2014 US Midterm Election Analysis Expect Little Change

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2014 Midterm Election Analysis Expect Little Change

Stan Collender

Table of

Contents

Executive Vice President Qorvis MSLGROUP, Washington, D.C. Twitter: @thebudgetguy

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Qorvis MSLGROUP’s Executive Vice President and National Director of Financial Communications, Stan Collender, has extensive experience in financial and public affairs communications. During his more than three decades in communications, he has designed and implemented awardwinning communications efforts for financial companies, Wall Street firms, trade associations, nonprofit organizations, and federal agencies.

Prior to joining Qorvis MSLGROUP, Collender was the general manager of the Washington office of Financial Dynamics Business Communications, national director of public affairs for Fleishman Hillard, and a senior vice president at Burson-Marsteller. He also served as the director of federal budget policy for two major international accounting firms Price Waterhouse and Touche Ross and as president of the Budget Research Group, a private Washington-based consulting organization.

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Collender also has extensive experience on Capitol Hill, and is considered to be one of the world’s leading experts on the U.S. budget and congressional budget process.

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He is one of only a handful of people who has worked for the House and Senate Budget Committees, and has worked for three U.S. representatives on the House Budget and Ways and Means Committees.

Collender is one of the leading experts on federal fiscal and monetary policies, Congress, and Wall Street’s response to Washington tax and spending policies.

He is a popular contributor to Forbes.com. He previously wrote “Fiscal Fitness,” a weekly column in Roll Call, the influential Capitol Hill newspaper and “Budget Battles,” which was published weekly by nationaljournal.com for more than 10 years. He is also the founder and principal writer of “Capital Gains and Games,” which the Wall Street Journal has called one of the top 25 economic and financial blogs in the U.S. Additionally, Collender is the author of “The Guide to the Federal Budget”, one of the most assigned texts on the subject.

House of Representatives

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Senate 06 The 2016 Election is Already Underway

11 Qorvis MSLGROUP Washington Subject Specialists

The Republican Party scored a decisive political victory on Tuesday by taking control of the Senate, adding to their existing majority in the House of Representatives and winning a number of governorships in key states across the country.

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But from a policy perspective, the Republican Party’s gains in the just-completed United States election are not as significant as they seem at first glance.

The reason is simple: The same types of stalemates that have typified legislating in Washington either will continue or possibly even intensify over the next two years.

Traditionally, younger voters such as Millennials in the U.S. tend to register in low numbers and then are the least likely to vote among all age groups. Although we won’t have actual numbers for several days, the preliminary indication from the early voting is that this trend continued in 2014 with Millennials not turning out in high percentages. A Harvard Institute of Politics poll conducted the week before the election found that 51 percent of young Americans who say they would “definitely be voting” preferred a Republican-run Congress with 47 percent favoring Democrat control. This was a major change from a similar poll taken before the last midterm elections in 2010.

House of Representatives

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http://en.wikipedia.org/wiki/United_States_House_of_Representatives

The results were not final in all House races by the time this analysis was completed, but it was clear that the Republicans had gained at least 10 seats and will continue to have a majority when Congress convenes in January.

But Republicans already had a majority in the House the past two years and will not gain significantly more influence with these additional members. They will not, for example, have the votes needed to override what could be a steady series of presidential vetoes. As a result, Republicans will continue to be in charge of the House of Representatives but their policy preferences are as likely to be stymied in the coming Congress as they have been the past six years.

As a result, Republicans will continue to be in charge of the House of Representatives but their policy preferences are as likely to be stymied in the coming Congress as they have been the past six years.

Senate

The more important Republican gains came in the Senate, where the previous 55-45 Democratic majority (including 2 independents who caucused with the Democrats) will become at least at 52 to 45 Republican majority, and several races are still to be decided that could increase the majority further. As a result, control of that chamber’s activities will shift to the Republican Party.

This will result in a number of important leadership changes.

Republicans will chair all committees and that will alter the agenda each of these panels follows through the year. There are likely to be more investigations of Obama administration initiatives and White House nominees may not be confirmed.

Republican Mitch McConnell (R-KY) is considered most likely to become the new Senate majority leader and that will have a significant impact on what legislation is considered and the procedures and rules that are used. Even the parliamentarian – the official who makes all procedural rulings on legislation being considered – will be a Republican appointee and she or he will be expected to make decisions that favor that party’s preferences.

http://en.wikipedia.org/wiki/United_States_Senate

But as is the case in the House, the Republican numerical majority in the Senate ultimately will not mean as much as it seems at first glance as far as policy changes are concerned.

There are three reasons.

1. The Republican majority will not be large enough to override a presidential veto. The Republicans will need 67 votes to do that and, without at least 12 votes from Democrats, which are not likely, veto override efforts will be futile.

2. It may be difficult for the new Senate Republican leadership to get even simple majorities on legislative proposals.

The major reason will be that 24 of the 34 senators up for reelection in 2016 will be Republicans, and many of them will be from traditionally Democratic states. That means that many of the bills passed by the more conservative House will be politically far too difficult for some Senate Republicans to support.

3. The political necessity for some Senate Republican incumbents running for reelection in 2016 to avoid extreme votes will be a direct challenge to that party’s far right “tea party” wing which can be expected to push the leadership to match what the more conservative House approves. Any move by the Republican leadership to accommodate its moderates may well result in the tea partiers voting no. That too will make it difficult for the Republicans to get much done.

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The 2016 Election Is Already Underway

Many top political analysts are already saying that the Republican gains in the 2014 election will be matched by similar Democratic gains in 2016 and that control of the Senate is likely to return to the Democrats two years from now. They are also saying that Republican control is likely to return in 2018 and then go back to Democratic control in 2020.

Long-term (that is, past lunch tomorrow) predictions of U.S. elections must be considered with a great deal of skepticism.

Nevertheless, given the expert analysis, the possibility that the 2014 election results may just be an interim step in a steady series of political changes in the U.S. must be taken seriously.

Key Issues Here’s what the 2014 election results most likely mean for key federal issues.

The Economy

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Judicial Nominees

The November election has complicated the already convoluted U.S. budget politics even further. The new Republican Senate majority, the political problems for many Republicans up for reelection in 2016, and the intransigence of the tea party will make passing a budget and the “reconciliation” bill – the legislation that actually implements much of what is assumed in the budget – very difficult.

In addition, the federal debt ceiling will have to be raised at some point next year and that is never easy for Congress to do, regardless of which political party is in charge.

Because of this, few legislative economic initiatives will be possible over the next two years and the Federal Reserve will continue to be the major economic policymaker. As a result, short-term interest rates in the United States may stay lower for a longer period than the market currently is expecting.

One of the biggest impacts of the new Republican majority will be on President Obama’s nominees for offices that require Senate confirmation. The time it has taken to get the president’s appointees considered the past few years will likely be much longer in the new Congress.

The current common assumption is that the White House will be unable to get few of its Supreme Court and lower court nominees (who are appointed for life and whose term would last beyond the end of the Obama administration) confirmed. That could leave many judicial vacancies on federal courts over the next two years.

In addition, cabinet- and subcabinet-level nominees for federal departments and agencies either may not be considered or won’t be approved.

Military Policy

Banking and Finance

The larger Republican majority in the House and the new Republican majority in the Senate will want to increase military spending, especially for research and development and the purchase of additional weapon systems.

The increase will not be guaranteed, however. Democrats in Congress and the Obama administration may not be willing to hike military spending without also providing an increase for domestic spending. With the White House holding the ultimate trump card the veto that neither house of Congress will have enough votes to override the chances are that an increase for the Pentagon either will also mean more for domestic agencies or will mean a far more modest rise for the military than anyone currently is expecting.

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Valeri Potapova/Shutterstock.com

Many of the final regulations for the Dodd-Frank “Wall Street Reform and Consumer Protection Act,� many of which are already years late, will likely be delayed further because of the election results. The Republican House and Senate may place limitations on what federal agencies and departments may spend to draft and finalize these regulations. In addition, banking and financial agency and department heads, who were always more likely to leave the administration as the end of the Obama presidency neared, are now much less likely to be replaced because the Republican-controlled Senate will slow the confirmation process. That will delay the Dodd-Frank regulation process even further.

EastVillage Images / Shutterstock.com

Tax Reform

Health

The votes, time and political consensus do not exist to move a comprehensive tax reform bill through Congress and the White House over the next two years. The new Republican Senate majority makes hearings and the drafting of bills on this subject more likely, but tax reform probably won’t move forward until after the 2016 presidential election and will then take years to complete.

By Chuck Alston (chuck.alston@mslgroup.com) The increased Republican majorities in the House and Senate will not be large enough to make major (or perhaps any) changes in the “Affordable Care Act” or, as it’s better known, “Obamacare.”

House Republicans voted more than 50 times over the past 2 years to repeal all or parts of Obamacare, and the Senate may now follow suit. Senator Orrin Hatch (R-UT), who is likely to become chairman of the committee with jurisdiction over most of Obamacare, is a very vocal opponent of the law and almost certainly will hold hearings on every aspect of its continuing implementation.

But Senate Republicans will not have the votes to stop a filibuster or overturn a presidential veto. As a result, the Affordable Care Act is likely to stay in place.

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The real action on the Affordable Care Act will be in the executive branch where rulemaking will continue on the delivery and payment reform aspects of Obamacare and as the government enters its second year running the insurance exchanges.

Meanwhile, lawsuits over the viability of subsidies provided for insurance purchased on the federal exchange will continue to wend their way through the courts.

Climate Change

Foreign Affairs/International Relations

By Sheila McLean (sheila.mclean@mslgroup.com)

By Greg Lagana (greg.lagana@qorvismsl.com)

The election will have little impact on the effort to secure an international accord at the U.N. climate change talks in Paris late next year. Todd Stern, the White House’s special envoy for climate change, has said that the U.S. may seek an agreement that is not a legally binding treaty. If that happens, the accord will not require approval by the Senate and the new Republican majority will not have an opportunity to influence or stop it.

More hearings and contentious oversight are likely, but the Republican takeover of the Senate most likely will not lead to any real changes in U.S. foreign policy.

The primary reason is that Republicans may be united in their disdain for the administration’s foreign policy and their criticism of Obama for lack of leadership and resolve, but they are not united on Pentagon spending or the extent to which the United States should exercise its military power in the world.

Republicans will try to burnish their party’s credentials in national security and foreign policy where they traditionally have held a political advantage and where polls show that confidence in Mr. Obama and the Democratic Party is very low.

Republicans will want to correct what they see as a weak and irresolute U.S. foreign policy that they believe has damaged U.S. standing and made the world a more dangerous place. But real change will be difficult to achieve.

Republicans can be expected to press hard for the Obama administration to take a harder line with Russia and be tougher in negotiations with Iran. They will insist that any agreement with Iran be ratified by the Senate, which the White House so far has resisted. They will also press the president to be more decisive and resolute in confronting international terrorism, particularly the Islamic State.

Stern has said the administration is looking at an agreement similar to New Zealand’s plan, which foregoes legally binding carbon mitigation targets but requires a schedule for emission reductions. Such a plan has broad support from environmentalists and business leaders looking for regulatory certainty.

Mitch McConnell becoming Senate majority leader will have a chilling effect on the Environmental Protection Agency’s proposal to cut greenhouse gas emissions from power plants.

McConnell campaigned hard on what he said was the EPA’s “overreach” and has vowed both to restrict EPA funding and turn back Obama’s environmental agenda.

Getting consensus to commit U.S. ground troops will be more difficult, however, both because the war in Iraq is still fresh (and unpopular) in Americans’ minds and because the populist-conservative wing of the Republican party has a strong isolationist bent.

Ironically, President Obama’s foreign policy may get a boost from the Republican-controlled Senate in two areas.

First, Republicans have traditionally favored “fast-track authority,” that is, the power given to the president to negotiate international trade agreements that Congress can approve or disapprove but not amend or filibuster. Outgoing Senate Majority Leader Harry Reid (D-NV) has opposed fast-track authority and has been unwilling to allow a vote on providing it.

Obama may finally get it because of the Republican control.

Continued on the next page

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Foreign Affairs/International Relations (cont’d)

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Second, Republicans are also less likely to investigate CIA interrogation methods and allegations of torture. Under its probable new chairman, Richard Burr (R-NC), the Senate Intelligence Committee should be friendlier to the intelligence agencies. It will also be inclined to keep debate over those activities out of the public eye.

John McCain (R-AZ), the likely new Senate Armed Services Committee chairman, can be expected to hold hearings on any foreign-policy matters that touch on the use of military power, either directly through the deployment of troops and advisers or indirectly through the provision of arms and other forms of military assistance. Likely Foreign Relations Committee Chairman Bob Corker (R-TN), who is less outspoken and more of a consensus builder, will be less aggressive in holding hearings and using his committee as a platform for criticism, but he should still provide far more assertive and critical oversight than the administration experienced under the outgoing chairman Senator Bob Menendez (D-NJ).

With the administration in its last two years, the Senate Foreign Relations Committee is not expected to approve many of the ambassadors currently awaiting confirmation. A few nominees— particularly career diplomats nominated for critical posts and some assistant-secretary nominees—will be confirmed, but it will not be a good time for political nominees who do not have strong foreign-policy credentials or are not slated for sensitive assignments.

Qorvis MSLGROUP Washington Subject Specialists

President, Qorvis MSLGROUP and National Director, Public Affairs Michael Petruzzello, michael.petruzzello@qorvismsl.com, 202-683-3113

U.S. Politics Stan Collender, stan.collender@qorvismsl.com, 202-683-3131 Ron Faucheux, ron.faucheux@qorvismsl.com, 202-683-3105 Rich Masters, rich.masters@qorvismsl.com, 202-683-3144

Business, Economy, Finance, Taxes Stan Collender, stan.collender@qorvismsl.com, 202-683-3131

Climate Change, Environment Sheila McLean, sheila.mclean@mslgroup.com, 202-683-3281

Defense, Aerospace Keith Strubhar, keith.strubhar@mslgroup.com, 202-683-3110

Digital Communications Archie Smart, archie.smart@qorvismsl.com, 202-683-3125

Foreign Affairs/International Relations Greg Lagana, greg.lagana@qorvismsl.com, 202-683-3245 Rich Masters, rich.masters@qorvismsl.com, 202-683-3144

Grassroots Elissa Dodge, elissa.dodge@qorvismsl.com, 202-683-3152

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Health Chuck Alston, chuck.alston@mslgroup.com, 202-683-3262 Nancy Glick, nancy.glick@mslgroup.com, 202-683-3284

Technology, Federal Contracting Cara Lombardi, cara.lombardi@qorvismsl.com, 202-683-3231