?
- Democratic control of the Senate may bring different scrutiny of cyber nominees and officials, while a potential review of CISA could examine how workforce losses have affected its readiness. Your company should monitor how confirmation activity, hearings, and such a review of CISA could affect federal cyber priorities and capabilities. Safety incidents and public sentiment are also likely to influence lawmaking.
As AI policy remains unsettled, companies should focus on the controls within their reach. AI agents represent an emerging insider threat as they gain access to sensitive data, critical systems, and the authority to act independently. Companies should assess and red-team models and agents; control their identities, permissions, and access to data; continuously monitor their actions; and maintain the ability to intervene or revoke privileges.
Increased congressional scrutiny could influence how cyber incident-reporting policy develops. Companies should continue to track the requirements that apply to them. Those that may meet CISA’s proposed covered-entity criteria should review CIRCIA’s proposed requirements and prepare for implementation. Once the CIRCIA final rule is published, you should confirm coverage, reporting obligations, and protections for reported information.
Diverging state approaches may create different AI security and safety requirements across jurisdictions. Your company should monitor the positions and emerging requirements in the states where your company operates.
Reduced support for state and local cyber capacity, together with less federal pressure on technology providers, may shift more responsibility to companies to manage ecosystem risk. Your company should strengthen oversight of critical technology dependencies, require evidence that providers address security weaknesses, and test whether operational and incident-response plans account for disruptions affecting providers or public-sector partners.
Tax policy
With Democrats taking control of both the House and Senate but the administration remaining in Republican hands, the legislative pathway for tax policy is likely to be shaped by both increased congressional leverage and executive resistance. While Democrats will have greater influence over must-pass legislation such as government funding (and perhaps the debt limit) in 2027, significant tax reforms remain difficult to realize. Instead, watch for targeted tax provisions around pressing issues like AI taxation, corporate tax, and wage equity as possible late additions to broader must-do legislation. Even if the debt limit is addressed by Republicans during a lame-duck session of the current Congress, government funding action during the next Congress will remain a point of leverage for Congressional Democrats.
Oversight activity is set to intensify sharply, with both chambers eager to assert investigative leadership on administration actions and business practices. This “double oversight” sets the stage for heightened scrutiny—not only of government policies but also companies tied to high-profile presidential initiatives and emerging technologies.
The Senate will play an especially pivotal role, as nomination battles may cause prolonged vacancies and an expansion of “acting” officials, particularly in agencies like the IRS and Treasury. This staffing uncertainty could slow regulatory development and add complexity to tax enforcement and policy implementation.
Within the Democratic caucus, leadership must navigate between members advocating for more comprehensive tax changes, such as wealth taxes or capital gains increases, and those favoring a more gradual, incremental approach focused on reforms that President Trump will sign into law. We’ll see some new faces on influential committees like the House Ways and Means and Senate Finance committees. Learning about these members and their priorities will be important, as they’ll likely bring new dynamics to tax policy debates. While the tax legislation introduced in a divided Congress may face hurdles, it often serves as a blueprint shaping the policy landscape for the next election cycle and beyond. Moderates in both chambers will be key power brokers in deciding which proposals gain momentum.
State-level political shifts add another layer of complexity. It’s often the combined makeup of state government—whether one party controls everything or power is split—that gives a clearer picture of what tax policies to expect, more so than party control over any one lever of state policymaking. Across the country, states are expanding consumption taxes to cover everything from tech services to digital products. Data-center taxes are becoming a hot topic too, with states looking closely at sales tax exemptions, property taxes, permitting, and resource use since these impact both where businesses invest and how local governments fund themselves. Some states are raising business taxes in general to tackle budget challenges like Medicaid funding gaps and rising public-sector costs while others are cutting income taxes and leaning more on sales and consumption taxes. If your business operates in multiple states, this patchwork of changing tax obligations and incentives is only going to get more complicated.
Trade and tariff policy also significantly impacts state’s economies and budgets, but power over this policy still sits firmly with the executive branch. Don’t expect Congress to shake things up much there regardless of who’s in control.
What does this mean for your company?
- With a Democratic-controlled Congress alongside a Republican president, expect increased legislative proposals and more frequent oversight activity. Still, enactment of major tax reforms will face significant political hurdles and any changes are likely to be only incremental. Your company should prepare for a wider range of tax proposals and heightened scrutiny, particularly around corporate profits, wage growth, and the role of AI in the workforce.
Delays and uncertainty in regulatory implementation are likely given Senate nomination challenges and the prevalence of acting officials in key tax agencies. This environment requires your tax and compliance teams to maintain flexibility and readiness to adapt quickly as policies and enforcement evolve.
Building relationships with a spectrum of policymakers, from progressives pushing for comprehensive tax reforms to moderates favoring incremental change, will be critical. Understanding these stakeholders’ positions can help you anticipate policy direction and prepare your company to engage effectively.
Keep a close eye on state-level shifts as well. Changes in state legislatures could ramp up new tax and regulatory demands that add complexity to your company’s broader tax strategy.
Trade, tariffs, and supply chain
The congressional sweep means Democrats may have greater capacity to challenge the Trump administration’s trade agenda even if they can’t unwind tariffs. Tariffs supported by Section 301 or Section 232 investigations could remain on firmer ground, while the Supreme Court’s 2026 IEEPA decision has already limited the use of that statute as an independent tariff authority. While the total amount of tariffs could stay the same, mechanisms to administer tariffs may change.
A Democratic Congress could launch extensive oversight efforts in both chambers using different investigative tools to scrutinize tariff decisions, exemptions, and trade agreements. Senate investigations could be particularly prominent as potential 2028 presidential contenders seek to demonstrate leadership on economic accountability and rising costs. Congress could also pursue legislation to reclaim some tariff authority, although any measure would still face a presidential veto unless it attracted enough bipartisan support. Still, these pressures could weaken the administration’s negotiating leverage and there may be opportunities for bipartisan cooperation on trade and environmental enforcement, including existing free trade agreement provisions and measures such as the Lacey Act.
For companies, that could prolong uncertainty around big trade agreements rather than resolve it. Any changes to the USMCA aren’t likely to get through a divided political environment in the next two years, and Canada and other trading partners might have more incentive to hold out.
The US-Canada track in particular may remain frozen until after Canadian provincial elections. But if a bilateral US-Mexico agreement materializes, it could include an energy protocol structured for executive action rather than congressional approval. Trade-related environmental enforcement could also become part of negotiations, potentially creating areas of agreement between the administration and congressional Democrats.
Supply chain strategy would therefore still center on flexibility, compliance, and the economics of long-term capital decisions. Reshoring may continue selectively, but US manufacturing often needs greater automation to offset labor-cost disadvantages.
What does this mean for your company?
- More congressional opposition could reduce the administration’s leverage or encourage trading partners to wait, potentially delaying agreements companies need for long-term planning. Model a longer negotiating timeline but don’t assume every North American negotiation will move at the same pace.
Separate reversible from structural decisions. Use short-term sourcing, inventory, and commercial levers where possible before committing to plant moves or other capital-intensive changes that are difficult to reverse.
Pair reshoring analysis with automation economics. Higher US labor costs mean many domestic manufacturing moves will require automation to be competitive, rather than simply relocating existing production.
Regardless of congressional control, enforcement, audits, and supply chain visibility requirements will remain central concerns for importers and multinationals. Keep trade compliance investment moving. Assess your exposure to potential House and Senate investigations, particularly if you benefited from tariff exemptions or trade arrangements. Also monitor possible changes in environmental enforcement priorities.
Workforce
Democratic control of both the House and Senate could bring greater attention to workforce regulation and controls, particularly around AI and employment. Businesses could face increased focus on responsible AI use, worker protections, and bias and fairness, while a renewed emphasis on sustainability could create demand for related capabilities. Even so, the underlying pace of AI development and workforce redesign is unlikely to slow substantially. As workforce leaders, your priorities should be to stand up and maintain flexible workforce plans and to make investments that can deliver value across different policy outcomes.
Immigration will remain an immediate pressure point for talent planning, particularly in sectors that depend heavily on immigrant labor. That includes the tech industry, which relies heavily on H-1B visas for specialized skill acquisition, as well as agriculture, hospitality, and construction industries, where changes in immigration policy could alter access to workers and affect recruiting and wage decisions. Businesses across sectors still face a broader skills mismatch between the jobs they need filled and the expertise available. As AI reshapes what technical and human skills are expected at every job level, revisit your recruiting strategies and total compensation packages to attract employees with the skills specific to your needs, like adaptability, context setting, and critical thinking. If you want to attract premium skills, be prepared to pay a premium. Also consider where work can be moved, outsourced, or redesigned. Arbitrage is always an option, but first ask yourself what a better process would look like and how it would help you deliver efficiently. Your needs will vary significantly by sector, making flexible workforce planning more important in a labor market where the right skills remain difficult to find.
Greater federal attention to AI could affect how companies redesign jobs as well as how they govern the technology. A united Democratic Congress may make federal regulation more likely, but even without major federal legislation, state and local requirements could push large employers toward policies designed to satisfy their most restrictive jurisdictions. Technology companies and hyperscalers could also face political attention around data centers, energy availability, and community impacts.
At the same time, you’ll need to determine which jobs AI changes, which capabilities become more valuable, and where human involvement remains essential. Software development offers an early example. As some early-stage engineering activity becomes more automated, it’s alleviating a classic development bottleneck. But while AI already shows value in testing, quality, and control areas, it can create new chokepoints when increased volumes require the judgment only humans can provide.
What does this mean for your company?
Work with regulators and policy makers to help shape local and federal legislation rather than waiting for policy to be made without you.
Consider partnering with academia to help develop and train the next generation of workers with the new set of skills they’ll need as entry-level employees.
Champion AI fluency for employees and create opportunities for internal mobility as jobs converge and combine. Productivity gains can create capacity for other priorities, rather than automatically translating into headcount reductions.
Double down on developing critical talent and help them build the skills you know you’ll need in an uncertain future: adaptability, curiosity, critical thinking, context setting, and the ability to question and evaluate AI output. This can help preserve momentum, even when the direction of federal policy remains unsettled.
Industry overviews
If there’s one thing that both parties and consumer markets executives can agree on after the midterms, it’s that affordability is weighing on the American consumer. Much of that is tied to rising inflation, labor issues, housing costs, and other economic factors that will take years to address. But the priority for business leaders nationwide remains the same—to provide value, defined broadly as price, quality, convenience, and trust, to consumers.
A popular explanation for the emphasis on value is the K-shaped economy, in which higher-income households keep spending while everyone else tightens. A closer look at the data, however, reveals a shape that more closely resembles Pac-Man. While spending is growing fastest at the top, it remains resilient at the bottom too. Companies that over-index on premiumization risk missing where a lot of durable demand lives. Instead, the task is to keep delivering real value and showing up for consumers across generations and income segments.
Tariffs are likely to remain a fixture of the business environment, driven largely by executive authority rather than legislation. With that in mind, continued activity, including a possible “phase two” of semiconductor tariffs affecting consumer electronics and additional forced-labor and infrastructure tariffs, could create ongoing uncertainty. Companies should stay focused on their areas of greatest exposure while broadening their response—for instance, by pairing alternative sourcing with product reformulation to offer more flexibility than sourcing changes alone.
On AI safety and youth privacy, much of the regulatory activity continues to happen at the state level. The growing patchwork of requirements around consumer data, AI and protections for younger users creates complexity for companies operating nationally with direct implications for loyalty programs, e-commerce, and personalization. Enterprise-wide governance and controls that can adapt to state regulations and shifting balance of power across jurisdictions are increasingly important to managing risk and maintaining consumer trust.
Finally, immigration policy and AI-driven shifts in work continue to reshape how companies think about talent. These conversations extend well past H-1B pipelines to frontline, operations, and supply chain roles. Companies are increasingly examining work at the task level, identifying opportunities to automate, augment, and redesign roles while building more flexible workforce models.
What does this mean for your company?
- Compete in the Pac-Man economy, not just the premium tier. Spending is growing fastest at the top, but it’s holding up at the bottom too. Value-oriented demand at scale may be an underappreciated growth opportunity.
Tariffs should be modeled as a structural cost. Keep sourcing, pricing, and portfolio scenarios current, and watch for sector-specific escalation in semiconductors, forced labor, and infrastructure. Speed is critical as companies are required to quickly adjust sourcing strategies and supplier portfolio while trade policy continues to evolve.
Get ahead of youth privacy data rules. The state-by-state patchwork presents a real risk, but early movers can turn strong governance into a trust advantage.
Build workforce flexibility. Diversify talent pipelines, reskill, and rebalance staff, contingent labor, and automation. Transparency about AI use can keep employees engaged through the shift.
A Democrat-controlled Congress will likely change the political backdrop for the energy sector even if it doesn’t bring major new laws. Energy companies, utilities, and large industrial users are still dealing with the same market reality, that demand for power keeps climbing while many parts of the grid remain under pressure. AI and data center growth are parts of that story, but so are domestic manufacturing, electrification, reshoring, and broader infrastructure needs. PwC’s Large Energy User Survey captures how serious the issue has become: 76% of respondents said outages and electricity supply disruptions have caused operational and financial impacts, and 70% said they’re less confident in the grid than they were two years ago. Access to reliable and affordable power will remain central to decisions about where companies build, invest, and grow.
With Democrats in control of both chambers, they will have the ability to shape committee assignments, oversight hearings, appropriations, and confirmations. That could increase pressure on federal agencies and regulated sectors to focus more on clean generation, transmission, storage, grid modernization, consumer protections, and stronger community and environmental conditions. Energy could still be one of the few areas where narrower compromise remains possible, but the passage of bipartisan landmark legislation is unlikely. The president still holds veto power.
Business leaders should plan for a world where federal policy is slow to change while prices and affordability drive policy developments at the state level. State utility commissions, governors, regional transmission organizations, and local permitting bodies will continue to shape deployment timelines, infrastructure approvals, and energy affordability. Both parties will face community opposition as a constraint for data centers, transmission, and other large projects if local concerns over cost or land use intensify. For some companies, that may further support investment in behind-the-meter generation, microgrids, and co-located power as ways to manage interconnection delays and improve operating resilience.
Tax policy will remain central to capital planning. Democrats controlling both chambers are in a stronger position to promote clean energy and manufacturing tax credits and incentives and to influence how they are implemented through appropriations and oversight. That could matter across wind, solar, storage, nuclear, hydrogen, carbon capture, clean fuels, and domestic manufacturing. For companies, the key issue is not just which incentives remain in place but which ones carry new conditions and how those changes alter project returns, financing structures, and deployment timing.
What does this mean for your company?
- Democrats may shift the tone in Washington but many of the most immediate business effects are still likely to come from regulators and state officials rather than federal law.
Hearings, investigations, and confirmation fights could bring more scrutiny to utility spending, infrastructure projects, emissions profiles, and the use of public incentives or federal support.
Decisions made in state capitals may carry more weight for energy costs, rate treatment, and project schedules, especially where governors and utility commissioners can redirect policy quickly.
Available clean energy tax credits and incentives may remain in place with Democrats in control of Congress, but value will still depend on qualification rules, compliance terms, and the timing of major investments.
Companies facing tight interconnection windows or unreliable service may have more reason to pursue behind-the-meter-supply that reduces dependence on the grid.
A defining post-election question is whether financial institutions can compete and offer new products when political policy moves in several directions at once. Our focus is on post-election fragmentation, where Washington and the most influential states pursue diverging rules, enforcement priorities, and regulatory expectations.
Despite the change in control of Congress, narrow majorities could remain a roadblock to passing major legislation, and hearings could become more contentious. In a divided Washington, budget standoffs could increase the risk of government shutdowns. Funding disputes and delayed appropriations can interrupt regulators, exams, deal approvals, and economic data. Fiscal uncertainty can also affect Treasury markets, rates, liquidity, and credit spreads. In a severe scenario, companies may be reluctant to hire until the dust settles, sending a shiver through consumers who continue to power GDP growth.
Major federal legislation on digital assets, AI, bank capital, M&A, or tax policy may be rewritten by the new majority, yet the rewriting process and added hearings can delay passage. And it’s unlikely the president would sign legislation written by the opposition. What won’t be changing is the deregulatory atmosphere using agency appointments, rulemaking, supervision, guidance, and enforcement to push it forward. Given the more difficult legislative environment, leaders at the Federal Reserve, OCC, FDIC, SEC, and CFPB may use their existing powers to change examination standards, enforcement philosophy, and transaction approvals without seeking congressional approval.
The states may write the rules if Washington doesn’t act. California, New York, and Texas governor races could usher in new mandates from voters, spurring those states to write regulations amid gridlock in Washington. California is building a state-level consumer financial protection regime that could establish the operating baseline governing automated decisions for lenders and fintechs. Maintaining separate systems, disclosures, and data controls is expensive, so California’s standard could become the de facto standard nationwide.
New York plays a similar role in cybersecurity and digital assets. Its cybersecurity requirements and virtual-currency framework already influence how firms design controls. “New York-grade” governance is becoming table stakes.
Texas’ favorable tax structure, economic-development incentives, and deep talent pool may continue to attract investment.
Post-election fragmentation could also slow product launches, alter licensing and approvals, and reshape capital and M&A. In that environment, larger institutions may be at an advantage, which could lead to further consolidation.
What does this mean for your company?
FS leaders should be disciplined in dealing with policy fragmentation. You’ll need to decide which issues materially affect your business and what principles will govern your position. Be prepared to apply those principles consistently.
Boards and management teams should translate that discipline into action.
Map election scenarios to earnings, capital, products, and market access.
Identify where state rules create a de facto national standard.
Assign ownership across lines of business, legal, compliance, risk, government affairs, and communications.
Build modular systems that can accommodate divergent federal/state requirements.
Establish principles, decision rights, and escalation protocols for public policy positions.
With Democrats in control of both chambers of the 120th Congress, healthcare affordability will likely take center stage in Washington. Expect more congressional hearings, investigations, and policy proposals focused on healthcare costs, expanding coverage, vertical integration, and industry practices. Democrats will also have a stronger platform to advance their healthcare priorities and build the components of a broader affordability package heading into the 2028 elections.
While Democrat control may give healthcare legislation a clearer path through Congress, enactment remains less likely. With President Trump retaining veto authority, Senate procedural hurdles, and narrow majorities limiting the prospects for major reform, targeted bipartisan legislation is more likely to move. Look for action on cybersecurity, AI, price transparency, modernizing drug development, and prior authorization processes. Regardless of congressional gridlock, continued regulatory implementation will shape near-term business and compliance requirements.
Congressional control also shifts the balance of power between the White House and Capitol Hill. Democratic leadership will likely bring more oversight into the activities of the federal health agencies, and nominees to key roles in the administration will have to gain the approval of Senate Democrats. In the lame duck period (November-January), the outgoing Republican Congress will face pressure to advance outstanding fiscal and legislative priorities before its leverage diminishes. Government funding, the debt ceiling, and a potential year-end package could create openings to address Republican priorities and advance targeted healthcare measures, including bipartisan proposals on cybersecurity and site-neutral payments. Failure to resolve major fiscal issues could set the stage for more contentious negotiations between a Democrat Congress and a Republican White House in 2027.
Even where legislation stalls, don’t dismiss the headlines. Congressional hearings, investigations, and bills proposed by Democrats will offer insight into the policies taking shape for 2028, while growing pressure around affordability continues to push the healthcare market toward consumer expectations. Executives who look beyond near-term political conflict, plan for multiple policy scenarios, and adapt to evolving consumer demands will be better positioned for potential healthcare reform after 2028.
What does this mean for your company?
Payers
Cybersecurity offers the most effective chance for bipartisan legislative and executive action.
Price transparency, utilization management, independent dispute resolution, ACA subsidies, AI coverage decisions, and vertical integration will be shaped by CMS rulemaking and congressional oversight via hearings. The threat of a presidential veto is ever present.
Any action taken in these areas could present risks to the bottom line due to increases in administrative burden and infrastructure costs and expanded opportunities for oversight activities.
Providers
Site-neutral payments and cybersecurity are the areas primed for the most attention from CMS, possible legislation, and executive action.
Price transparency, utilization management, independent dispute resolution, 340B reform, and vertical integration will be influenced by agency rulemaking, executive action, and possible legislation.
Pressure on margins will come from lower reimbursement, increased administrative burden and infrastructure costs, 340B reform, and greater antitrust and public scrutiny.
Pharma
Momentum appears to be building for bipartisan action on drug development modernization as well as US-China restrictions and 340B reform.
Significant movement is already underway on tariffs/trade policy, CMMI models, drug pricing, and advertising. All of these are being driven by agency rulemaking or executive action.
While drug development modernization promises to speed pharmaceuticals to market and lower R&D costs, other dynamics portend higher import costs, pricing pressure, and promotional constraints.
Medtech
CMS rulemaking and possible legislation may propel action on site neutral payments and accelerate the shift in site of care.
US-China restrictions may disrupt supply chains and cybersecurity action may result in higher compliance costs. Both will require agency involvement and possible legislation.
Tariffs/trade policy implementation is underway as a result of executive action and trade authorities. Medtech firms are already seeing high import costs.
With Democrats in control of Congress, technology, media, and telecommunications companies are likely to see more gridlock than sweeping change on key issues. Stalled action on Capitol Hill will shift focus to the states, continuing a patchwork approach to regulations. Consider these implications.
AI regulation
Comprehensive federal AI regulation seems unlikely in the face of divided government, but states—along with federal agencies and the courts—will likely fill the vacuum. The real question for businesses isn’t whether AI gets regulated but how quickly it happens and how much it will cost to comply with a growing list of fragmented rules.
Expect more pressure on safety, bias, labor, copyright, and transparency. While a national privacy law is unlikely, you can expect the state-by-state patchwork to persist. Documentation and testing requirements may increase, but regardless of federal action, customers will increasingly evaluate AI governance as a key factor in their purchasing decisions.
Data center tax
While data center tax treatment hinges on which party holds the gavel, most activity still runs through executive, state, and local permitting. Federal tax credits paired with state and local (SALT) credits are core levers, so the business case depends on both layers moving together. State regimes, however, remain decisive in every scenario.
With Democrats in control of both chambers of Congress, pressure shifts toward clean power, grid transmission, emissions, water use, impact on consumer utility rates, and climate disclosure requirements. Heavier reporting burdens can lengthen project timelines, making clean-power plans and sustainability documentation central to site selection.
However, access to power and water as well as local community opposition ultimately determine whether a project pencils out. Texas now ties its AI rules to power and grid-connection constraints, and New York has paused approvals for some large data center projects. Site strategy should treat power, water, permits, credits, and community risk as one integrated picture. Regardless of shifts in the balance of power at the federal level, this should be the top concern for hyperscalers and large-scale data center providers.
Crypto tax
Despite the failure of the CLARITY Act—a 2025 crypto market-structure bill dividing SEC and CFTC oversight—Congress has signaled more willingness to legislate on crypto tax. The House Ways and Means Committee advanced a digital-asset tax bill with 38-5 vote, and a parallel bill is circulating in Senate Finance. However, with Democrats in charge of both chambers and setting the agenda, it’s unlikely the tax bill will advance despite initial bipartisan support.
What does this mean for your company?
- Continue to plan for uncertainty. Build flexible compliance frameworks—aligning federal and state incentives—and prepare for a policy landscape increasingly shaped outside of Congress.
Don’t wait to advance your trust and safety agenda. Build one adaptable governance model based on the most demanding state requirements you’re likely to face. A coordinated multistate compliance roadmap should be a priority.
Treat power and permitting as the gating factors for data center investment. Engage early with state and local officials on data centers. Execution risk lies more in interconnection queues and permitting timelines than in Washington.
Prepare for crypto tax rules to come from multiple authorities. Don’t rely on congressional action. Watch Treasury and IRS guidance as well as state tax developments and prepare reporting, recordkeeping, and systems to adapt as requirements take shape.
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Cut through the election noise. Tune into business impact.
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