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Before we look at the issues and factors shaping the midterm elections, we want to jump ahead to survey the landscape in the Supreme Court and what we expect on Capitol Hill when Congress returns for the interregnum known as the lame duck session before the new 118th Congress is sworn-in on January 3, 2023.

Congress left town until mid-November and has passed a 10-week stopgap continuing resolution (CR) to keep the government functioning until December 16. If the midterms go as we’re predicting, and a divided government becomes the lay of the land for the next two years, there will likely be no common ground for agreement on the annual government spending bills. Consequently, we’re likely to face a series of CRs with increased volatility around these and other measures of import—but we’ll save that for a future missive.

 

Lame Duck on the Menu

When Congress returns for the lame duck session, they’ll need to tackle several issues before adjourning the 117th Congress for the year—some are more likely to garner bipartisan support than others.

  • National Defense Authorization Act
  • Tax extenders
  • Electoral Count Act
  • Big tech regulation
  • Continuing resolution (current government funding expires December 16)
  • Russia-Ukraine war, COVID-19, and Hurricane Ian disaster relief

There’s likely to be some rancor passing these legislative measures during the lame duck, and if the Republicans prevail in capturing one or both chambers, the Democrats could be forced to abandon ship, leaving the leftovers for the next Congress. There is, however, a scenario in which the Democrats (with some Republican support) combine these issues into one massive year-end measure that may give them a better chance at finding support for final passage.

 

Supreme Being

Last week the Supreme Court opened its new term, including oral arguments in a case challenging redistricting in Alabama and the state’s compliance with the Voting Rights Act. This term, the Supreme Court will likely take up cases that examine several key factors influencing federal-election outcomes. These issues are increasingly important in the aftermath of allegations about stolen elections and institutionalized political bias.

 

Carolina on their Minds

In the Tar Heel State, another case challenges the authority of state courts to supplant the redistricting plans adopted by the state legislature for congressional elections. The North Carolina Supreme Court rejected the legislature’s redistricting plan as illegal partisan gerrymandering—leading to a new redistricting plan devised under the Court’s direction. The US Constitution specifies that the manner of electing federal lawmakers shall be prescribed by state legislatures. North Carolina lawmakers are asking the federal Supreme Court to invalidate the action of the North Carolina Supreme Court as an unauthorized seizure of exclusive legislative power over election rules.

Oral arguments will offer valuable insights, but it could be an uphill fight for conservatives to win a majority for such a narrow view of the relevant constitutional provision. The Court’s moderates could be concerned that empowering state legislatures to concoct election rules free of state-court review could undermine confidence in election integrity when “threats to democracy” have grabbed the political spotlight. The outcome will not affect this year’s midterms but will likely impact elections for the remainder of the decade, resulting in redder and bluer Congressional districts as well as fewer purple swing districts.

 

Social Media Limits?

In the weeks ahead, we expect the Supreme Court will grant review of one or two cases challenging the constitutionality of state laws that restrict or prohibit political censorship or the banning of candidates on social media platforms. Although platforms such as Twitter, Facebook, and Google are private actors with first amendment protection, several conservative members of the Court have shown an interest in treating such platforms as common carriers with enhanced obligations to carry the content of all users. If the Court grants the hearing petitions in these cases, social media platforms could face new limitations on how they design and operate their services.

 

Election Direction

Every election cycle tends to zero in on a handful of issues that both parties will use to hammer their positions (as well as their opponent’s), excite their respective bases, and drive voter turnout—this cycle is no different. With the midterms now about a month away, here are the top issues Republicans and Democrats are using to shape voter opinion:

  • The economy and inflation – Make no mistake about it, with inflation remaining stubbornly high, another Consumer Price Index1 (CPI) report on deck, and a looming recession, the economy is the #1 issue that most voters care about this cycle, and it will certainly benefit Republicans.

  • Immigration – Arrests at the border have reached an all-time high of 2.3 million, and the Biden Administration has fumbled this issue for the past 20 months with no concrete solution in sight. We expect Republicans to use immigration as a cudgel for the next 30+ days. Recent polling, however, indicates that the publicity surrounding two Republican governors, Greg Abbott (TX) and Ron DeSantis (FL), flying migrants to blue cities and states has loosened the Republican grip on the issue.

  • Abortion – Following the Supreme Court’s decision to overturn Roe v. Wade this summer and the recent near-total ban on abortion in Arizona, many voters remain opposed to the ruling and the corresponding ripple effects in red states. While a handful of Republicans have kept the issue top-of-mind in Congress, others would prefer to sweep it under the rug until after November 8. The Democrats have a clear advantage on the hot-button issue and have since been using it to galvanize their base, register new voters, and lure independents back into their camp.

  • President Joe Biden…and former President Donald Trump – In a typical election year, the top dog of either party would be a huge catch on the campaign trail for almost any candidate running for election. This year has been anything but typical with the pendulum swinging back and forth … and back again. Biden’s abysmal approval ratings have been an albatross for the Democrats throughout his presidency. His numbers may have ticked up over the summer with a string of legislative victories, but most Democrats aren’t chomping at the bit to appear jointly with him. He’s been relegated to headlining fundraisers and raising cash for the party’s coffers—a consolation prize they will gladly accept.

Trump has successfully stumped for several candidates nationwide and is still in demand in many pivotal races, but most Republicans would prefer that he stick with golf until the midterms are over. Each time they gain traction on an issue, a Trump controversy manages to find its way into headlines, depriving Republicans of the opportunity to control the narrative and stay on offense against the Democrats.

There are plenty of other issues on voter’s minds, but these are the ones rising to the top tier and motivating voters to turnout at the polls (turnout is expected to surpass 2018’s record midterm participation). Additionally, crime, China, and Ukraine have all been polling higher in the past few months. If you have yet to see these topics featured in ads, brace yourself for the next four weeks.

 

Mapping it Out

House: Our previous forecasts stating that Democrats were gaining momentum has manifested, with recent polls showing fewer gains for Republicans in the House (who at one point were touting gains of more than 50 seats). Only five seats are needed to take control, and we think Republicans stand to gain a pickup in the range of the low-to-mid teens—enough to hand them the gavel in January 2023.

 

FIGURE 1

2022 House Election Map

Source: 270 To Win, as of 10/5/22.

 

Senate: There have been some developments in the Senate races in eight battleground states as trends have begun showing slight movement toward Republicans in Ohio, North Carolina, Wisconsin, and Pennsylvania (narrowing Fetterman’s double-digit lead); and to Democrats in Arizona and New Hampshire. Nevada and Georgia remain pure toss-ups. We still maintain that these races are too close to call with the Democrats having an ever-so-slight edge to keep the Senate.

 

Are Ticket Splitters Back?

The lost art of ticket splitting may be making a comeback with the country now more polarized than ever and voters casting ballots mostly along party lines. Given the number of controversial candidates in the mix, there’s growing evidence that there may be some exceptions to this trend in the current cycle. Senate candidates from both parties are hoping for a coattail effect, or crossover, with governors and gubernatorial candidates in battleground states polling significantly ahead of their opponents (Pennsylvania, Georgia, New Hampshire, and Ohio). It’s likely that we may see split outcomes for the governor and senator in each of these four states.

 

FIGURE 2

2022 Senate Elections Map

Consensus Forecast

Source: 270 To Win, as of 10/5/22.

 

October Surprise?

It wouldn’t be an election season without mention of the October surprise.

Recently, polling has swung back toward Republicans on the heels of the August CPI report and there’s still one more to go before election day. Further, OPEC is cutting production just as gas prices are stabilizing. Should further bad economic news appear on the horizon, Republicans may stand to benefit. We also can’t overlook the potential for a controversy to arise in the eleventh hour—the Peach State being a prime example of how an alleged past indiscretion can knock one of the tightest races in the country off course for a week.

Did we mention elevated geopolitical risk with Ukraine, Iran, and North Korea?

 

Talk to your financial professional to help make sure your portfolio is prepared for whatever happens in Washington D.C. 

 

 

1  The Consumer Price Index is a measure of change in consumer prices as determined by the US Bureau of Labor Statistics. 

The views and opinions expressed herein are those of the author, who is not affiliated with Hartford Funds. Hedgeye Potomac Research is not an affiliate or subsidiary of Hartford Funds.

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About The Authors
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Senior Policy Analyst, Hedgeye Potomac Research

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