The Republican victory in the battle to control the Senate elevates Kentucky’s senior Senator, Mitch McConnell to the position of Majority Leader, a very big deal.

 

While the final spread is still to be determined due to a December 6 run-off in Louisiana, what is the importance of Republicans gaining control of the Senate?

 

While Senate Democrats will still be able to stop most Republican legislative initiatives using the filibuster, and the President will have more than enough Democratic votes to sustain his vetoes; there are serious policy implications that will unfold from Republican control of both the House and Senate.

 

The rules of the Senate give great authority to the Majority Leader, with perhaps the most important being the ability to schedule the issues that come before the Senate. The ability to determine what bills come before the Senate is a key tool in setting the national agenda.

 

Next to the power to schedule what comes to the Senate floor, the other major advantage that comes from controlling the Senate is the ability to chair committees. Committee Chairs may be the last bastion of absolute power and authority left in Washington. A Committee Chair has the authority to schedule hearings, choose witnesses, and decide what bills will be considered by the Committee. Over the last few years of the Obama Administration the Senate Democrats could schedule hearings to balance the attacks that came from House hearings. Now with Republican control of the Senate that disappears and for the President this will mean unfriendly hearings and investigations occurring in both chambers of Congress.

 

What policy changes could come from a Republican controlled Congress?

 

This first real policy confrontation may be the debate on raising the debt ceiling. The current suspension of the debt ceiling expires on March 15, and by that date the Congress will have to either extend the current suspension or pass an increased ceiling. Senator McConnell has been the architect of the recent compromises that got the debt ceiling increased. His basic idea is to have the President increase the ceiling, but give the Congress the authority to over-ride the increase. However, like any bill it could be vetoed; and unless the President’s veto is over-ridden the higher ceiling would prevail. At this point it is not clear if a Republican controlled Congress would agree to this process; at some point the Republican leaders of Congress will need to develop a strategy to increase the debt ceiling, but it may be painful.

 

Assuming that some compromise is found to raise the debt ceiling, the next opportunity for Republicans to force a confrontation with the White House will be the developing of a budget reconciliation bill. Reconciliation is the legislative tool that allows Congress to change any law that impacts the budget, either through taxes or spending. Reconciliation requires both the House and Senate to pass a budget, and then pass a Reconciliation Bill that “reconciles” the spending levels and revenue levels to match the approved budget. Reconciliation is the one bill that can’t be filibustered in the Senate. However, a Reconciliation Bill is regular legislation and hence is subject to a Presidential veto. While Congress can take dramatic action under the budget reconciliation process, it is likely to fall victim to an Obama veto. Unlike other bills noting happens if a reconciliation bill doesn’t pass.

 

While not as dramatic as a reconciliation bill, another vehicle for confrontation between the new Republican Congress and the President is likely to be the appropriations process. This year’s annual appropriations process is likely to be difficult on two counts. First, with the expiration of the Ryan/Murray budget agreement the sequestration cuts come back for FY 2016. Second, the Republican Congress will try to cut social spending and to increase defense spending: not a formula likely to be accepted by the President. To add to the confrontation is a commitment by Republicans to add riders to the appropriations bills to stop spending on programs ranging from Obamacare to EPA coal regulations. Again, Congress sending unacceptable bills to the President, and the President then vetoing the bills, is likely to become a rather consistent refrain in Washington in the coming year. However, at some point there will be a need to find some common ground to avoid a government shutdown on October 1, or to re-open government as we saw n 2013.

 

What can the Congress and White House accomplish?

 

While at some point the Congress and the President will pass a debt ceiling increase, and appropriate money for FY 2016, the President and Republican Congressional leaders will search for broader policies that they can agree on.

 

Trade: Ironically one area where the President may be able to make a lasting contribution, working with a Republican Congress, is approval of a major trade agreement. As NAFTA was approved under Bill Clinton, so President Obama and the Republican Congress could accomplish a groundbreaking treaty covering the Pacific Rim. The Obama Administration has been negotiating with a group of 11 countries including Chile, Australia and perhaps most importantly Japan, to serve as a counter-balance to growing Chinese influence in the area. Both Senator McConnell and Speaker Boehner have said that trade is one issue where they would like to work with the President as generally Republicans support free trade as a core economic policy.

 

Tax Reform: This past year’s focus on US companies that considered inversions of their corporate headquarters in order to reduce their corporate tax rates has led to a serious bi-partisan discussion in Washington on the appropriate rate to tax businesses. Both the Obama Administration and Congressional Republicans have advocated a lower corporate tax rate. With Republicans now in charge of the tax-writing committees in both the House and Senate this might be an issue that is ripe for compromise.

 

Lots to do.

 

In addition to raising the debt ceiling, funding the government for the new fiscal year, looking for compromise on trade and tax policy; there are many other issues that Congress and the White House will need to deal with.

 

The Highway Trust Fund runs out of money on May 31. The war against ISIS needs to be funded. Energy policy is in the middle of major change as coal policy, natural gas, and alternative energy sources all compete for markets and government initiatives. In the financial services area Congress may work with the President to find a more lasting resolution for GSEs and move towards a more market oriented solution. Financial firms are likely to push for changes in the charter that created the Consumer Financial Protection Bureau (CFPB) to bring it into the regular appropriations funding process.

 

Tom Block is a public policy consultant who had a 21-year career with JP Morgan Chase where he served as head of government relations in New York City and created a Washington research product. He also created the bank’s EU Government Relations program and developed a new position as U.S. Government Policy Strategist focusing on how U.S. government policy impacts capital markets. He has an extensive government and banking background, has worked on political campaigns and as a speech writer. He is a family trustee of Bernheim Aboretum in Louisville and holds a bachelor’s degree in political science from American University. He and his wife make their home in Kentucky. He is a regular contributor to KyForward. Contact him at tomblockct@aol.com.