By Jim Collura, NEFI Vice President & Director of Government Affairs
Election Day is Tuesday, November 6, 2018. All 435 members of the House of Representatives, and 33 out of 100 Senators are on the ballot this year. At the state level, 39 governorships will be decided and control of many state legislatures hangs in the balance. Nationwide, generic ballot polling has consistently shown an advantage for Democrats.
This is not unusual. Democrat or Republican, the president’s party has traditionally lost seats during mid-term elections, especially when a president’s popularity is below 50% (Trump’s hovers around 40%). In each of the last three mid-term elections, the opposing party captured one or both chambers of Congress. Most non-partisan observers argue Democrats have attracted a greater number of qualified candidates, especially in purple and red states and districts where they have called up popular career politicians, political moderates or military veterans. In many races, they have also raised more money than the GOP.
Republicans have some things going for them, however. First, gerrymandered Congressional districts and local political trends are likely to limit pick-up opportunities. We are unlikely to see a repeat of the 52-seat pick-up achieved by Republicans during Clinton’s first mid-term when his favorability polls were about equal to Trump’s. Democrats are also facing the worst Senate map of any party in history.
Second, by nearly all measures, the U.S. economy is very healthy, unemployment is at record lows, America is not engaged in a major land war, and military casualties are at their lowest level since the start of the “War on Terror.” These factors typically benefit the party in power. Third, like President Trump, House and Senate Minority Leaders Nancy Pelosi and Chuck Schumer hold less than 50% approval in nationwide polling.
House of Representatives Outlook
Democrats need 23 seats to win control of the House, and they have plenty of opportunities. Open seats resulting from Republican retirements alone provide nearly enough pick-up opportunities for Democrats to retake the chamber. Republicans are retiring at a rate of more than 2-to-1 this cycle compared to Democrats. Half of the 44 Congressional Districts held by retiring House Republicans are considered competitive, as opposed to six of the 19 Congressional Districts held by retiring Democrats. Of all the seats Republicans are defending across the country, 23 are in districts Hillary Clinton won in 2016. One recent forecast predicts an 80% chance Democrats will retake the House, with an average gain of 37 seats, 14 more than needed.
If Democrats take the house, maintaining control of the Senate will be vital for the GOP to preserve its legislative agenda and protect President Trump from a possible impeachment. Republicans are defending only nine of the 33 Senate seats up this year. Democrats are defending 24. Ten of those are in states that President Trump won, several by double digits. However, Republicans can afford to lose only one seat, which would result in a 50-50 split, in which case Vice President Pence would possess the tie-breaking vote. And despite facing the worst election-year map in Senate history, Democrats have a shot at obtaining the two seats they need to take control. Democrats are proving competitive in at least two states won by Trump in 2016 and in a number of other states where races are expected to be close. According to recent polls, Republicans have pick-up opportunities in four states. If they pick up all four and hold their current seats, they will secure a 55-seat majority. However, this is unlikely due to four at-risk Republican seats seen as toss-ups. All things considered, election forecasters give Republicans a 68.7% chance of maintaining control of the Senate.
Impact on Industry Priorities
The outcome of the 2018 election could change the course of federal policy and have a meaningful effect on industry policy efforts. Following are four possible outcomes.
Democrats win House, Republicans keep the Senate: This is the most likely outcome and would result in a divided Congress. Most likely, led by Pelosi again, House Democrats would look to the possibility of retaking the Senate (with a more favorable map compared with 2018) and the White House in 2020. Having taken control of the House committees, they would likely conduct very aggressive oversight investigations and hearings into the Trump administration and its various officials, departments and agencies. Only major, must-pass legislation would be possible, and the negotiations would be dramatic and receive much press coverage. Government shutdowns over spending legislation would be possible.
Democrats win House and Senate (and impeach Trump): This would result in a very divided government. Moving forward with impeachment would create a constitutional crisis and historic political instability. If the attempt were to fail due to a lack of votes in the Senate, it could jeopardize Democrats’ competitiveness in 2020. In terms of legislation, Democrats would still have to negotiate with Senate Republicans to pass most major legislation, as a filibuster-proof supermajority requires 60 votes. Depending on how confrontational the Democratic Congress gets with Trump, this scenario could see frequent vetoes and government shutdowns. The president may want to use all tools at his disposal to protest investigations, hearings and impeachment proceedings.
Democrats win House and Senate (and don’t impeach Trump): Alternatively, having experienced a major defeat, Trump might extend an olive branch to Pelosi and Schumer right after Election Day. Democrats could decide to drop the idea of impeachment and work cooperatively with the White House on major legislative reforms to health care, infrastructure, energy policy, etc. Honestly, this is probably the least likely scenario listed here.
Republicans maintain control of both chambers: This would preserve the united government and result in the greatest amount of political stability. It is also the best chance that Congress has of successfully enacting meaningful legislation. This could include “Tax Reform 2.0,” the repeal and replacement of Obamacare, infrastructure legislation, etc. On the other hand, a smaller House majority could increase the influence of the conservative bloc, which could make enactment of legislation more difficult. At the same time, a tougher Senate map for Republicans in 2020 could motivate at-risk members to compromise, which could exacerbate intra-party divisions and institutional conflict between the two chambers.
Bottom Line: The industry needs to prepare for all possible outcomes and the effects they could have on federal legislative and regulatory priorities. NEFI Government Affairs Committee Chairman Scott E. MacFarlane will reconstitute and reconvene the committee immediately following Election Day. NEFI will also prepare a member survey to solicit feedback from members on which issues are most important going forward.