Bruce Mehlmanbruce@mc-dc.comOctober 1, 2018

THE CHAOS CONTINUES

How a Close Election, Fraught Lame Duck & Very New Congress Promise More Disruption in DC

@bpmehlman

37 days 765 days95 days

116th Congress

Q4 ‘18 Washington Update

2

CONTENTS

THE CHAOS CONTINUES37 DAYS TO THE MIDTERMS……….……………………………. Slides 3-10… Race for the House & Senate

94 DAYS REMAINING IN 115TH CONGRESS……….……….….. Slides 11-16… Four Key Questions for the Lame Duck

ANTICIPATING THE 116TH CONGRESS…..……………..…....... Slides 17-24… New Members, New Chairmen, New Priorities

765 DAYS UNTIL THE 2020 ELECTIONS………………..…....... Slides 25-31… Future of the Political Parties… The Road to 2020

Senate GOP

House GOP

QUOTH THE MAVENS

Odds Democrats Win…HOUSE Forecaster SENATE

80% 31%

78% 27%

68% 34%

Sources: PredictIt; 538 (H, S); Iowa Electronic Markets

Big Data Models See House at Risk, Senate Safer (& Hillary President)

3

PRESIDENTIAL APPROVAL CONSISTENT w/ PRIOR WAVES

39 4042 43

45 46

52

58

63 6366

2006 2018 2014 1982 2010 1994 1978 1990 1986 2002 1998-30 ? -13 -26 -63 -54 -15 -8 -5 +8 +5-6 ? -9 0 -6 -9 -2 -1 -8 +1 0

HS

HS

Chamber lost Already in minority 4Chamber gained

1994 1998 2002 2006 2010 2014 2018Congressional Control Preference (NBC/WSJ) R+6 R+1 Even D+9 Even R+2 D+12

Recruited More House Candidates (FEC) R+11% R+1% R+4% D+12% R+51% R+21% D+24%

Primary Turnout Advantage (NBC) +2.2M +1.2M +1.2M +3.0M +4.9M +2.1M +4.3M

Very Satisfied with U.S. Economy (NBC/WSJ) 4% 27% 4% 10% 3% 4% 26%

Consumer Confidence (U. Michigan, Nov.) 91.6 102.7 84.2 92.1 71.6 88.8 100.1

FAVORING GOP FAVORING DEMSEconomy Recruiting

Red States & CDs “Generic Ballot”Electorate Turnout in Primaries

OTHER KEY ELECTION INDICATORS MIXED

(Midterms historically older, less diverse)

5

HOUSE MAJORITY VERY VULNERABLE

-18

-10

8

54

93

64

48

30

11 13

42 40

23

16

-20

0

20

40

60

80

100

2014 1998 2002 1994 2010 2018 2006Net Seats at Risk Margin of Control

278%300%

233%129%

Seats-At-Risk-to-Margin Ratio High

Majority Lean, Toss-Up, Worse - Minority

Source: Cook Report’s final House Ratings of each cycle, late Sept. for 2018

DEM minorities had more seats at risk than GOP majorities

6

Majority Grew Majority Grew Majority Grew House Flipped House Flipped House Flipped

Source: RealClear Politics aggregation of recent polls as of 9/30

DEMS DEFENDING MAJORITY OF CLOSE SENATE RACES

-4.5

-1.6 -1

0 0.5 0.7 1.12.5 3

6.78.3

9.311

-6

-4

-2

0

2

4

6

8

10

12TX ND MO TN IN NV FL AZ MT MN NJ WV WI

Dem Candidate Lead in Closest Senate Races (RCP 9/30)

7

KEY (Map & Chart)

Dem IncumbentGOP IncumbentGOP-Held Open Seat

Smith

BUT… OUT-PARTY INCUMBENTS RARELY LOSE

91%

100%

80%

69%

80%

31%

State VotedFor POTUS

(10+)

State VotedFor POTUS

(0-10)

State VotedFor POTUS

(0-10)

State VotedAgainstPOTUS

State VotedFor POTUS

(10+)

State VotedFor POTUS

(0-10)

OUT-PARTY INCUMBENTS

DonnellyHeitkampManchinMcCaskill

Tester

BaldwinBrownCaseyNelson

Stabenow

Cruz

Heller

TN Open

AZ Open

Source: Mehlman Castagnetti Rosen & Thomas analysis

IN-PARTY INCUMBENTS IN-PARTY OPEN SEATS

Historical Winning Percentages in Modern Midterms (1978-2014)

8

BUT, BUT, BUT… IT’S ALL ABOUT TURNOUT

Source: Washington Post, Sept. 25, 2018

TRADITIONAL DEM CONSTITUENCIES

Source: Gallup, Sept. 28

Afr. Am. Hispanics 18-29 Dems66% 27% 26% 63%

Whites 50-64 65+ Reps65% 69% 82% 65%

TRADITIONAL GOP CONSTITUENCIES

% Absolutely Certain They Will Vote

9

$-

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

$900.0

$1,000.0

1990 1994 1998 2002 2006 2010 2014 2018

Record Outside Spending in a Midterm Election

Thru Sept. 29 After Sept. 29

PARTIES GETTING WEAKER, ROBBER BARONS STRONGER

$7.3M $9.5M $15.2M $27.6M$69.5M

$309.8M

$385.1M

$566.1M

$1.17Bprojected

Source: OpenSecrets (FEC) excluding Party Committee independent units 10

Historically 33% of total Historically 67% of total

The Future of the 115th Congress

Four Key QuestionsNov. 7, 2018 – Jan. 2, 2019

11

#1. WILL ELECTION RESULTS BE CONTESTED?

Democrats Allege GOP Illegalities in Every

Election

President Trump Alleged Widespread Fraud in an

Election He Won…

The Losing Side May Not Accept Defeat Quietly

Likely to Blame:1. Russian Hackers2. Elbridge Gerry (Gerrymandering)3. Billionaires4. Voter suppression

Likely to Blame:1. Media (MSM, Social)2. The Deep State3. Illegal Immigrants4. Chinese Hackers

12

Licensed from AP

#2. HOW COMPLETE THE REVOLUTIONS?The Next Battles in the Parties’ Civil Wars

Both Nancy Pelosi (D) & Kevin McCarthy (R) have majorities for Speaker.Neither may have 218 votes.

DEMOCRATS

Plan A: Pelosi

REPUBLICANS

13

Plan A: McCarthy

Plan B Plan C

Official photos

Official photos

Plan B: ???

Anchorman 2

#3. WHAT REMAINS FOR THE 115TH CONGRESS?

Battles Over Wall-Funding & Nominees Likely

1. Funding Government Past 12/7 Continuing resolution expires Pres. Trump may veto spending

bill that fails to significantly fund border wall.

2. 154 Nominees awaiting Senate Confirmation (on Executive Calendar)

3. Farm Bill / Food Assistance (SNAP)

4. Intelligence Reauthorization

5. Nat’l Flood Insurance Program

6. Higher Education Act

7. Tax Extenders & Technical corrections

8. IRS Reforms

9. Election Security

10. Violence Against Women Act

** Opioids & WRDA Bills (expected to pass pre-election)

14Source: Senate Executive Calendar, pending civilian nominations

#4. WHAT PROBES, PURGES, PARDONS & PARTINGS?

Mueller Report Expected

Post-Election Turnover? End of Year Pardons?

Firings Widely-Rumored

Sources: All photos licensed from AP 15

PAST PERFORMANCE IS NO GUARANTEE… BUT…

16.2%

33.2%

11.1%

24.8%

12.9% 12.7%

18.7%

6.4%

19.9%

0.9%

25.1%

27.1%

22.0%

14.9%

6.7%

3.7%4.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

'50 '54 '58 '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14

Performance 12 Mos. After Mid-Term Election

Source: Strategas Research Partners

S&P 500 hasn’t fallen in the 12 months after a Midterm since 19461950 - 2014 avg = 15.3%

16

The 116th Congress

Brand New Congress, Same Old Challenges

Jan. 3, 2019 – Nov. 3, 2020

17

73

39

56

69

92

67

7774

81

4350

33

44

110

86

74

40 41

54

40

55 54

94

82

5952

64

1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Freshmen Classes 1967-2019

Retiring 2018 / Lost Prim

ary15%-25% OF THE HOUSE WILL BE NEW

High R

isk (Toss-Up/W

orse)

Size of Freshman Classes in the House of Representatives, 1967-201918Source: CRS (thru 2008) & research by A. Yukawa, MCR&T

MAJOR TURNOVER IN COMMITTEE LEADERSHIPTerm Limits & Retirements Guarantee Changes, Others May Lose

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

6 1 2 2 3 2 5 7 4 2 5 3 2 8 3 5 2 4 3 10# Departing House Chairs

HOUSE COMMITTEES WITH NEW CHAIRS / RANKING MEMBERS

AdministrationAppropriations

Financial ServicesForeign Affairs

Homeland SecurityJudiciary

Oversight & Government ReformSpace, Science & Technology

Small BusinessTransportation & Infrastructure

Veterans’ Affairs

SENATE COMMITTEES WITH NEW CHAIRS / RANKING MEMBERS

Commerce, Science & TransportationCommerce, Science & Transportation

Finance Foreign Relations

Homeland Security

19

Italics = Toss Up race

EXPECT TRUMP ADMINISTRATION TO DOUBLE DOWN

STYLE(Disruptor)

217

153 145 152 157

210245

267

307291

262

196

147175 171

257 259

386

338

383 378

0

50

100

150

200

250

300

350

400

1/17 2/17 3/17 4/17 5/17 6/17 7/17 8/17 9/17 10/17 11/17 12/17 1/18 2/18 3/18 4/18 5/18 6/18 7/18 8/18 9/18

Tweets Per Month from @RealDonaldTrump

THERE WILL BE TWEETS

SUBSTANCE(Doing what he promised)

Proudly politically-incorrect Intentionally unpredictable Media-obsessed Speaking direct to public

Remaking global trade Controlling immigration Ending ObamaCare Rebuilding infrastructure

20Source: http://trumptwitterarchive.com/archive

WHAT A DEM-LED HOUSE WILL DO

Aggressive Oversight Potential Deals

Stop / Reverse Trump Rally the Base

• Infrastructure• Rx Prices• Trade / USMCA & China• Carried Interest• Techlash (Privacy, Antitrust)

• Immigration/ Dreamers• Ethics Reform• Gun control• Pay Equality• Voting Rights• Medicare for All

• Block Deregulation (Labor Environment, Banking)

• Protect / Save ACA• Undo Tax (Corp rate, SALT)• Block Judges / Noms

(If Dems take the Senate)

• Trump (campaign, business +)• Cabinet & Agencies• Investigating Industries

• CEO Pay• Board diversity• Antitrust• LGBTQ rights

• Health costs• Net Neutrality• Climate• #MeToo

21Sources: Pelosi pic (Wikimedia Commons); Analysis (Mehlman Castagnetti Rosen & Thomas)

DEBT CEILING FIGHT RETURNS Q1 2019Congress Must Increase Debt Ceiling in 2019,

As PAYGO is Re-imposed & Trillion $$ Deficits Return

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

U.S. deficit in billions, past & projected

$1.4 trillion

$1.5 trillion

$1 trillion

$413 billion

Source: CBO Apr. 2018 baseline 22

COMPANIES WILL FACE EVEN MORE PRESSURE

New Accountability

New Audiences

New Opportunities

New Risks

Social Issues Increasingly Inescapable, Fraught With Peril & Promise

23

2020 SENATE: CAN IT FUNCTION?

Intense Kavanaugh Confirmation Acrimony Will Linger

Rules Require Compromises, Politics Prevent Them

116th SENATE BY THE NUMBERS

0-1: Likely margin of control

9+: Dem Sens may be running for WH

12: Seats defended by Democrats(2 in Trump ‘16 states: AL, MI)(4 in swing states: MN, NH, NM, VA)

22: Seats defended by Republicans(2 in Clinton ’16 states: CO, ME)(4 in swing states: AZ, GA, IA, NC)(1 Majority Leader)

0: States split 2016 Sen/Pres. vote

24

25

The Road to 2020

FUTURE OF THE GOP #1: LESS COLLEGE

Source: Pew (college grads+ among registered voters) 26

4950

5150

47 47 4748 48

5048

47

44 4442

4142

4644

4342 42 42

39

36

45

4244 44

4544

46

4243

4244

4749

48 48

5150 47 49

5051 51

50

54

58

30

35

40

45

50

55

60

1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GOP & R Leaners DEM & D Leaners

Voters With College Degrees: Party ID (self-described)

FUTURE OF THE GOP #2: FEWER WOMEN

27

41

37

3940

3637

33

47

5150

51

5354

58

30

35

40

45

50

55

60

2010 2012 2014 2016 2017 2018 2018

GOP DEM

Source: NBC / WSJ (Sept. 2018)

Women: Congressional Preference

Jan-Aug Sept

2020 BEGINS: HAIL TO THE CHIEF

It’s Trump’s Party(He Can Tweet If He Wants To)

Take Back the Right (What Would Reagan Do)

Rockefeller Restoration(Return of Kinder, Gentler)

No incumbent Republican President ever failed to

win re-nomination.(Major challengers in 1912, 1932, 1976 &

1992 all failed)

GOP turns to popular moderate with proven record (Eisenhower 1952)

(e.g. Governors John Kasich, Larry Hogan or Charlie Baker)

90% likely 9% likely 1% likely

Insurgent runs as “truer conservative” (Reagan 1976)(e.g. UN Amb. Nikki Haley, Sens. Ben

Sasse, Marco Rubio, Ted Cruz)

28

A Tale of Two Democratic Parties

FUTURE OF THE DEMOCRATS: ‘18 DETERMINES ‘20

WIN BACK “REAGAN DEMOCRATS”(Party of the Electoral College)

LEFTWARD HO!(Party of the Popular Vote)

29

Do You Think President Trump should be impeached

& removed from office, or not?Liberal Moderate

74% YES 39%

17% NO 41%

Sources: Fox News poll , 9/16-19/18 (impeachment); Politico (dump Pelosi article)

2020 BEGINS: WHICH DEMOCRATS AREN’T RUNNING?

MORE PROGRESSIVITY LESS 30

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