In Brief
- The major Republican tax cuts and reform bill has been finalized with passage planned for this week. Trump signing it by Christmas is virtually certain. As many as 90% of US households will have their taxes reduced noticeably starting in February.
- The Tax bill essentially eviscerates the non-Medicaid part of Obamacare by eliminating the requirements that all have some form of health insurance. Between 10 and 20 million households will be freed from paying a high tax penalty from not having such coverage or the even greater expense of paying for very costly and unwanted health insurance.
- Revelations about the sins of sex abuse and sexual harassment will just keep on confronting the land. Expect many more surprises next year.
- Special Counsel Mueller, the FBI and DOJ are all now under their own clouds of bias and wrong-doing. Congressional investigators are breathing down their necks and 2018 promises endless inquiries into their potential political corruption.
- Moore, Bannon and Trump all lost in Alabama.
In-Depth
What’s Important
Lessons from Political History and 2017 for the 2018 Elections
As 2017 draws to a close, what have we learned this year and from longer term political history that will help us handicap the outcome of the all-important 2018 elections? I’ll summarize my conclusions in five statements and then speak to each in more detail.
- The early 2017 special elections for Congress, the November NJ and VA elections and the just completed AL special election offer little insight about what will transpire in 2018.
- Two things happening at the end of 2017…the sexual harassment hysteria and the Republican Tax Bill…are likely to have far more influence on 2018 than anything that shaped the 2017 election results.
- The two 500-pound gorillas of public opinion and election results… [1] the economy and direction of unemployment rates and [2] whether the country is in an unpopular war…will have far more political impact than 2017’s elections.
- Civil wars in both parties are raging, but with far more significant impact in the Democratic Party.
- Political history tells us that non-Presidential year elections, often lead to large House and Senate losses for the party holding the White House. 2018 may continue that trend but must be tempered by the fact that relatively few House members in either party are vulnerable. But, the Ds have 7 times as many vulnerable Senate seat than do the Rs—14 to 2.
ONE—LESSONS FROM THE 2017 ELECTIONS?
In 2017, we had three clusters of elections. The first cluster consisted of the special elections to replace congress-people who took new jobs in the Trump administration or elsewhere. Notwithstanding great hopes that intense hatred of Trump by Democrats would energize huge D turnouts to defeat the new R candidates the Ds failed in every case. The incumbent party won each election. NO NEW LESSONS THERE FOR 2018.
The second cluster was comprised of the NJ and VA statewide elections as well as local elections around the country. Apart from a massive loss of Republican seats in the VA House of Delegates, the NJ and VA races went just as one would have predicted based on the recent politics of the two states—NJ staunchly blue and VA becoming so. NO NEW LESSONS THERE.
The final election of note in 2017 was the AL special election last week. My analysis of that race appears below. The only notable lesson there applies to both parties. DON’T NOMINATE DEEPLY FLAWED CANDIDATES.
TWO—ISSUE CARRY-OVER FROM 2017
Two major issues from this year will clearly carry-over well into 2018.
The first is the unexpected sexual harassment hysteria that has blown up. Arguably it started with Bill Cosby…then Roger Ailes and Bill O’Reilly…followed by the Roy Moore [R] allegations…proceeding on to Conyers [D], Weinstein, Franken [D], Lauer, Barton [R], Spacey, Rose, Fahrenthold [R], Kihuen [D]…and to be followed by dozens or hundreds more. The victims will be politicians, media stars, celebrities and executives as well as thousands of unknowns.
The hysteria, including many justified firings and career endings will, sadly, be accompanied by many unjustified or unfair punishments. Other forms of “sin” like drunken driving, infidelity, illegal drug use and other “offense” risk becoming political, social and financial cudgels.
As this hysteria continues into 2018, the primary Democratic sexual harassment target has been removed by Alabama’s voters. The poster boy is now Bill Clinton with his trusty enabler Hillary. Trump will also be a prominent target.
The political consequences will be substantial but unpredictable, except that numerous congress-people will be forced from office creating open seats and special elections. Also likely are gender and race wars, especially in the Democratic party, as men and minorities are differentially targeted. Those rumblings are already starting.
Second, and of certain import, will be the Republican Tax Bill. Elsewhere in this blog I speak to the political impact of the tax cuts and reforms for almost all US voters.
But, also of great political import is the impact of the removal of the Obamacare health insurance mandate as part of the Tax Bill. According to estimates from the Congressional Budget Office [take them with a grain of salt, but they are probably in the ballpark] anywhere from 10 to 30 million US households will no longer have to pay 2.5% of their adjusted income as a tax for not having health insurance or the even larger cost of having to pay for health insurance they don’t want. This political benefit for the Republicans will be concentrated among voters in their late 20s to early 40s, a group where they have been weak and the Democrats strong.
The Democrats and media have presented this provision as a big negative because the number of people covered by health insurance will go down by many millions. But, from the standpoint of the voters in those households, the end of the mandate will be a huge financial relief, probably far larger than any tax relief from the legislation.
Politically, in 2018, both the tax cuts and health insurance mandate termination will help the Rs with voters. In addition, the legislation mostly puts to bed the notion that the Republicans can’t govern or get anything done. These are reasons why the Democrats have been so opposed to the legislation.
THREE—LESSONS FROM POLITCAL HISTORY ABOUT PUBLIC OPINION AND VOTING
The two major drivers across the decades of public opinion and of voting behavior are the economy and war. The simple version is: economy good—incumbents do well; unpopular war– incumbent White House party does poorly.
2018 looks quite good on the economic front. Baring something unexpected the year promises good growth, lots of jobs, low unemployment and low inflation. Incumbents in both parties will benefit.
The war issue is more complicated and unpredictable. ISIS has been defeated on the battlefield, but its terrorism will continue. The US is engaged in numerous low-scale wars around the globe but nothing big enough to cause a major political backlash.
The wild-card is N Korea where a catastrophic shooting war could develop. Because the Trump administration escalation strategy still has many steps to climb, a shooting war in 2018 seems improbable but not impossible. Odds are that the war issue won’t drive voting in 2018 but it could.
FOUR—CIVIL WARS IN THE PARTIES
There is much talk about the battles in the Republican Party after the Roy Moore/Alabama debacle. Internal conflict is clearly there. But, in 2018, the conflagration in the Democratic Party will dwarf the Republican travails.
Among the Republicans, Steve Bannon, the chief cheerleader for Moore, stands out as a divisive figure. He has been pushing a small number of insurgent challenges to incumbent or mainstream Republicans in 2018. But, the Moore debacle has greatly weakened Bannon and his message.
The conflict between the Never Trumpers and Trump is not over, but doesn’t seem to be resulting in any significant number of primary battles next year.
A useful metric reported by the WSJ and liberal Brookings Institution counts the number of challengers to incumbents in the US House raising $5,000 or more by the end of the most recent campaign finance reporting deadline. For the 2018 elections the Republicans have about 70 such challengers which is an average number. By contrast for the 2010 elections, during the internal battle with the Tea Party, there were almost 200 such challengers indicating a civil war.
For the Democrats preparing for 2018 there are two things encouraging an unusual level of candidate recruiting excitement. First is the hatred of Trump. That has energized candidates to a very significant degree.
The second is the fulminating internal ideological war between the emergent progressive wing led by the likes of Sanders and Warren versus the traditional wing epitomized by Biden and Bill Clinton. This conflict has gotten only modest media coverage to date but will explode as the 2018 primaries near.
Using the same metric noted above, the normal number of challengers for House races among Democrats is about 90. For this election cycle it is almost 400—almost 5 times the norm. To fine tune that a bit, the same sources show that …” [at] least four Democrats have filed to run against Republican incumbents in at least 26 battleground House districts, setting up expensive, politically bruising primary fights”.
Based on previous examples in both parties these are likely to devolve into a battle of “who is most ideologically pure”, in this case “progressive”, rather than who is most likely to win the general election.
As part of the earlier Tea Party civil war among Republicans, at least four Senate seat—DE, IN, MO and NV—that should have been won were lost by Republicans because the nominees were ideologically pure but had very weak political skills.
It is very likely the Democrats will make the same mistake in 2018 given the intensity of the ideological battles they will wage.
FIVE—POLITICAL HISTORY AND VULNERABLE SEATS
Political history shows that in the off-year elections where a presidential race is not underway the party holding the White House usually loses seats in the House and Senate. But the number varies dramatically depending on factors like those discussed in the analysis above and on other key factors. In 2018, assuming President Trump’s approval rating stays around 40 percent, his ratings will be a general drag on Republicans prospects.
But two facts idiosyncratic to the races in 2018 suggest Republican vulnerability in the Congressional races is limited.
First, in the House there are only 10 to 20 really vulnerable Republican seats and less than 10 vulnerable Democratic seats. My analysis at this point is that the Republicans may lose 5 to 15 seats but retain control of the House.
Second, in the Senate the Democrats now have 14 vulnerable seats [ FL, IN, MI, MN (2), MT, MO, NM, ND, OH, PA, VA, WV, and WI] while the Republicans have but two [AZ and NV]. This disparity is just an accident of political timing, but offers Rs a major opportunity to expand their slim 51-49 Senate majority.
Ten of those 14 are in states Trump won and 5 in states he won by double digits.
It is almost certain the Democrats will lose Senate seats next year even if they have a good political year
So, in the spirit of the Christmas season we’ll invoke the image of a fuzzy Christmas snow-globe and tentatively predict the Rs hold the House but lose a modest number of seats and that the Democrats lose at least a handful of seats in the Senate.
Elections
I had intended to continue my series on elections in different regions of the US, but there is so much other news I must analyze for you there just isn’t room. I’ll come back to the series very soon.
Alabama: A Lose – Lose Election
The people of Alabama have spoken! Democrat Doug Jones will be a US Senator from Alabama unless a miracle occurs for Roy Moore.
Moore v Jones was, in effect, a political trial, not just an election.
Former Judge Moore, who was removed from the Alabama Supreme Court for failing to follow the law, is an extremist and would have certainly caused the Republicans problems if elected to the Senate. But, those problems won’t arise because he lost.
The big loser besides Moore himself was Steve Bannon whose standing as a political strategist plunged. The losers also include President Trump who decided to support a deeply flawed candidate he had previously rejected.
The Democrats gained a Senate seat, likely for just the 3 years left in the term Jones will fill. But, they also lost the chance to save Al Franken and numerous other Democratic congressmen they will now be forced to expel or cajole into retirement given that Moore’s likely sexual transgressions of 40 years ago defeated him.
So, Alabama’s Senate race produced losers across the board.
Minnesota
When Al Franken resigns, the Democratic Governor of Minnesota will appoint a temporary successor. That has been announced as current Lt. Governor, Tina Smith. She has indicated she will also seek to maintain the seat.
There will be a primary for nominations and a general election in November for the remainder of Franken’s term.
Minnesota is a state in political transition much like most of the Great Lakes states.
It has been a solidly Democratic state for generations but is moving toward partisan parity. Consider:
- Clinton beat Trump just 46% to 45%.
- The “conservatives” on the ballot [Trump, Johnson and McMullin] got 50% to the “liberals” [Clinton and Stein] 48%.
- In the eight MN US House races the Ds won the total vote by just 51% to 47%.
So, the Franken Senate seat is not a sure “hold” by the Democrats.
I’ll look at MN in detail when I resume my regional politics series soon.
Major Legislation and Policies
Tax Reform
The Senate and House have both passed tax reform bills, but they were somewhat different and now have been reconciled in a Conference Committee. It is now a near certainty that the Republicans will pass the Tax Bill this week and President Trump will sign it before Christmas.
Included in the bill is the repeal of the Obamacare health insurance mandate that all have health insurance or pay a substantial tax penalty.
The Democrats and mainstream media have lied to the American people that this bill will raise the average American’s taxes and have convinced a majority that is true. It is not true, and, in fact, the vast majority of American households will see their taxes go down.
Let’s take an average family of four—2 adults, 2 children—with the average [median] income of $60,000. If they take the standard deduction their federal tax in 2018 will be $2,000 lower than in 2017. A single adult, under 65, will similarly see a federal tax decrease of $1,000 on an average income of $50,000. That is real money if you are living on about $1,000 per week.
There is little doubt taxes will go up for some across the US. High income earners in high tax states [NY, NJ, CA and others] will be especially hard hit because of the loss of much of the state and local tax deduction. But even in those states a large majority of households will get tax cuts.
As noted earlier in this edition of the TR, the repeal of the Obamacare health insurance mandate and tax penalties will be a substantial financial saving for 10 million or more households.
As almost all US households see the end of February 2018 they will find their take-home paychecks noticeably larger. It is easy to predict that the Tax Bill’s popularity will rise when that happens. The corporate and business tax breaks will also be an eye-opener for the over 20 million small businesses in the US. Almost all will get substantial tax decreases allowing them to expand and/or add employees.
The realities will gradually sink in as we move toward important Congressional elections in November.
The Democrats may well rue the day they lied to the American people and failed to support this Tax Bill.
But, all is not hunky-dory.
This legislative process has been rushed through and mistakes have been made in adjusting the hundreds of important elements of the tax code. Don’t be surprised to see a “corrections bill” sometime during 2018.
Predictions
Changes this week
Political Predictions – Elections
- The chance the Rs will lose at least a few seats in the 2018 House elections is 80 to 90 percent.
- The chance the Rs will lose their 241-194 House majority in 2018 is 10 to 20 percent.
- The chance the Republicans will still control the Senate after next year’s elections is 90 to 95%.
- CHANGE–The chance the Ds lose three or more of their 49 Senate seats in ’18 is 85 to 90 percent. [Ds added a 49th]
- The chance that Donald Trump will be the 2020 R nominee is 90 to 95 percent.
- The chance that Trump will win a 2nd term is 80 to 85 percent.
Policy and Legislative Predictions
- CHANGE–There is an 95-100% probability the Congress will pass and Trump sign major tax reform and tax cuts for most by Christmas. [Increase to near certainty.]
- CHANGE--There is a 95-100% probability that Obamacare will be very substantially changed by the tax reform bill. [Up from high probability.]
- NEW—There is a very high probability that additional legislative changes will be made to Obamacare in early 2018 to bolster or adjust several of its remaining provisions.
Media
Don’t forget the Tuchfarber 30 Day test—when you get upset about something in the news ask if it is likely to be IMPORTANT IN 30 days or so. Only seldom will it be so, and you can usually ignore it.
China’s Politics and Economy
China Watch
- The International Monetary Fund [IMF] reported recently that China’s banks have insufficient capital to weather a credit or debt crisis. The problem is widespread but especially focused in the rapidly exploding “wealth management “arena and in the broader shadow banking arena where the authorities have not been able to keep up with “innovative” approaches by a variety of financial actors.
- NEW–Justin Trudeau, Canada’s Prime Minister, made a trip to China last week expecting to make a breakthrough on trade and getting commitments on labor and environmental issues. Basically, the Chinese handed his head to him.
- NEW–Australia introduced legislation to limit foreign interference in Australian politics leading to some swift political resignations of Australians ensnared by Chinese interests.
- China is becoming more and more authoritarian, forcing its tech companies and US tech companies to monitor Chinese citizens and make the results available to the government.
- The US and Europe are increasingly unwilling to let China flout the World Trade Organization rules it pledged to abide by when admitted is 2001.
Opinion and Commentary
Mueller, DOJ and FBI Under Fire
The Inspector General [IG] at the DOJ, Michael Horowitz, is gradually releasing documents clearly demonstrating anti-Trump political bias, political corruption and potentially illegal actions by Obama era DOJ and FBI officials. So too, there are dubious actions by officials on Special Counsel’s Mueller’s team. Those DOJ and FBI officials include Peter Strzok, Andrew McCabe and Bruce Ohr.
Republicans on several the investigating committees in Congress are clamoring for all the documents associated with such bias and actions. Many have already been released by the IG and are the basis for much of the current outrage. Horowitz is promising a full report soon.
Asst. AG Rod Rosenstein and FBI Director Christopher Wray are counselling patience and waiting for the final report. That enrages some of the Republicans, but the final report done with care and due process will serve all well.
Also, Republicans should know that disclosers during the holiday season will get lost in the shuffle. Disclosures in early 2018 will have far more public impact than anything disclosed in the next few weeks.
The goal is to get the facts out to the people and let them decide.
After that it will be the job of the Trump administration and Congress to rebuild the shattered credibility of the DOJ and FBI as well as other federal agencies corrupted by political bias. That will take personnel changes, new rules and legislative action.
Until next week… MERRY CHRISTMAS AND HAPPY HOLIDAYS!
Al Tuchfarber
Professor Emeritus of Political Science, University of Cincinnati