Six things to watch in the new GOP Congress

Republicans had a very good day  in midterm elections yesterday. But can they translate their ballot-box success into a positive legislative agenda? Six things to watch. 

Republicans had a very good day yesterday. But can they translate their ballot-box success into a positive legislative agenda? It won’t be easy but here are six clues:

Mitch McConnell: He is a brilliant legislative tactician. We know he’ll use those skills to try to outmaneuver Democratic Leader Harry Reid but will he also use them to box in ambitious and impatient hardcore Senate conservatives?  Ted  Cruz (R-TX) has some reinforcements in newly elected senators Thom Tillis of North Carolina and Joni Ernst of Iowa. But McConnell, who is nothing if not patient and pragmatic, may want to rein in the Tea Party agenda. How will he balance the conflicting demands of his hard right with those of voters who want to end gridlock? The outcome of this intra-party battle will be a key to whether Washington can begin to reach consensus on even the most modest legislative initiatives.

The new Democratic Dynamic: Reid, the old boxer, may be a better counterpuncher than even McConnell. He’s a master at stalling legislation. And just as the Senate GOP caucus has become more conservative, the Democratic cloakroom has gotten more liberal. Centrists such as North Carolina’s Kay Hagan and Arkansas’ Mark Pryor are gone, Alaska’s Mark Begich is losing, and Louisiana’s Mary Landrieu faces a tough runoff.  Even if McConnell wants to try to peel off Democratic votes, it will be hard to find them.

Tax Reform: Everyone says they want tax reform but once past that rhetoric, they agree on very little. President Obama says he supports corporate reform. Cruz wants a flat tax. Paul Ryan, who wants to be the new chair of the House Ways & Means Committee, favors broad-based overhaul rather than corporate reform alone. House Speaker John Boehner says he favors tax reform but when presented with a plan by Ways and Means Chair Dave Camp earlier this year, Boehner ran for the hills. On top of that, Democrats and Republicans are completely at loggerheads over whether reform should cut taxes, raise them, or leave them roughly the same. Other than that, a deal is imminent.

The Budget:  Will the congressional GOP go to war over spending and regulation? House Republicans have a free hand to pass anything they want. In the Senate, McConnell can use the budget process—and the threat of a government shutdown—to try slash domestic spending, roll back environmental and financial regulation, and cut business taxes. The idea: Push Obama into a corner where he must choose to sign such a bill or risk a shutdown.  It might work. But it would also further poison the already-toxic Washington atmosphere, assure no other significant legislation passes before 2017, and further alienate voters– if that’s possible.

The Affordable Care Act: Cruz wants to repeal it. McConnell says that’s a fool’s errand but vows to do what he can to hamstring the program. For instance, a GOP Congress could try to repeal the tax/penalty that enforces the individual mandate. And there is a good chance that Congress will dump an ACA tax on medical device makers. The real question: Will congressional Republicans spend the next two years trying to destroy the ACA or can they agree among themselves on a serious alternative?

The IRS & Treasury: IRS Commissioner John Koskinen is going to spend so much time testifying to congressional committees, he may as well bring a cot up to Capitol Hill. His agency’s budget is likely to be slashed even more deeply. But under GOP pressure, will Treasury and IRS back down on regulatory efforts to curb corporate inversions or control the use of 501(c)4 non-profits by political organizations?

Yesterday’s election gave Republicans control of the Senate but did it open the door to significant policy changes? That’s anyone’s guess.

The post The Day After the 2014 Election: Six Things To Watch In the New GOP Congress appeared first on TaxVox.