2006 MID-TERM ELECTION ANALYSIS: WITH A SPECIAL POST-SCRIPT ON THE LAME-DUCK SESSION

November 13, 2006


Whether you consider what happened November 7 to be an election or an intervention, the Democratic takeover of both houses of Congress dramatically alters the government's balance of power.   

By a margin considered almost inconceivable just a few weeks ago, Democrats regained control over the House of Representatives for the first time in 12 years and now hold a one-seat majority in the Senate.  

Over the next several days and weeks, political pundits and commentators will undoubtedly go to great pains to tell us why and how this happened.  But for now it seems safe to say that voters in districts across America turned away from the familiar Tip O'Neill dictum and voted national politics, not local.  What turned out to be the largest number of competitive races in recent memory unfolded as a referendum on the Iraq war, presidential and congressional competence and leadership, economic security and corruption.

By ending an era of one-party control the electorate seemed to be sending politicians a message: Focus less on ideology and more on bipartisan problem-solving.

Congress by the Numbers

Democratic candidates were able to secure a majority in the House by capturing 28 seats currently held by Republicans, and they may capture several more as results continue to be tallied in 9 undecided races.  These 28 seats comprise 20 that were defended by incumbent Republicans and 8 that were open due to retirements.  Based upon results that have been projected to date, Democrats will hold 230 seats and Republicans will hold 196, with 9 seats still undecided.  The outcome of two House races will be decided in December run-off elections, while the remaining undecided races may be subject to recount.

On November 9, Democrats secured the last of six seats needed to capture control of the Senate, when Senator George Allen (R-Virginia) conceded in his Senate race in Virginia.  By winning races in Rhode Island, Pennsylvania, Ohio, Missouri, Montana and Virginia, Democrats secured a razor-thin 51-49 voting majority in the Senate.  More specifically, the Senate in the 110th Congress will consist of 49 Democrats, 49 Republicans, and two independents – Senator Joseph Lieberman (Connecticut) and Senator-elect Bernie Sanders (Vermont) – both of whom will caucus with the Democrats.

Democrats picked up Republican House and Senate seats from New Hampshire to California, although most came from the Northeast and Midwest regions of the country.  In the House, Democrats were able to capture 10 seats from the Northeast, 8 seats from the Midwest, 5 seats from the South and 5 seats from the West.  Pennsylvania produced the most new seats (4) for the Democrats, followed by 3 each from Indiana and New York.

Voter turnout played a significant part in the election, with swing independent voters—26 percent of this year's electorate—voting 2 to 1 for Democrats.  And to some extent, moderate Republicans have been replaced by moderate-to-conservative Democrats:  Republicans lost 7 representatives and 1 senator who are members of the moderate Republican Main Street Partnership.  Two additional members of this group retired, and two others, Reps. Rob Simmons (Connecticut) and Heather Wilson (New Mexico), are in races that are still undecided.

Of the 28 Democratic victors in the House, 8 have already pledged to join the Blue Dog Coalition in Congress – a group of moderate to conservative Democrats formed after the Republican sweep in 1994.  The Coalition will grow to 44 members in the 110th Congress – presenting a clear challenge to the more liberal ideological wing of the party.

What Difference Does It Make?

Whether consciously or not, the electorate opted to return to a divided government, most likely to check each party's excesses.  Because while the elections triggered a dramatic shift in the balance of power, left unchanged is the close margin of power that has been in place for the past 12 years.  In fact, only twice before in this nation's history—from 1877 to 1887 and 1947 to 1957—has Congress been so closely divided for so long a period.

If the last dozen years are any indication of what may be ahead, and apart from issues like the Iraq war, this close partisan balance means that there is no predominant majority nor any mandate to force policy changes.  In practical terms, it also means that while Democrats have a numerical majority in Congress, they do not have a governing majority.  In the Senate, where 60 votes are needed to overcome a filibuster, the Democrats come up nine votes short.  As of November 13, Democrats in the House hold 230 seats—only a 12-seat margin—so to get things done they will have to either overcome, or accommodate, intra-party factions like the more conservative Blue Dog Democrats or the party's progressive wing.  (Republicans will need to do the same with their more conservative Republican Study Committee members.) 

Being in the majority certainly carries benefits: Democrats will be empowered to call hearings, conduct investigations, determine which issues get on the legislative calendar, and what amendments are in order.  But those perks of power will be of little value unless a governing majority is formed to tackle the big issues, like energy costs, declining job and retirement security and the affordability of health care.  The prospects for major policy changes in these and other areas will also depend on how President Bush decides to govern during his final two years in office.  How important is a policy legacy to him?  And is he willing to take a conciliatory approach that risks offending some elements of his party's political base?  

Here again, the electorate seemed to put lawmakers on notice not to spend the next two years just shoring up their re-election prospects, but instead to rise above partisanship and work together toward sensible policies.

The Fiscal Realties

In the run-up to this year's elections, Democrats unveiled a wide-ranging agenda, called A New Direction for America, that calls for rebuilding the military, bolstering homeland security, college access for all and affordable health care.  But the agenda also calls for bringing the federal budget deficit under control by imposing pay-as-you-go requirements.  In other words, any new spending or tax cut proposals would have to be accompanied by an offset. (See The Democrats' Agenda below)

The Democrats' plan may have made for good political rhetoric, but the challenge will be to implement it in today's fiscal climate. 

In early October, the Congressional Budget Office reported that the 2006 budget deficit is $248 billion, or less than what was projected earlier this year.  (Notably, that better-than-projected number was the result of an unanticipated increase in revenues, not of any legislative action taken in Congress.) But those results would be far more heartening if they signaled a declining trend.  Instead, the deficit is projected to rise from 2006 to 2007.

Under the circumstances, it is difficult to envision that Democrats will be able to advance bold new initiatives while simultaneously bringing the deficit under control.  In the short run, they will probably have to settle for incremental change.  

As for more immediate concerns—namely, next year's budget debate—regardless of which party had won the majority, the narrow partisan margins combined with a pre-2008 election mentality that will soon overcome Capitol Hill, will make a budget agreement very hard to come by.  All things being equal, the traditional split between Democratic budget hawks and the rest of their party will likely be as prevalent as it was before.  The major difference could be that after spending more than a decade in the minority, most Democrats may be more inclined to work together behind the scenes.  This could occur because the budget resolution itself does not make specific changes in spending or taxes; that work is left to congressional committees later in the year.

The Democrats' Agenda

Predicting what any legislative body is going to do is a decidedly low-percentage activity.  In their document A New Direction for America, however, Democrats set out their agenda and their intentions for the 110th Congress.  In it, they lay out what they call "Six for '06 – Priorities for All Americans, Not Just the Privileged Few."  Among the highlights:

Security

  • Develop a plan to transform policies on Iraq, the Middle East and elsewhere.
  • Redeploy forces from Iraq to force the Iraqis to take responsibility for their country.
  • Double the size of the US Special Forces to target Al Qaeda and other terrorists.
  • Rebuild the military to project power when necessary.
  • Fully implement the recommendations of the 9/11 Commission.
  • Improve and equip the National Guard, police, firefighters, and other first responders.
  • Honor our commitments to veterans.

Prosperity

  • Prohibit any congressional pay raises until the minimum wage is raised.
  • End tax provisions that effectively reward companies for moving American jobs overseas.

Opportunity

  • Enact a permanent provision to make college tuition tax deductible.
  • Cut student loan interest rates in half.
  • Increase Pell Grants to $5,100 and make an additional 250,000 persons eligible.

Energy Independence

  • Enact initiatives to advance energy-efficient technologies such as biofuels.
  • Reduce tax incentives awarded to the oil industry.
  • Enact tough laws with strong penalties for price gouging.

Affordable Health Care

  • Fix Medicare Part D by negotiating prices with the drug companies.
  • Promote stem cell research.

Retirement Security

  • Oppose any plan to privatize Social Security, in whole or in part.
  • Enact pension reforms that protect employees from corporate corruption and mismanagement.
  • Expand the incentives for personal savings.

On election night, Rep. Nancy Pelosi (D-California), the incoming Speaker of the House, indicated that within the first 100 hours of taking office Democrats would:

  • adopt the recommendations of the 9/11 Commission;
  • raise the minimum wage;
  • empower the federal government to negotiate Medicare prescription drug prices;
  • pass stem cell legislation that was vetoed by President Bush earlier this year;
  • cut student loan interest rates in half; and,
  • reform lobbying practices.

But as one moderate Democrat noted the night before the elections, "The only thing worse than not taking back the House would be taking it back for one term."  Over the longer term, Pelosi and her Senate counterpart, Senator Harry Reid (D-Nevada), know that their ranks include a fresh crop of moderate and conservative members whose elections were won in part by distancing themselves from the party's progressive wing.  Faced with a president from the opposing party, they know they must moderate their agenda and reach across the aisle to Republicans if they hope to achieve anything.

To succeed, in short, Democrats will have to govern from the middle.   

The President's Role

Whatever policy changes the Democrats hope to pass will have to be analyzed in the context of a White House that is likely to be less than supportive.  Many of the proposals they articulated prior to the election are in direct contravention to current administration positions, although in Washington, positions can change in a matter of hours.  (Just ask former Defense Secretary Donald Rumsfeld.)

Democratic leaders Pelosi and Reid are not the only ones who will have to make tough choices.  Every day after next January 3, when the 110th Congress is sworn in, will be one day closer to the next presidential and congressional elections.  President Bush is irrevocably a lame duck who will have to balance what he wants his policy legacy to be, with how best to enhance his party's chances in 2008.  

Under the Republican-controlled Congress, President Bush often chose a policy direction that set up a fight with Democrats, knowing that his agenda could be enacted with Republican support only.  Now, will he be willing to risk criticism from a segment of his own political base by moving to the center?  How flexible will he be when oversight hearings are called?  Or how tough will he be with nominations for courts of appeals or possibly the Supreme Court?

Despite the Democratic take-over, the opportunity for meaningful policy action for the most part is driven by the president.  Early in his term, President Bush showcased his abilities to bring competing interests to the table by negotiating passage of the No Child Left Behind Act.  If he chose, he could do the same with energy, immigration and health policy, and there are dozens of other areas where a "third way" approach could work, including pension reform and global warming.

The New Power Brokers

Over the next several weeks, both parties will set their respective leadership structures and make committee assignments.  As that process unfolds, we will get a clearer picture of how Democrats plan to operate.  For example, will Democrats revert to a tradition of authorizing committee chairs to draft legislation and advance it through the process?  During the past 12 years, the House Republican leadership, in particular, has run a highly-centralized legislative operation.  Committee chairs were often told what to pass and when, or were by-passed altogether; legislation was often advanced without hearings or mark-ups, having been drafted by leadership teams; and the House Rules Committee tightly controlled the number and scope of amendments.

Over the longer term, we will also see the degree to which various House caucuses will guide strategy and substance, including the Congressional Black Caucus (43 members), the Congressional Hispanic Caucus (21 members), the conservative/moderate Blue Dog Coalition (35 members in the current Congress), the business-oriented New Democrat Coalition (45 members), and the Progressive Caucus (59 members) – any of which could try to exert their influence in a narrowly-split House of Representatives.

In the meantime, the first order of business is for Congress to select its leaders.  Following is a roadmap of the various leadership slots in play.     

Senate Leadership

  • Sen. Harry Reid (Nevada), the current Minority Leader, is expected to be elected Majority Leader without opposition.  Sen. Richard Durbin (Illinois), the current Minority Whip, is expected to become Majority Whip without opposition.
  • Sen. Mitch McConnell  (Kentucky), the current Majority Whip, is expected to become Minority Leader, replacing retiring Sen. Bill Frist (Tennessee), without opposition.
  • Sen. Lamar Alexander (Tennessee) and Sen. Trent Lott (Mississippi), the former Majority Leader, will both run for Minority Whip.

House Democratic Leadership

  • Rep. Nancy Pelosi (California) is expected to ascend to Speaker of the House without a challenge.  After being nominated by the Democratic Caucus, Pelosi will assume the Speaker's gavel when the 110th Congress officially convenes January 3.
  • Rep. Steny Hoyer (Maryland), the current Minority Whip, is being challenged for Majority Leader by Rep. John Murtha (Pennsylvania).  Both are long-time members of the House Appropriations Committee.
  • Rep. James Clyburn (South Carolina), who currently chairs the Democratic Caucus, will run for Majority Whip.  Rep. Diana DeGette (Colorado), currently one of the Democratic Chief Deputy Whips, has said she will also be a candidate.
  • Rep. Rahm Emanuel (Illinois), the current chair of the Democratic Congressional Campaign Committee, will run for chair of the Democratic Caucus. 
  • Rep. John Larson (Connecticut) the current vice-Chair of the Democratic Caucus, will attempt to hold that position, but Reps. Xavier Becerra (California) and Mike Ross (Arkansas) have both expressed an interest in that position. 

House Republican Leadership Contests

  • Speaker Dennis Hastert (Illinois) has announced that he will not seek a leadership post in the 110th Congress.  Rep. John Boehner (Ohio), the current Majority Leader, will run for Minority Leader.  Also seeking that post is Rep. Mike Pence (Indiana), who currently heads the 109-member conservative Republican Study Committee.  Rep. Joe Barton, who currently heads the Energy and Commerce Committee, has also announced that he may enter the race.
  • Rep. Roy Blunt (Missouri), who is currently the Majority Whip and third-ranking in the GOP leadership, has announced his intention to run for Minority Whip.  He will be challenged by Rep. John Shadegg (Arizona).  Like Pence, Shadegg is considered a leader among conservative Republicans.  The results of these two races will be a real signal as to the policy direction House Republicans will take during the next two years, and perhaps the degree of cooperation with the Democrats that might be anticipated.

 

  • Rep. Adam Putnam (Florida), the current Republican Policy Committee chair, the fifth-highest position in the Republican leadership, has announced he will be a candidate for the third-ranking position in the leadership, Republican Conference chair.  Rep. Marsha Blackburn (Tennessee), Rep. Dan Lungren (California), and Rep. Jack Kingston (Georgia) are also running for that slot.
  • Rep. Kay Granger (Texas) and Rep. Steve Pearce (New Mexico) have announced that they will run for vice chair of the Republican Conference.

As more details emerge, CRD Associates will publish a special report on the make-up and the agendas of key congressional committees.

Postscript on the Lame-Duck Session

Appropriations: What's Next and When?

Regardless of the election results, lawmakers have already set the stage for a budget battle that could result in an additional $5 billion cut in spending for discretionary programs.

The plot line was written back in May, when Congress failed to adopt a budget resolution, an overall blueprint that guides spending for the year.  Moderate Republicans in the House and Senate argued that the President's $872.8 billion budget request for domestic programs was wholly inadequate; unless two years worth of spending cuts were at least partially restored, moderates vowed to block passage of the budget resolution.  They were reassured by House leaders that the additional funding, about $7 billion, would ultimately be provided.  On the other side of the Capitol, the Senate voted to boost domestic spending by $14 billion, including $7 billion more for programs contained in the Labor-HHS-Education bill.  But congressional leaders decided not to convene a House-Senate conference to finalize the spending blueprint, reverting instead to the President's original $872.8 billion limit on discretionary spending.  (The budget limit was inserted in a spending bill supporting US forces in Iraq and Afghanistan.) 

Before adjourning September 30, Congress completed two appropriations bills, defense and homeland security, while postponing work on the remaining spending bills until after the elections.  In order to pass those two bills and avoid a threatened presidential veto, lawmakers shifted an additional $5.3 billion into defense and homeland security—funds that were originally set aside for domestic programs, including public health, education, employment training, agriculture and transportation. 

Unless Congress decides to ignore its own spending limits, the $5.3 billion add-on will have to be offset by cuts in the remaining appropriations bills. 

How Will the Cuts Be Achieved?

In order to avoid any disruption in the programs covered by those unfinished bills, Congress passed a continuing resolution through November 17.  When lawmakers return to work November 13, their first order of business is to attempt to forge agreements on the remaining appropriations bills—a task that will extend the legislative session into December.  If lawmakers are unable to resolve all of their differences by then, they will leave whatever bills remain for the new 110th Congress.

Regardless of when Congress deals with the remaining appropriations bills, if lawmakers decide to adhere to current spending limits they will have to determine how best to spread the required $5.3 billion cut in spending.  In each of the past four years the mechanism of choice has been a government-wide across-the-board cut.  To do that this year would require a cut of as much as 1.1 percent.  (That would be in addition to the $12 billion cut absorbed by domestic programs over the last two years.)   Under this scenario, for example, funding for the National Institutes of Health, which is already facing a $351 million shortfall in inflation-adjusted dollars, would be cut an additional $315 million. 

But this year Congress may be forced to forgo an across-the-board cut in favor of selected program reductions.  Reports are circulating that a cut of 1.1 percent is deep enough to trigger widespread government lay-offs and a drop in services in critical areas like the Social Security Administration and the Medicare prescription drug benefit program. 

If Congress decides to make selective reductions, a number of high-visibility programs—including NIH, college student aid and No Child Left Behind—could face even deeper cuts, as would vulnerable categorical programs like health professions training and Head Start.  Under that scenario, and depending upon the political dynamics, lawmakers may also be hard-pressed to impose cuts on popular national programs while funding narrowly-focused congressional earmarks.

Other Issues of Note 

Medicare physician payment fix. -  While it is rumored that the outgoing chair of the Ways and Means Health Subcommittee, Rep. Nancy L. Johnson (R-Connecticut), plans to address Medicare physician payment reform during the lame-duck, the outcome largely depends on the willingness of GOP leaders to take on the issue before giving up the reins of power.  Outgoing Ways and Means Chairman, Bill Thomas (R-California) and Senate Finance Committee Chairman, Charles Grassley (R-Iowa), are scheduled to discuss a legislative plan to address a physician payment fix and an extension of the Medicare Part D enrollment period.  Like most everything, the decision ultimately will hinge on money.  First, Congress must determine whether it will simply block the proposed 5.1 percent cut scheduled to take effect January 1, 2007, by freezing payments, or propose a more comprehensive reform that includes quality reporting.  The Congressional Budget Office estimates that a simple one-year fix would cost $13 billion over five years, while a complete revamping of the payment system is tagged at $58 billion over five years and $218 billion over 10 years.  Lawmakers have hinted that some off-sets could come from the managed care stabilization fund contained in the 2003 Medicare prescription drug law.  However, health plans and the White House are opposed to tapping the fund.  Prior to the mid-term elections, Energy and Commerce Committee Chairman Joe Barton (R-Texas) said he supported a multi-year physician payment solution to buy lawmakers more time to work on a comprehensive proposal for scrapping the entire payment system.  Barton has warned against passing legislation remedying the problem for only one year, saying Congress has spent "billions of dollars on short-term fixes that make a long-term remedy only that much more expensive."  While there is bipartisan agreement that physicians' pay should be increased in 2007, House Democrats remain skeptical of Republican plans to include pay-for-performance (P4P) measures in a reform proposal, saying there may not be enough time to craft a serious P4P system during the lame-duck session. On the other side of the Capitol, incoming Finance Committee chairman Senator Max Baucus (D-Montana) supports elements of quality reporting.

Health Information Technology -  Before recessing for the mid-term elections, House Energy and Commerce Committee Chairman Joe Barton (R-Texas) announced that some progress had been made on finalizing health care information technology legislation, and promised that the legislation would be considered during the lame duck session.  However, it seems unlikely that a final compromise will be reached during the lame duck session, given the election results and the disparate positions the House and Senate have taken in their respective versions of the legislation, specifically Senate provisions that call for federal grants to help organizations transition to electronic medical records and House provisions that create safe-harbors in federal anti-kickback laws.  With Reps. John Dingell (D-Michigan) and Charles Rangel (D-New York) poised to take over the chairmanships of the House Energy and Commerce and Ways and Means Committees, respectively, postponing work on the legislation until early next year would allow more time to address House Democrats' concerns about privacy, the lack of federal funding for IT acquisition and the omission of a date certain requirement for implementation of new health IT standards.  Along those lines, Rep. Patrick Kennedy (D-Rhode Island) earlier this year authored the 21st Century Health Information Act, legislation that garnered the sort of bipartisan support the House-passed bill lacked.  In addition, Rep. Adam Smith (D-Washington), who heads the business-oriented New Democrat Coalition, may seek to forge bipartisan health IT legislation as well. 

On the Senate side, Senator Bill Frist (R-Tennessee), one of the co-authors of the Wired for Health Care Quality Act (S. 1418), is retiring, leaving Senators Mike Enzi (R-Wyoming), Ted Kennedy (D-Massachusetts), and Hillary Clinton (D-New York) to advance this legislation.  The Senate-passed bill enjoyed strong bipartisan support from the start and included extensive federal funding for health IT acquisition in the form of grants.  It is unlikely that this bipartisan support will dissolve when the Democrats take control of the Senate.  In the meantime, the Centers for Medicare and Medicaid Services (CMS) will move ahead with regulations encouraging physicians' use of health IT.  Acting CMS Administrator Leslie Norwalk has said that she intends to implement IT policies favored by the Bush administration, viewing them as key to improving the quality of health care service and to reducing costs.