US: Senate Races Tighten to Center

Published on September 26, 2014

With less than 40 days remaining before the November mid-term elections, the balance of the Senate remains uncertain with almost every one of the key Senate races too close to call.

*** Republicans still look certain to pick up three seats — in Montana, West Virginia, and South Dakota — of the six needed to win control of the Senate. But Democrats are still hanging on in four fiercely competitive races in North Carolina, Louisiana, Arkansas, and Alaska. Three previously safe Republican seats in Kentucky, Kansas, and Georgia are in contention, while three other Democratic seats in Iowa, New Hampshire, and Colorado are now in play. ***

*** The polling in the key states will improve substantially in about two weeks when national, non-politically affiliated polls will get underway that should provide a better feel for the probabilities of which party will win control of the Senate. That said, the GOP should in fact be doing much better considering how many Democratic seats are in play and the unpopularity of President Barack Obama weighing on the Democratic campaigns. ***

*** As we wrote previously (SGH 9/3/14, “US: Significance of a Narrowed Senate Majority”), whether Democratic or even Republican with control of the House as well, we think it is going to be a narrowed Senate majority, and that next year will mark a break from the partisan dysfunction of the last few years on certain key issues. Senate centrist deal-makers are likely to dominate, driving more bi-partisan legislation, especially in ending or limiting the sequester, to provide an increasing fiscal tail wind to the US recovery in 2015 and 2016. ***

Tight Races in All Ten Key States

Before delving into the individual Senate races that are drawing so much of the national media and donor attention, it is worth noting to keep things in perspective that most of the state-wide polls so far are paid for by the two main political parties or the thinly disguised “issue” advertising by tax-exempt organizations in fact endorsing one candidate or another.

For instance, a recent poll in Alaska shows Republican challenger Dan Sullivan pulling strongly ahead of Democratic incumbent Mark Begich, but the poll is in fact paid for by the state Chamber of Commerce, which is supporting Sullivan.

That skewing of the polling data will begin to change in about two weeks, however, when the bigger, better, independent polls will produce new surveys. These polls are undertaken with larger sampling surveys, less biased questions, and because they are more expensive than the average campaign polls, their sponsors tend to wait until the last few weeks to save money. For instance, Nate Silver’s data analytics company 538 ranks the ABC News/Washington Post poll highest for predictive accuracy.

In particular, pollsters are expected to be closely scrutinizing the results in the new polls on the number of and strength of sentiment among undecided voters in the closing weeks: as a general rule of thumb, undecided voters tend to break two to one in favor of a challenger, which is rather ominous for Democratic incumbents, especially in the southern red states like Arkansas, Louisiana, Georgia, and North Carolina.

So with that caveat, what can be mostly gleaned from the mass of the state-wide polls up to now is simply that almost all of the most competitive Senate races in the key battleground states are within the margin of error.

Republicans in fact should be doing far better at this point, considering how many Democratic Senators are facing re-election challenges, many of them in red states, or how badly President Obama is faring in the polls (though bad, he is still polling twice the level of the generic polling on Congress itself). Nate Silver has reduced the odds of Republican control of the Senate down to 53% from his prediction of a 65% probability only 19 days ago.

Five of those too close to call races are for Democratic-held seats in Arkansas, Alaska, Colorado, Iowa, and North Carolina. In the latter, Democratic incumbent Kay Hagan does look to be building an increasing lead over her Republican challenger Thom Tillis, on the back of heavy attack ads on education funding against a wobbly Tillis, who is being further hobbled by talk the national GOP is going to pull its money to focus elsewhere.

But what were assumed to be safely Republican held seats are also becoming surprisingly competitive races because of their stronger than expected Democratic campaigns. In Georgia, for instance, strong home state family name recognition is boosting Democratic challenger Michelle Nunn in putting up a close fight with Republican David Perdue, who should be doing much better in red state Georgia, though Nunn does seem to be losing some steam in the last week.

Even in Kentucky, Senate Minority Leader Mitch McConnell has been forced to fight an unexpectedly tough re-election campaign against Democratic challenger Alison Lundergan Grimes, though the veteran Republican too looks to be slowly rebuilding a healthier-looking lead. In New Hampshire, on the other hand, the Republican challenger transplanted from Massachusetts, Scott Brown, is still running shy of credible odds to beat Democratic incumbent Jeanne Shaheen, who continues to hold a narrow but decent looking lead.

But of all places, Republican incumbent Senator Pat Roberts in deeply red Kansas is fighting a lackluster campaign to beat back a strong challenge from an independent, Greg Orman, who has a lead by more than several points after the Democratic candidate dropped out. It is hard to imagine Kansas going with anyone but a bedrock conservative Republican (it has not voted Democrat in a lifetime), so Roberts is probably still going to squeak through, especially if Orman discloses he will caucus with the Democrats.

And hardly helping his chances, Orman was also recently hobbled by disclosure of his arrest in the 1990s during a police raid on a strip club in Kansas City while receiving a lap dance, which may not play too well with the decisive marginal voter; the average Kansas woman.

An equally “is anyone so dumb” campaign misfire was committed — in Iowa — by Democratic candidate Bruce Braley, who was videotaped during a fund raiser in Dallas praising trial lawyers and mocking farmers and the hugely popular Republican Senator Charles Grassley. In contrast, his freshly minted Republican first time challenger, Joni Ernst, a farmer and Iraqi war veteran, is running a near flawless campaign, putting the race to replace retiring Democratic Senator Tom Harkin into a dead heat.

And in Colorado, it is not so much stupid moves as an incredibly well-run campaign by Republican challenger Cory Gardner that has pulled him within a dead heat with Democratic incumbent Mark Udall, who had been expected to coast, and his fumbling campaign showed it. Likewise, in Red state Arkansas, Democrat Mark Pryor is still holding his own against Republican Tom Cotton, mostly on the back of a well-run campaign.

Alaska’s incumbent Democratic Senator Mark Begich has run a campaign that, until last week when the third party independent candidate dropped out, was keeping him within reach of Republican Sullivan. Begich now trails in most of the better polls in this race; Nate Silver predicts Sullivan has a 67% chance to win.

In Louisiana, Democratic incumbent Mary Landrieu is well ahead of her nearest Republican challenger Bill Cassidy, but is still expected to fall nine points short of a 50% majority and may face a tougher battle in an expected December 6 run-off. Likewise, in Georgia, if neither Nunn nor Perdue clear the 50% hurdle — always possible with a Libertarian and other candidates who could carve up to 5% of the vote — the Peach state will also hold a run-off election, but not until January 6.

If the balance of the Senate will not be known until the outcome in those two states, it could make for an interesting lame duck session planned for mid-December and a vote on extending the current Continuing Resolution beyond December 11, not to mention the Senate return to session on January.

Return of Dealmaking in the Senate

To us, we think it should be less important to the markets which party controls the Senate as much as by how much they will be in the Majority, for several reasons.

For one, a narrowed majority of perhaps one or two seats will make it much more difficult for the Senate Majority Leader — be it Nevada Democrat Harry Reid or Kentucky Republican Mitch McConnell (assuming he wins his re-election) — to severely limit the debate and amendments in the way Majority Leader Reid has in the last two years.

As we noted in our last report (SGH 9/3/14, “US: The Significance of a Narrow Senate Majority”), Reid has used a procedural maneuver called “filling the amendment tree” to block Republicans looking to embarrass politically vulnerable Democrats with “show votes” that have no chance of passing. But it has also meant bills favored by his fellow Democrats failed to find their way to the Senate floor as well.

With a narrow majority of one or two, the Majority Leader’s power over his colleagues in his own party — regarding their plans to offer individual amendments — declines from “not unless I say so” to “please call me first.” The longest running tradition of the Senate, ignored over the last two years, is the ad hoc formation of issue-based coalitions. With the public sentiment towards Congress running at record lows, our sense is that “doing something” is about to come back in style.

More importantly, we think the Senate in 2015 will be operating under an entirely different political dynamic that will be driven as much as anything else by the calculations going into the 2016 campaigns, among both Democratic and Republican Senators.

To put it succinctly, the only door into or out of the Senate next year is the center door.

For Democrats, they will no longer be facing the grim math of the 2014 elections, when 21 Democratic seats, seven of them in states carried by Romney in 2012, were up for re-election versus only one Republican in a blue state (Susan Collins, a GOP centrist who will win reelection handily). Instead, in 2016, the math is almost completely reversed, with 24 Republican Senate seats up for re-election, none of them in strongly Red states, and nine in Blue states or close swing states such as Ohio, Wisconsin, and Pennsylvania. Democrats, on the other hand, have only ten seats to defend in 2016, and all are in Blue states.

GOP mainstream strategists and fund raisers were already worrying about the damage to the party’s national branding by pushing back against Tea Party challengers in this year’s primaries, and continue to worry the hardline firebrand politics of the last few years will seriously erode their electoral prospects beyond these mid-term elections.

We are well aware that few people are aware that the GOP has an agenda already planned for 2015 if they take the Senate majority. They do, and two things stand out: the agenda excludes divisive, purely partisan talk of slashing government, and its primary author is Ohio’s Rob Portman, who has a history of seeking a Democratic co-sponsor on legislation important to him. He is also a close confidant of the House Speaker.

In addition, Democrats will have a demographic tailwind in the number and make-up of the voters in a presidential election year. And in Hillary Clinton, assuming she does indeed run as widely expected, the Democrats will have a candidate strongly appealing to women, the young, African Americans, and Hispanics, all of which goes hard against the Republican brand.

Even if Hillary isn’t running, that is not really the point. Republicans running close re-election campaigns now and certainly in gearing up for campaigns in 2016 assume she is running and that alters the political preparations and positioning in those key purple and swing states.

Already, some of the Republicans in the closely contested Senate races this year have been in recent weeks pulling more to the center, now favoring a minimum wage, same sex marriage, or even legalizing medical marijuana and in-state tuition assistance to illegal immigrants.

But it also means a different legislative tact is building among key Republican Senators for more bi-partisan legislative push in 2015 and 2016, mostly in order to have a legislative track record on which to run a more positive, centrist campaign the GOP can govern by countering the Democratic accusations of the GOP as “the party of no.”

It is telling, for instance, that the Republican Senate caucus turned over its 2014 agenda document to be drafted by Ohio Republican Ron Portman, a conservative moderate who has himself co-sponsored several bills with Democrats and has been pulling the party more to the center, who got a sign-off from all 45 GOP Senators.

We think this is indeed pointing to what will be a considerable effort by Republicans in the Senate, as well as Democratic centrists to press ahead with bi-partisan bills by the spring of next year that will be especially focused on the budget and spending bills for fiscal years 2015 through 2017.

Finally, and little appreciated by the markets, neither party, including the Republicans, like the spending limitations of the sequester, and it will show by next spring when we think this new political dynamic in the Senate will lead to budget resolutions with significantly higher spending levels.

This will, in time, make its way into the decisions being weighed by the Federal Reserve, if there is an increasing fiscal tail-wind supporting the economic recovery after all these years of fiscal headwinds being imposed by a bitterly divided Congress.

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