As Primary Smoke Clears, Election Scene Looks The Same

For all the noise and drama about Tea Party upsets and anti-incumbent fervor during the primaries, the outlook for the upcoming congressional elections appears very much the same as it did early this year.

Most of the pundits have since come around to the view I expressed here in February that Republicans are likely to win control of the House of Representatives and to make significant gains, though probably not take control, in the Senate.

At the time, I thought the best hope for the Democrats would be a strong upswing in the economy that would make voters happier about the results of the party’s four-year control of Congress and two years in the White House. Instead, the Democrats have struggled through a miserable spring and summer of bad news: first the oil spill in the Gulf (which seemed to remind voters of the ineffective federal response to Hurricane Katrina, even though its ultimate consequences appear far less dire), and then the mounting evidence that the economic rebound during the run-up to the elections has been feeble, at best.

All this bad news might have permitted even bigger Republican gains than I expected, but the GOP is battling its own demons. One is the loose-cannon effect of former Alaska Gov. Sarah Palin and the Tea Party movement, which has mounted strong primary challenges – some successful, some not – to the party’s favored candidates. In most of those instances, regardless of which side won, the intra-party battle cost time and resources that might have been deployed against Democrats.

The Republican Party is not terribly popular with the electorate, either. The country is still sharply divided along partisan lines, with only a relatively small slice of independent voters holding the balance of power. So there is a limit to how much more Republicans might capitalize on Democratic Party travails, no matter what happens.

Larry J. Sabato, a political handicapper and director of the University of Virginia’s Center for Politics, recently predicted that Republicans will pick up a net gain of 47 seats in the House, exactly the same number I calculated in February. Stu Rothenberg, editor of the Rothenberg Political Report, has suggested that a Republican gain of 37 to 42 seats is likely, but that a gain in the 45 to 55 seat range is also “quite possible.” Republicans must net 39 seats in order to take the majority.

I continue to believe that a GOP takeover in the Senate is possible, though not likely. Enough seats are realistically in play that a switch in the balance of power could take place, but everything would have to work exactly in the Republicans’ favor. To take the majority, Republicans would have to gain 10 seats. I predicted in February that they would most likely take only nine, leading to a 50-50 split and leaving Vice President Joe Biden a potential tie-breaking vote. In his recent predictions, Sabato wrote, “Republicans have an outside shot at winning full control (+10), but are more likely to end up with +8 (or maybe +9).”

History could work in the GOP’s favor in the Senate: Since World War II, every time the House of Representatives has flipped parties, the Senate’s balance of power has changed as well. In 2006, a Democratic takeover of the Senate was considered unlikely, but everything fell to the party’s advantage, and the Democrats gained control of both chambers. This November we might see the process happen in reverse.

Whatever happens on Election Day, the results will have important consequences even before the new members take their oaths in January.

If Democrats somehow hold onto both houses, a lame-duck session to address tax legislation will be inevitable. Democrats would not necessarily succeed at passing anything, but they would certainly try to achieve their goal of retaining the Bush tax cuts for households with incomes below $250,000, while allowing taxes to rise for higher earners.

A Republican takeover of both houses, on the other hand, would almost eliminate any chance of passing tax legislation this year. The only reason for Democrats to even call a lame-duck session in that event would be to deal with other matters, of which there are plenty in the pipeline, ranging from controversial trade deals to labor legislation to the federal budget. Democrats might make a last-ditch push to get some of their positions written into law before the next Congress strengthens the other side’s bargaining position.

Why do I believe there will be no serious push for tax legislation in a lame-duck session before the Republicans take control? Because to get anything done in the Senate, the Democrats – who are not themselves unified on ending the Bush tax cuts for high earners – need to sway at least one Republican. The three usual suspects are Sens. Scott Brown, R-Mass., Olympia Snowe, R-Maine, and Susan Collins, R-Maine. But these three would be unlikely to support a Democrat-sponsored tax bill if they knew their own party was about to take power. With the GOP soon to hold majority control, the three senators would stand to take on much more influential roles. I doubt any of them would be willing to cross party lines in order to let Democrats pass a tax bill in 2010 if it might mean losing a coveted chairmanship or committee assignment.

If Republicans take the House but not the Senate, which I consider to be the most likely outcome, there may be some possibility of new tax legislation, but it will not be easy for Democrats to get anything passed. Republicans will count on all of their party’s senators toeing the party line to stop Democrat-sponsored tax bills from making it through the Senate during a lame-duck session.

There is still time before Election Day, but at this point I think the die has been cast. In some places, early mail-in voting will begin in just a few weeks. Given the country’s political polarization and the struggling economy, very few people are likely to change their minds between now and when they cast their ballots. All that remains is for the dust to settle.

• Become A Funded Futures Trader