Bruce Mehlman bruce@mc-dc.com @bpmehlman July 19, 2018 Q3 18 Washington Update MIDTERMS IN THE AGE OF DISRUPTION What to Expect in the 2018 Elections
CONTEXT: CHANGE ELECTIONS ARE THE NEW NORMAL It s Not Unique to America WRONG TRACK 10 0 90 80 2015 2016 & 2015 2017 2017 2017 2017 2017 2016 2017 2018 2017 2016 2017 70 60 50 40 2016 2015 RIGHT TRACK 2016 30 20 10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Most Elections This Century Flipped House, Senate &/or WH 0 2017 2002 2006 2008 2010 2014 2016
CONTENTS CASE FOR THE GOP Slides 4-9 Economy, Electorate, Maps, Unity CASE FOR THE DEMS. Slides 10-15 History, Enthusiasm, Recruiting, Special Elections BIGGEST WILDCARDS... Slides 16-20 Money, Markets, Madmen, Manufactured Crises KEY QUESTIONS Slides 21-24 GOP Motivation, Dem Disunity, SCOTUS WHAT COMES NEXT... Slides 25-30 2018 Agenda, Future of Dems & GOP, 2019 Issues 3
THE CASE FOR THE GOP 4
STRONG ECONOMY U.S. Economy Strong, Voters Confident Q2 GDP forecast: 3.8% 4.0% unemployment rate (lowest in midterm election year since 1966) All-time high construction spending ($1.3B in May 2018) Sources: Atlanta Fed GDPNow; BLS; AGC; NFIB; Gallup; 5
MIDTERM ELECTORATES FAVOR GOP Midterm Voters Typically Older, Whiter As a Share of the Electorate 18-29 Year Olds African Americans Hispanics 17% 15% 16% MIDTERM MIDTERM MIDTERM 17.1% 15.4% Share of Total Electorate 13% 11% 9% 11.1% 10.0% 11.2% 12.3% 11.3% 11.4% 13.2% 8.3% 11.9% 10% 7% 5.9% 5.6% 7.3% 6.8% 7% 5% 2004 2006 2008 2010 2012 2014 Source: Election Project 6
SENATE: DEMS ON DEFENSE Dems Defending 10 Trump States; GOP Defending 1 Clinton State WA OR MT ND MN ME ID WY SD WI MI NY CA NV UT CO NE KS IA MO IL IN OH KY WV PA VA TRUMP 16 DEMS DEFENDING +42 MANCHIN (WV) AK AZ NM TX OK AR LA MS TN AL GA NC SC +36 HEITKAMP (ND) +20 TESTER (MT) +19 DONNELLY (IN) FL +18 McCASKILL (MO) +8 BROWN (OH) +1 NELSON (FL) TRUMP 16 GOP DEFENDING +26 OPEN (TN) +3.5 OPEN (AZ) +0.8 BALDWIN (WI) +0.7 CASEY (PA) +0.2 STABENOW (MI) -2.4 HELLER (NV) 7
HOUSE: TOO GERRYMANDERED TO FAIL? Fewer Easy Targets For Democrats in 2018 Wave Year 1994 2010 2006 2018 Won by Other Party s Presidential Candidate 53 34 18 23 Rated Toss Up or Worse (by Cook Political Report) 63 78 43 33 Seats Lost -54-63 -30?? Source: David Wasserman, Cook Political Report 8
HISTORIC PARTY UNITY BEHIND PRESIDENT 100% 90% 80% 96% It s Trump s Party (He Can Tweet If He Wants To) 88% 86% 84% 84% 84% 83% 81% 79% 77% 70% 60% Own Party Approval ~July 4 of Midterm Year 67% 61% 52% 50% 40% 30% 20% 10% 0% Bush43 Trump LBJ** JFK Ike Nixon Bush41 Obama Reagan Ford** Clinton Truman** Carter Source: Gallup; **VPs who became President after death / resignation 9
THE CASE FOR THE DEMS 10
HISTORY FAVORS THE INSURGENT PARTY Presidents Usually Lose Seats in First Midterm Elections YEAR NET APPROVAL HOUSE SENATE GOVs ST. LEG. SEATS JFK (1962) +36-4 +4 0-76 IKE (1954) +35-18 -2-8 +483 GW BUSH (2002) +33 +8 +2-1 +127 NIXON (1970) +31-12 +2-11 -288 GHWBUSH (1990) +26-8 -1-1 +32 CARTER (1978) +13-15 -2-5 -357 LBJ (1966) +3-47 -3-8 -762 CLINTON (1994) 0-54 -9-10 -514 OBAMA (2010) -3-63 -6-6 -708 REAGAN (1982) -6-26 +1-7 -201 TRUMP (2018) -10 TRUMAN (1946) -19-54 -12-2 -456 Lost Majority Sources: Gallup; Sabato; NCSL; RCP (Trump) 11
UNPRECEDENTED RECRUITING SUCCESS 1500 1400 Record Number of Democratic House Candidates GOP DEM 1370 1475 1300 1200 1224 GOP waves 1180 1174 1100 1000 900 1104 981 971 940 901 948 909 978 800 700 600 680 654 844 DEM wave 500 1990 1994 1998 2002 2006 2010 2014 2018 Source: Center for Responsive Politics (based on FEC reports) 12
Sources: Generic (WSJ/NBC), Pew (Enthusiasm), Gallup (Congress, Resistance,& Optimism) DEM Wave Year GOP Wave Year No Wave 2018 HOUSE: MANY WAVE INDICATORS FLASHING WAVE LESS LIKELY WAVE MORE LIKELY 2018 2002 1998 1994 2010 2014 2006 RESISTANCE INTENSITY (Approval of President by out party) 1998 2002 2014 2010 1994 2018 2006 WAVE LESS LIKELY 2002 1998 GENERIC BALLOT (Which party do you prefer to control Congress, minority-majority) 1998 2006 1994 2010 CONGRESSIONAL JOB APPROVAL (Do you approve of the Job Congress is doing) 2018 2002 1994 2006 2014 OPTIMISM GAP (Are you satisfied with direction of the country minus dissatisfied) 2018 2014 2010 WAVE MORE LIKELY 2018 2002 1998 2014 1994 2010 2006 ENTHUSIASM GAP (Difference in more enthusiastic than usual to vote between parties)
DEMS OUT-PERFORMED IN SPECIAL ELECTIONS Dem Candidates Beat the Spread Every 2017-18 Election Source: FiveThirtyEight 14
SENATE: OUT PARTIES WIN MORE MIDTERMS Over the past 10 midterms (333 Senate races) Heller PARTY HOLDING WHITE HOUSE 84.0% 80.0% 68.8% INCUMBENT SENATORS WINNING % PARTY OUT OF WHITE HOUSE State voted for POTUS by 10%+ 90.7% State voted for POTUS by 0-10% 100% State voted against POTUS by 0-10% 90.6% Donnelly Heitkamp Manchin McCaskill Tester Baldwin Brown Casey Nelson Stabenow TN Open AZ Open PARTY HOLDING WHITE HOUSE 80.0% 30.8% 20.0% OPEN SEATS HOLD % PARTY OUT OF WHITE HOUSE State voted for POTUS by 10%+ 71.4% State voted for POTUS by 0-10% 100% State voted against POTUS 0-10% 75.0% Sources: Research by Jake Brennan, MCR&T 15
BIGGEST WILDCARDS 16
MONEY Outside Spending Crushing Midterm Records, But Who Benefits? 2018 $198.3 Outside Group Spending by Election Cycle (millions) 2014 2010 2006 2002 $5.5 $2.2 $43.7 $124.2 There s More Where That Came From (Announced spending on 2018 elections) 1998 $3.3 1994 $1.6 KOCH $400M BLOOMBERG $80M ADELSON $30M STEYER $30M UIHLEIN $25M Sources: Center for Responsive Politics; various newspapers 17
MARKETS Will Rising Costs Anger Consumers or Investors? Trade war already imposing $150B in bilateral tariffs, $550B more threatened by with retaliation likely. Higher prices, fewer jobs likely. Implemented & threatened tariffs & retaliation projected to reduce GDP by ~$105B (0.42%) & kill 325,000+ jobs over time (Tax Foundation). Oil prices up 22.5% so far in 2018, near 3 year high. Morgan Stanley forecasts 15% further increase this year. Avg monthly health insurance premium up 27% this year for coverage purchased through ACA exchanges (CMS). One month before election new (likely higher) rates for 2019 come out (KFF) Consumer inflation hit 6 year high in June. Federal Reserve expected to raise interest rates 4x in 2018. Sources: US Chamber; Tax Fdn; Morgan Stanley (Oil YTD; CMS; KFF via NBC; CPI; Fed. 18
MADMEN Will Hacking, Terrorism, Diplomacy or War Dominate Discussion? Sources: AP (Putin, licensed); Wikimedia Commons (KJU; Rouhani) 19
MANUFACTURED CRISES Opportunities for Major Disruption Remain 20
KEY QUESTIONS 21
WILL GOP REMAIN UNIFIED & MOTIVATED? EVANGELICAL CONSERVATIVES All 3 GOP Factions Getting What They Want So Far PRO-BUSINESS ESTABLISHMENT ANTI-ELITE POPULISTS JUDGES 2 Supreme Court 22 Appeals Court DEREGULATION (Economically-significant regulations by year) Sources: Wikipedia (Judges); WSJ (regs) 22
WILL DISUNITY DISRUPT DEMS? Herbal Tea Party Pushing Dems Left QUESTIONING STRATEGY CHALLENGING LEADERS DEMANDING CONFRONTATION Do you think the Democratic Party has a clear plan for the country? DEM VOTERS Yes: 49% No: 42% 33 Democratic candidates in 2018 publicly oppose Pelosi for Speaker (12 incumbents) (GOP voters on GOP: Yes 65%, No 29%) CA Dems endorse De Leon over Feinstein NY Dems picked Ocasio-Cortez over Crowley Sources: Fox News poll (Plan); Mia Luckett (Pelosi); Pew 23
WHO IS HELPED BY THE SUPREME COURT FIGHT? Both Sides Can Benefit, But Likely Net Plus for GOP HOW IT HELPS THE GOP HOW IT HELPS DEMS 1. Unifies & motivates all 3 factions of the GOP base. 2. Diverts liberal resources into pressuring red state Dem Senators. 3. Focuses campaigns on substantive issues, not Trump. 1. Energizes liberals to give / spend more money. 2. Motivates millennials and minorities to register & vote. 3. Maintains / expands historic gender gap into election season. 24
WHAT COMES NEXT? 25
THERE IS STILL PLENTY OF WORK TO DO IN 2018 10 More Things Congress Must Do / Attempt This Year 1. Funding government or shutdown 9/30 2. Kavanaugh confirmation & other judges & nominees 3. Nat l Flood Insurance Program (expires 7/31) 4. Nat l Defense Authorization Act (expires 12/31) 5. Farm Bill (expires 9/30) 6. FAA Reauthorization (expires 9/30) 7. Tax cuts 2.0, extenders & corrections 8. Intelligence Reauthorization 9. Opioid Crisis legislation 10. Pandemic preparedness, GME for children s hospitals, ADUFA (w/ cosmetics reform maybe) (expires 9/30) 26
DISRUPTORS REMAIN IN CHARGE We re 37% Through President Trump s First Term 915 Days Remaining 546 27
THE NEXT GOP: MUCH LESS EXPERIENCE Retiring: 1/4 th Leaders, 1/3 rd Experience, 43% House GOP Chairmen Leadership Years Experience Committee Chairs 45 40 25% retiring 31.7% retiring 42.9% retiring 40 35 30 25 20 15 10 5 0 27 23 17 17 16 15 15 15 14 13 13 12 12 9 5 6 5 3 House Republican Retirements (1930-2018) 26 26 25 24 24 22 21 21 20 20 21 22 20 19 19 19 18 18 17 17 16 14 14 14 10 8 1930 1932 1934 1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Sources: Brookings; MCR&T analysis 28
THE NEXT DEMOCRATIC PARTY: HISTORIC DIVERSITY 100.0% 90.0% 80.0% 70.0% 94.9% 93.4% White Men as % of House Democrats White Men as % of House Republicans 86.8% 60.0% 50.0% 40.0% 39.7% 30.0% 32.7% 20.0% 10.0% 4.0% Women as % of House Democrats 0.0% 1961 1963 1965 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 Sources: Legistorm (Members) & Pew (USA) 29
REGARDLESS OF WHO WINS, 2019 INCLUDES Health Care Issues Techlash Prescription Drug Pricing Privacy & data security Future of the ACA Medicare & Medicaid Sustainability Opioid Epidemic Emerging tech security & ethics (AI, IOT, cyber, CRISPR) Market competition & data antitrust Fake news, hate speech, election interference & censorship bias Platform liability & black markets Phone / social media addiction USG / law enforcement cooperation 30
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