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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

Qorvis MSLGROUPs 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 worlds leading experts on the U.S. budget and
congressional budget process.

06
Key Issues

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 Streets 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
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The 2016 Election is
Already Underway

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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.

But from a policy perspective, the Republican Partys 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 wont 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

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 chambers 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 partys
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 partys 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.

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
Heres what the 2014 election results most likely mean for key federal issues.

The Economy

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 Obamas nominees for offices that require
Senate confirmation. The time it has taken to get the presidents
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
wont 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.

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 wont 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 its 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.

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 Houses 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 administrations 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 partys 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 Zealands 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 Agencys
proposal to cut greenhouse gas emissions from power plants.
McConnell campaigned hard on what he said was the EPAs
overreach and has vowed both to restrict EPA funding and turn
back Obamas 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 Obamas 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

Foreign Affairs/International Relations (contd)

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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 nomineeswill 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