The mid-term elections were notable for two reasons, one historical, one prospective. The Senate elections on Tuesday marked the 100th year of direct elections of Senators pursuant to the 17th Amendment, which became effective in 1913, superseding Article I, section 3, of the Constitution, under which Senators had until then been elected directly by state legislatures. With voters having cast their ballots, President Obama and the Republican Congress should be able to accomplish a great deal if they seize the opportunity.
What might motivate them to work together? The President now has two remaining years in office, time in which he is expected to focus on legacy issues. As he has already demonstrated, the President is prepared to act unilaterally, through Executive Orders and through rulemakings underway or contemplated. But surely the President could reduce potential future litigation risks and advance his legacy by working with Congress, though that will require a change of approach and a willingness to compromise.
Republicans have reasons to offer an olive branch, not least to show the American public in the run up to the presidential elections in 2016 that they can govern. The 2014 Senate races were run in states that naturally favored Republican candidates, including several states in which Democratic incumbents were facing electorates that had voted for Mitt Romney by double digits in 2012. By contrast, Democrats will clearly be on the offense in 2016, when 34 seats will be contested. Many Senate races will be fought in states much more historically receptive to Democratic candidates, and the party will have the benefit of a presidential race turnout model that boosts Democratic prospects in close races. Of the 34 Senate seats up in 2016, 24 feature Republican incumbents, while just 10 Democrats will be up for re-election. Unlike in 2014, none of the 2016 Democratic Senators up for re-election hail from states that President Obama lost in the 2012 election. The 2016 Senate Republicans, though, must defend six seats in states that President Obama carried in 2012 (Florida, Illinois, Iowa, New Hampshire, Ohio, Pennsylvania, and Wisconsin) and two he carried in 2008 (Indiana and North Carolina).
In this environment, many Senate Republicans will likely wish to demonstrate to their constituents that they can work with Democrats to move legislation forward that can be signed into law. Going from being the party in control of only one chamber to being in control of both chambers will put the onus on Republicans to change the narrative of a “Do Nothing Congress” to one of a “Do Something Congress.” Since they remain well short of 60 votes and thus cannot easily overcome even a threatened filibuster by Democrats, Senate Republicans will need to reach across the aisle to move legislation in which they have an interest. Congressional Republicans will no doubt consider using the Budget Reconciliation process, which requires a simple majority in both chambers, to advance major legislative priorities. (But given the limitations inherent to this procedural option, they may find that their options are limited.) Lacking 67 votes in the Senate, congressional Republicans cannot expect to overcome presidential vetoes if they go too far. The new majority no doubt will look for ways to send legislation to the President, giving him the opportunity to use a veto pen that he has only wielded twice in his first six years. This strategy in particular may be used by Speaker John Boehner (R-OH) and Majority Leader Mitch McConnell (R-KY) as a pressure relief valve for conservatives who want to confront the President. Once vetoes have occurred and been sustained, the Republican leadership could then pursue more moderate legislative options that the President will sign into law. But even those who wish to get to yes will need to overcome the divisions within their own ranks.
History shows that the last two years of a lame duck President can be productive, even for one facing a Congress controlled by the other party. Presidents Ronald Reagan, Bill Clinton, and George W. Bush, the last three Presidents to serve two four-year terms, successfully worked with Congress to enact significant legislation or to otherwise achieve landmark initiatives in their final two years in office. President Reagan, for example, pushed back against conservatives in his base to negotiate an important arms reduction treaty with the Soviet Union that eliminated the threat of intermediate-range nuclear missiles. Notwithstanding opposition from his party, President Clinton reached agreement with China to normalize trade relations between our two countries. Even though he did not enjoy as much success as Reagan and Clinton, President Bush found common ground with Democrats on a major energy bill, the last “all of the above” energy bill to clear Congress, and signed into law legislation that was essential to dealing with the fallout of the collapse of Lehman Brothers, when the world economy also was at risk.
President Obama will face similar opportunities, such as working with Republicans in Congress to secure enactment of Trade Promotion Authority, which we think is essential for his Administration to conclude major trade agreements across the Atlantic (TTIP) and across the Pacific (TPP) for the benefit of the nation as a whole. Fundamental tax reform, at least on the corporate side of the ledger, is also within reach. If realized, that goal could pay dividends for decades. Finally, there is a real need to address the impact of “sequester” on future spending options, especially the adverse impact it will continue to have on military readiness. Beyond these more contentious issues, Congress and the White House should be able to reach agreement on a new surface transportation bill, an aviation funding bill, and other bills that historically have enjoyed bipartisan support, such as education reform legislation.
However, little of this will be possible unless the President and the Republican Congress are prepared to give a little to get a lot. We remain optimistic about the prospects. As Senator Rob Portman (R-OH) recently put it, “It’s very possible to get a number of things done if the president is willing to come to the table, and I believe he will.”
One final subject is worth mentioning, which could have a profound impact on relations between the White House and the Republican Senate next year, and thus their ability to get anything done. Minority Leader Mitch McConnell (R-KY) has spoken recently about the importance of returning to “regular order,” including bringing more bills to the floor in which Senators will have real opportunities to offer and debate amendments. But perhaps more importantly, he has suggested that the Senate should return to the precedent of subjecting judicial and agency nominations to the same 60-vote requirement that applies to legislation in order to end debate. This precedent was abandoned late last year when, after long argument between the parties, Majority Leader Harry Reid (D-NV) triggered the “nuclear option,” which reduced the threshold necessary to invoke cloture and end debate on all executive and judicial nominations (other than Supreme Court nominations) from 60 votes to a simple majority vote. As a result of that change, since November 2013 the Senate has confirmed more than 60 judicial nominees, including twelve circuit court judges, relying solely on Democratic votes. Assuming the Senate decides to revert to prior practice, the President will face a much greater challenge in securing confirmation of any of his nominees since he will need the support of many more Republicans than had he needed only a simple majority vote.
For the institution as a whole, we think Leader McConnell’s expressed desire to revert to the pre-nuclear option filibuster threshold and return to regular legislative order would be good changes. But there can be little doubt that the limitations on the President’s ability to move forward on some judicial nominees and potentially even some cabinet selections will lead to more partisan battles that could impede progress in other areas.
Facing an all-Republican Congress, the White House can anticipate an increase in congressional investigations, as well as a continuation of those already underway in the 113th Congress, such as one focused on Benghazi. There can be little doubt that committees with jurisdiction will be investigating various aspects of the Affordable Care Act, investigations which could affect the business community as well, as investigators seek to build a record for recommending changes to the law. In addition, if the President moves forward to address immigration reform by Executive Order, he is likely to face additional congressional investigations, as well as a more poisoned political environment and a harder climb to confirmation for many of his executive and judicial appointments.
But before the 114th Congress convenes and these developments begin to play out, the 113th Congress still has plenty to do in the forthcoming “lame duck” session. Since the 20th Amendment was ratified in 1933, which moved the start date for a new Congress from March to January, legislators have met 19 times in a lame duck session, some more productive than others. In 1948, for example, after Democrats regained control of both Houses and President Harry S. Truman was elected to a full term, the “do-nothing” 80th Congress met for approximately an hour and a half. By contrast, in 2012, the lame duck 112th Congress approved legislation extending most of the “Bush” tax cuts, postponed budget sequestration, extended unemployment benefits, postponed a reduction in Medicare payments to physicians, reauthorized the Foreign Intelligence Surveillance Act Amendments, and approved the defense and intelligence reauthorization bills. In addition, the Senate confirmed 66 nominees, including 16 judges.
Before it left town for the elections, the 113th Congress adopted a continuing resolution to fund the government through December 11. One of its highest priorities when it reconvenes will be to fund the government through next year, though not necessarily for the full fiscal year. Although the politics have yet to be sorted out, the math is pretty straightforward. Last year, Congress set domestic and national security spending levels for fiscal years 2014 and 2015 at $1.014 trillion. For FY 2015, the House and Senate defense appropriations bills are only $1.3 billion apart, and many other measures have the same or nearly identical funding levels. That isn’t to suggest that major policy issues don’t divide the two bodies or the two parties, but at least they are not looking at differences of tens of billions of dollars to reconcile, as in past years. Since spending for FY 2016 and beyond needs to be addressed next year, including the continuing impact of sequester on defense readiness, both parties and both houses should want to resolve the current funding impasse quickly, and to do so for the entire remaining fiscal year. But it still isn’t clear whether enough Republicans are willing to move a bill in the lame duck session to eliminate one less distraction early next year, which they will otherwise face if all Congress is able to do is provide for another short-term extension of funding.
Congress still has not completed action on “tax extenders” legislation either. Although not technically a “must pass” bill, the legislation remains a high priority for the Administration and many Members of Congress. Even though the House and Senate have, to date, taken very different approaches on extenders, resolution–of some duration—for the fifty plus provisions that have already expired or will expire by the end of the year is likely.
Congress has allowed extenders to lapse many times in the recent past. Most recently, in both the 2010 and 2012 lame duck sessions, Congress passed two-year extensions of most expiring provisions. Moreover, despite the twelve-month gap from expiration to renewal, the extender bills were made retroactive to the beginning of 2010 and 2012, respectively. The leadership of both the Democratic-led Senate and Republican-led House have acknowledged that extenders must be addressed in the lame duck session, but there has been considerable disagreement as to what the final legislation should look like, with the House and Senate taking starkly contrasting approaches so far this year. The Senate Finance Committee reported bipartisan legislation, the EXPIRE Act, which would extend nearly all expired provisions for two years (2014 and 2015), thereby preventing an $85 billion tax increase on individuals and corporations from taking effect. Rather than opting for a short-term extension of all expired provisions, the House has passed a handful of bills making select extender provisions permanent at a much greater cost. Under the House approach, dozens of provisions that expired at the end of 2013 remain unaddressed. With the 2014 tax filing season closing in, there will be significant pressure to deal with these provisions in the lame duck session. Although both the House and Senate will seek to defend their preferred approach to extenders, it is more likely that the Senate’s lowest common denominator approach will prevail as it has historically.
We also expect Congress to consider legislation that combines the most critical elements of the Marketplace Fairness Act (MFA) with a long-term extension of the Internet Tax Freedom Act (ITFA). Both MFA and ITFA enjoy broad bipartisan support in Congress. The MFA, for example, which would give states the authority to compel online and catalog retailers to collect sales taxes on remote sales if they have simplified their state sales tax laws, passed the Senate with a strong bipartisan margin in 2013. The IFTA, which would make permanent the ban on state and federal taxation of Internet access, passed the House this summer with strong bipartisan support and was then extended as part of the legislation funding the government until next month. Congressional leaders have expressed urgency to resolve both issues in tandem, since the IFTA expires on December 11, 2014. Senate Majority Leader Reid and other Senators have publically committed to take up and pass the Marketplace and Internet Tax Freedom Act (MITFA) early when Congress returns to work this month. Swift consideration of MITFA would satisfy a broad coalition of stakeholders, including Internet Service Providers and anti-tax advocates that strongly support ITFA, and brick-and-mortar retailers, technology providers, Internet retailers, and state-and-local governments that support enactment of the MFA this year.
We also expect Congress to take up the issue of retransmission consent for satellite TV providers. Current law, which expires at the end of the year, provides satellite TV providers with certain retransmission rights to broadcast TV station signals. If the law is not renewed, some 1.5 million satellite TV subscribers could lose access to these broadcast stations. This past summer, the House passed a bill to address the problem. In September, the Senate Commerce Committee passed its version, although after some difficulty. There are some key differences between the Senate and House versions that will need to be resolved. The Senate bill, for example, addresses several issues with retransmission agreements and procedures, including examining the costs of such agreements for cable TV providers, investigating whether such agreements are being negotiated in “good faith” by broadcasters, and placing limits on such agreements to prevent cable and satellite TV providers from carrying certain out-of-market stations. The House bill does not include any of these or other provisions.
We also expect Congress to give final approval to the annual defense authorization bill, which has cleared the House but not yet reached the Senate floor. Leadership of the Armed Services Committees will produce a bill that represents the equivalent of a conference report, with initial approved in the House and final passage in the Senate thereafter. In recent years, when Congress has struggled to pass legislation of any sort, the defense authorization bill is one of the few bills that Congress can be counted on to send to the President.
In addition, Congress will need to extend the Terrorism Risk Insurance Act (TRIA) by year end when current law expires. The House Committee on Financial Services and the full Senate have approved legislation to reauthorize TRIA. While the House and Senate versions of the legislation differ substantially, both chambers have acknowledged the need to reauthorize TRIA by year end.
Beyond that, we don’t see much else being done in the lame duck session.
In the pages that follow, we offer our thoughts on major policy areas that will drive the agenda in Washington for the next two years in the run up to the 2016 presidential election and how they might affect you. The next Congress will face the need to extend or reauthorize the nation’s surface transportation and aviation programs, with funding and policy challenges involved in each. It will also need to address the debt limit. Many other challenging issues await it as well. To give you a sense of what potentially lies ahead, we sketch out our sense of what is in store in the areas of appropriations and budget matters, defense and national security, energy and the environment, financial services, food and agriculture policy, healthcare, homeland security and cybersecurity, international policy issues, tax, technology and telecommunications, trade, and transportation and infrastructure.
As a firm with deep public policy roots, we are proud of our ability to help clients exercise a right enshrined in the U.S. Constitution by petitioning their government. We have been at it since 1965, when Jim Patton encouraged a young White House aide named Tom Boggs to help him build a different kind of law firm, one that understood that all three branches of government could provide solutions to challenging problems. By combining political know-how, legislative experience, and substantive knowledge of the law, they had a vision for helping clients achieve success.
This year marked a historic transition for our public policy practice, as we joined with our colleagues at Squire Sanders to form Squire Patton Boggs and dramatically expanded the capabilities we offer our clients. From a small firm in 1965, we have evolved into a firm with 44 offices in 21 countries, including a presence in capitals around the world where major policy decisions made today could affect your business tomorrow. We have an expanded ability to connect your business objectives to policy decisions worldwide. We look forward to using our broader capabilities to help our clients achieve their global public policy objectives in the next two years.