Elections have consequences and the impact on U.S. economic policy of last week's election will be enormous. We're sure we'll be writing about all of these issues in much greater depth over the next several months, but, for now, here's a broad outline of what to expect.

One of the Republicans' first tasks will be repealing much (but not all) of the Affordable Care Act, also known as Obamacare. To get that done, they will use the budget reconciliation process in the US Senate, where they don't need to break a filibuster with 60 votes; instead, they only need a simple majority. The budget process can be used to eliminate (1) penalties for not getting insurance, (2) subsidies for buying government-approved overly-broad insurance packages, and (3) the expansion of Medicaid.

Although you may hear about "compromises" on children staying on parent's insurance plans and pre-existing conditions, those aren't really compromises. Rules that aren't budget related can't be repealed thru a budget bill. But expect the Department of Health and Human Services (maybe headed by Bobby Jindal) to change some rules to substantially slim down health insurance, to make it look more like catastrophic insurance, and, therefore, much less expensive.

On net, this means not only a big cut in government spending but lower effective marginal tax rates. Right now, large Obamacare subsidies remove an incentive to earn more money. The dollar value of working more hours and earning more income is offset by the loss of subsidies.

Next: A big supply-side tax cut, particularly on capital investment. Look for a big drop in the tax rate on regular corporate profits. The only problem will be getting enough Democratic votes for a supermajority in order to make these changes permanent. With only a simple majority, tax cuts are limited to just 10 years, just like under President Bush.

On entitlements, several years ago, House Speaker Paul Ryan developed a plan to block-grant Medicaid to the states, similar to how the welfare system was block-granted to the states in 1996 under President Clinton. Look for that to happen later in 2017, especially if the GOP decides to temporarily leave Medicaid alone when it repeals other parts of Obamacare. Ryan also has a plan to turn Medicare into a more efficient and less expensive insurance subsidy system rather than a fee-for-service system. The one area of inaction will be Social Security, where changes require 60 votes in the Senate.