The Political Calculus Of Near-Term Republican Dominance
With control of all of the elected branches of the Federal Government, the Republicans will not be in a position to blame economic failures on President Obama (although they will certainly try). At the level of microeconomics, I imagine that there will be efforts to enact various wish lists: slashing regulation, targeting programmes favoured by Democrats, etc. Whether the Republicans can take on the entrenched insurance lobby and repeal "Obamacare" (or "Romneycare") is an open question. One could imagine the Republicans moving to turn Social Security into a tax-sheltered investment pool, but one may note that Hillary Clinton's financial backers were pushing for the exact same thing. Although such policy changes matter for American citizens, I am only interested in commenting on business cycle issues.
The self-destruction of the Clinton campaign points to future political risk for the Republicans. Previously, the Clinton apparatus controlled the Democratic Party, and Bill Clinton was probably one of the best Republican Presidents of the postwar era (based on modern Republican views; Eisenhower was one of the best Keynesian presidents over that period). The entire Clinton wing of the Democratic Party is probably implicated in the email scandal, and they are highly vulnerable to leaks from future investigations. The only real chance for the Democratic Party is to run an economic populist who is not tarred by the various scandals (following the footsteps of Bernie Sanders). (To be clear, the Democratic Party could easily cough up another weak candidate like Hillary, but the Republicans cannot rely on such complacency.)
As a result, Trump would not want to let the economy remain on its current pathetic growth path that leaves large parts of the electorate under-employed, as that would make him an easy target for such a populist. Therefore, a "dash for growth" looks like the best bet, but it will certainly be biased towards tax cuts and "tax expenditures" (achieving the same objective as spending by creating targeted tax credits). It seems likely that the Republicans will rely on "trickle down" economics, but we could also see some "infrastructure Keynesianism" (possibly packaged as "public-private partnerships"). As in the 1960s and 1970s, such non-targeted fiscal stimulus would probably raise inflation before it reduces underemployment.
The obvious objection to my scenario is that the Republican Party contains a great number of balanced budget advocates. My view is that the Republicans are greatly in favour of balanced budget amendments when the President is a Democrat, not so much during Republican administrations. As long as the moves are packaged as way of shrinking government, "sound finance" can be put on the back burner (particularly if Social Security is "reformed").
(c) Brian Romanchuk 2016