In a Nov. 9 Law360 article, McGuireWoods Consulting senior advisor, Frank Donatelli, reviewed the 2018 midterm elections with ten snap observations.

TEN: The turnout for the 2018 midterms was the largest in history – approaching 113 million voters.

NINE: Republican campaigns focused on immigration, and base Republican voters were energized by the Brett Kavanaugh U.S. Supreme Court hearings. However, Republicans did not do well in southwestern states, and the strong economy was not emphasized.

“Trump is comfortable talking about issues that motivate his base, and that won him an upset victory in 2016,” said Donatelli. “However, he has yet to construct a broader message that might win him support of new voters to fortify his electoral coalition.”

EIGHT: The congressional issue agenda will be altered with a Democratic House majority, including oversight investigations and scrutiny for the president’s revised trade treaty with Mexico and Canada. Progress on immigration and criminal justice reform may be possible – both parties now have a stake in seeing legislative results.

SEVEN: Republicans gained at least three Senate seats, making it easier to confirm Trump appointees.

SIX: Republicans control 62 of the 99 state legislative chambers, giving them a strong voice in redistricting, and Democrats won governorships in key states such as Pennsylvania, Michigan and Wisconsin – all states won by the president in 2016.

Donatelli noted, “Not only do those wins give Democrats more leverage in the next census and redistricting, but they also enhance Democratic chances to win those states’ electoral votes in 2020. Governors matter in many ways.”

FIVE: Progressive stars came up short.

“The results support the argument of Democratic centrists that their party needs to attract more independents and moderate voters to win larger states,” Donatelli said, and added a prediction – “Progressives will resist that conclusion.”

FOUR: Important voter groups such as college-educated women and suburban voters came out for Democrats in key swing districts – helped by Republican efforts to repeal the Affordable Care Act.

THREE: Republicans won governorships in Maryland, Massachusetts, New Hampshire and Vermont – all reliably blue and purple states. It is still possible to decouple a state campaign from national issues and partisan national interest groups, Donatelli added.

TWO: Spending on political advertising this election cycle is close to $4.7 billion.

ONE: Democrats continue to make inroads in the Southwest – winning in New Mexico, taking the Senate and governorship in Nevada, and Beto O’Rourke came within three points of winning the Senate in Texas. Democrats also made major gains at the state and local level. In the past, the business-friendly policies of Republicans attracted urban votes, but the GOP is now changing from “a suburban party to one dominated by rural voters and cultural matters,” he said.

Donatelli added, “For those of you who cannot get enough of politics, the next presidential election begins — RIGHT NOW.”

When Congress reconvenes in January, Democrats will be in control of the House for the first time in eight years. Lawmakers will continue to discuss privacy and cybersecurity issues, including whether there should be a federal standard for how companies should be allowed to use and safeguard consumer data and how to stop cyberattacks from foreign entities.

In a Nov. 7 article from Law360, McGuireWoods Consulting senior advisor, Michael Drobac, noted that these issues may receive more attention in a split Congress.

“When there’s a divided Congress that’s unlikely to be able to move forward with controversial issues such as middle-class tax cuts or reforming health care, then it becomes more likely that lawmakers will seek to address and bring to the fore issues like privacy that have been percolating and have bipartisan agreement,” said Drobac.

Republican and Democrat lawmakers have proposed standards around data security, breach notifications and privacy in the past decades. Leadership of the Commerce, Judiciary and Intelligence committees will determine the priority of these issues.

Rep. Frank Pallone (D-NJ) is expected to take over the House Commerce Committee and “has been incredibly eager to do research and to get information from companies about what privacy practices and safeguards have been put in place for consumers,” Drobac said.

He added that Sen. Roger Wicker (R-MS), who will likely become chairman of the Senate Commerce Committee, has shown an interest in making tweaks to the privacy landscape so companies are not dealing with a patchwork of privacy laws. The House Judiciary Committee may work to craft meaningful notice and disclosure regulations that make sense for members of the digital ecosystem under the expected leadership of Rep. Jerrold Nadler (D-NY).

Pallone, Nadler and Wicker “have shown an affinity and interest in doing a deep dive into what has taken place with the tech industry and how that compares with consumers’ expectations, and what needs to be done to address different laws that have been imposed and have been enacted in other states and countries, and they are likely to take leadership on these issues,” Drobac said.

Other influencing factors include former tech executive Sen. Maria Cantwell (D-WA), who could lead the Commerce Committee if current ranking member Bill Nelson loses his re-election race in Florida, and Rep. Adam Schiff (D-CA), who is expected to take over the House Intelligence Committee and reopen inquiries into possible Russian interference in the 2016 U.S. presidential election.

The 2018 midterm elections were significant due to the volume of statewide races across the country with potential policy and political impact.  As anticipated, there were significant victories for the Democratic candidates for Governor.  Democrats flipped seven governor seats from Republican control, bringing the total up to 23 Democrat and 26 Republican governors.  This is a big win for Democrats, especially considering no single party has netted more than 6 governorships since 1994.  Note: These numbers are based on projections of a Republican win in Alaska and no official call yet in Georgia.

At the Attorney General level, Senator Aaron Ford flipped the Nevada Attorney General office from Republican to Democrat. There also may be potential flips for the Democrats in Colorado and Michigan, but those races have not yet been called.  Other notable results include Tish James, who will become the first African American elected statewide in New York, Keith Ellison, the first Muslim elected to Congress, who will also be the first African American elected to the position in Minnesota, and William Tong, who will be the first Asian American Attorney General in Connecticut.  Once all the races are called, the Democrats are poised to take over the majority of the Attorney General seats across the country.

On the legislative level, Democrats made some inroads picking up new trifectas in Colorado, Illinois, Maine, New Mexico and New York.  Trifectas, which are valuable heading into redistricting after the next Census, signify that one party has control of both legislative chambers and the Governor’s mansion.  There are now 12 Democratic trifectas, up from seven, heading into next year.  Despite these gains for Democrats, Republicans still control a majority of state legislative chambers. Republicans, who currently control 67 chambers, lost control of only 5 chambers in this election.  In 2019, they will control 62 out of a possible 99 chambers.

Visit McGuireWoods Consulting’s website for midterm election results from the gubernatorial and attorneys general races across the country.

With several races still too close to call, Republicans maintained and expanded their majority in the Senate, while Democrats picked up enough seats to take control of the House. Once in the majority, House Democrats can be expected to exercise their oversight, and if necessary, subpoena authority to compel responses from the Administration to inquiries from the minority on a host of controversial topics that were not answered due to the process that only committee chairs could compel those responses. Despite the increased political rancor that comes with a divided Congress, there are important and bipartisan issues such as consumer data security and privacy reforms, federal infrastructure programs, and immigration reforms that could receive bipartisan agreement. There will also be new leadership on key committees like Senate Commerce, Science, and Transportation that will influence policymaking in technology, telecommunications, innovation, and other key areas.

Read the full update for an overview of expected changes in leadership on congressional committees that shape policies that determine how businesses can integrate emerging technologies to be competitive in today’s economy. We also explore the potential agenda for the 116th Congress as it may impact companies with a stake in issues ranging from data privacy to antitrust, oversight, and technology and innovation policy.

Learn more about McGuireWoods Consulting’s Emerging Technologies team.

On Oct. 19, the IRS and Treasury Department issued proposed regulations and a Revenue Ruling as the first part of its long-anticipated guidance package regarding the Opportunity Zone program. Enacted at the end of last year as part of the 2017 Tax Act, the Opportunity Zone program offers significant tax incentives (including gain deferral and partial exclusion) to investors who make qualified investments of capital gains in Opportunity Zones — i.e., the low-income urban and rural communities that were designated as Opportunity Zones earlier this year.

Check out McGuireWoods’ preliminary analysis of the proposed regulations here.

 

The Financial Stability Oversight Council (FSOC) voted unanimously to remove Prudential from its list of non-bank systemically important financial institutions (SIFIs). Prudential was the only institution left on the council’s SIFI list.

The FSOC has issued an explanation of its decision to rescind the SIFI label, which can be viewed here. The council is expected to revamp its SIFI designation process going forward and may issue an outline of the new process before the end of 2018.

The Senate convenes Tuesday, Oct. 9 at 3 p.m. The House is in recess until Nov. 13.

Senate

  • Water Infrastructure Bill. The chamber will resume consideration of the America’s Water Infrastructure Act of 2018 (S. 3021), a bill that would authorize funding for 15 water infrastructure projects related to flood control, navigation, hydropower, drinking water, and the Strategic Petroleum Reserve. The bill, as amended, cleared the House on Sept. 13. A cloture vote is scheduled for 5:30 p.m. on Tuesday.
  • Nominations. After the chamber completes its work on the water infrastructure measure, members will turn to the following nominations:
    • Jeffrey Bossert Clark to be an assistant attorney general
    • Eric S. Dreiband to be an assistant attorney general
    • James N. Stewart to be an assistant secretary of defense

Key Hearings & Meetings

Tax & Financial Services

  • Oct. 11 – Senate Banking Committee to hold a hearing on the cryptocurrency and blockchain ecosystem.
  • Oct. 11 – SEC to hold an open meeting to consider whether to reopen the comment period for rules and amendments related to capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants; and capital requirements for broker-dealers. See the agenda here.

Consumer Protection

  • Oct. 10 – Senate Commerce, Science, and Transportation Committee to hold a hearing on consumer data privacy, focusing on lessons from the EU’s general data protection regulation and the California Consumer Privacy Act.

Energy

  • Oct. 9 – EPA to hold a public meeting to discuss oil and gas extraction wastewater management.
  • Oct. 11 – Senate Energy Committee to hold a hearing on blackstart and other system restoration plans in the electric utility industry.
  • Oct. 11 – Nuclear Regulatory Commission to hold a meeting on the strategic programmatic overview of the decommissioning and low-level waste and spent fuel storage and transportation business lines.

Welcome to fiscal year 2019! Congress averted a government shutdown last week when the president signed a minibus spending package (H.R. 6157) that includes a full-year funding for Defense and Labor-HHS-Education as well as a continuing resolution (CR) through Dec. 7.

The House is now in recess until after the November midterm elections. House Majority Leader Kevin McCarthy said the chamber would reconvene on Nov. 13. Meanwhile, the Senate is expected to stay put in October to work through a busy agenda: the Kavanaugh nomination, FAA reauthorization, opioids legislation, water infrastructure bill, and the remaining FY 2019 appropriations bills.

As a reminder, Congress has completed work on five out of the 12 annual appropriations bills:

  • Energy-Water
  • Milcon-VA
  • Legislative Branch
  • Defense
  • Labor-HHS-Education

Nine are still pending:

  • Financial Services, Interior-EPA, Transportation-HUD, and Agriculture (H.R. 6147) – this four-bill package is in conference.
  • Homeland Security,
  • State-Foreign Operations
  • Commerce-Science-Justice

 

As expected, the House last week passed all three bills in the GOP’s Tax Reform 2.0 package – just before members departed for their month-plus-long recess. Here’s how the votes went down.

Protecting Family and Small Business Tax Cuts Act (H.R. 6760)

  • This bill would make permanent the individual and small business tax cuts enacted in 2017. The Joint Committee on Taxation (JCT) estimates that the measure would reduce federal revenue by about $631 billion.
  • House passed the measure by a 220-191 vote.
  • 10 Republicans voted against it, and 3 Democrats voted for it.
  • Vote breakdown here.

Family Savings Act (H.R. 6757)

  • This bill would make it easier for individuals to save for retirement, education, and other family expenses. For example, the bill would create Universal Savings Accounts, expand 529 plans, and allow for penalty-free withdrawals from retirement plans for expenses related to the birth or adoption of a child. The JCT estimates that the measure would reduce federal revenue by about $21 billion.
  • House passed the measure by a 240-177 vote.
  • 10 Democrats voted for the measure.
  • Vote breakdown here.

American Innovation Act (H.R. 6756)

  • This bill contains provisions to spur entrepreneurship and lower barriers for start-ups. The JCT estimates that the measure would reduce federal revenue by about $5.4 billion.
  • House passed the measure by a 260-156 vote.
  • 31 Democrats voted for the measure.
  • Vote breakdown here.

Next Steps. Consistent with my earlier assessment of Tax Reform 2.0’s prospects, the Senate will not take up the package before the November midterm elections. The retirement and savings piece (H.R. 6757) could see some action in the Senate in the lame-duck session. For more insights into Tax Reform 2.0, check out my previous articles on the topic below:

The Senate convenes Monday, Oct. 1 at 3 p.m. The House is in recess until Nov. 13.

FLOOR ACTION

Senate

  • FAA. The chamber will resume consideration of the five-year FAA reauthorization bill (H.R. 302). A procedural vote is scheduled for 5:30 p.m. today. As a reminder, the Senate passed a short-term extension (through Oct. 7) last week.
  • Opioids Legislation. This week, the chamber will take up and pass H.R. 6, as amended by the House.
  • Nomination. Brett Kavanaugh’s nomination to the Supreme Court remains on hold until the FBI completes its supplemental background investigation.

KEY HEARINGS & MEETINGS

Tax & Financial Services

  • Oct. 2 – Senate Banking Committee to hold a hearing on the implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
  • Oct. 2 – Senate Finance Committee to hold a hearing to consider the nomination of Andrew Saul to be commissioner of Social Security.
  • Oct. 3 – Senate Small Business Committee to hold a hearing on “Expanding Opportunities for Small Businesses through the Tax Code.”
  • Oct. 3 – Senate Judiciary Committee to hold a hearing on big bank bankruptcy, focusing on 10 years after Lehman Brothers.
  • Oct. 3-4 – U.S. Commodity Futures Trading Commission (CFTC) to hold its first fintech conference.
  • Oct. 5 – CFTC to hold a meeting of its Technology Advisory Committee.

Health Care

  • Oct. 3 – Senate HELP Committee to hold a subcommittee hearing to examine rare diseases, focusing on expediting treatments for patients.

Consumer Protection

  • Oct. 3. – Senate Judiciary Committee to hold a subcommittee hearing on the oversight of the enforcement of the antitrust laws.

Energy

  • Oct. 3 – Senate EPW Committee to hold a subcommittee hearing on the oversight of the EPA’s implementation of sound and transparent science in regulation.