THIS WEEK IN WASHINGTON
November 16, 2022
Heard on the Hill
By Steve Gordon, Total Spectrum Managing Partner and
Congressman Erik Paulsen, Total Spectrum Strategic Consultant 
 
Red Puddle
Many Republicans in Washington and around the country felt a Red Ripple or a Red Wave was coming – and there were numerous reasons for this optimism. The off-year congressional election after a presidential victory is traditionally good for the party out of power. Add in President Biden’s low favorability, then layer on the highest inflation in 40 years which is causing prices to go up, the stock market to go down, and interest rates to go way up – and it’s easy to see why Republican expectations were high.
 
Polls showed that 70% of Americans thought that we were going in the wrong direction. Pundits and pollsters read the red tea leaves and felt the momentum. Predicting the final number of Republican pickups in the Senate and the House became a parlor game. Most Republicans in Washington – and some Democrats, too – expected Republicans to have a 1- or 2-seat advantage in the Senate next January and to win at least 20 new seats in the next House of Representatives.
 
As we all know, that is not what happened. As of this evening—
 
  • Democrats will have at least a 50-50 tie in next year’s Senate, with Vice President Harris available to break a tie. The runoff in Georgia will be held December 6, so the U.S. Senate next year will either be 50-50 or 51-49 with Senator Schumer and the Democrats in control.  
  • Republicans have secured a majority in the House of Representatives. They currently hold 218 seats, including the recently-decided victories in Arizona of Congressman David Schweikert and Juan Ciscomani. Democrats hold 208 seats.  Seven races remain uncalled.
 
Republicans are indeed pleased with retaking the majority in the House, even if it’s a razor thin majority.  But they expected a bigger victory in the House and hoped for a new majority in the Senate.
 
One reason for the outcome was that the polls were off again this cycle. Some polls oversampled Republicans, trying to overcompensate for under sampling Republicans in previous elections.
 
It is also true that some of our assumptions about the election were off.  Democrats were much more enthused about the election than previously thought, and a major reason for that intensity was the abortion issue. The Supreme Court’s decision overturning Roe v. Wade set off a wave of reaction. Democrats then put an abortion referendum on the ballot in Michigan, California, Kentucky, Montana, and Vermont, which ensured pro-choice women would go the polls.
 
There’s also no question that the January 6th investigation and the intense feelings some Americans have for former President Trump helped create enthusiasm among Democrats and some Independents. Exit polls show that Republicans turned out more of their voters than did Democrats, but also show that Independents favored Democrats nationally by over four percentage points – and by a much larger margin in Arizona, Georgia, and Pennsylvania.
 
Independents and political moderates used to be fertile terrain for ticket splitters, but there was concern that our polarized political environment may have choked off their oxygen. This year’s election proved that ticket splitters still exist. Voters in Georgia, New Hampshire, Nevada, Ohio, Pennsylvania, and Wisconsin were asked in the exit polls if they strongly approved of President Biden, strongly opposed President Biden, or somewhat disapproved of President Biden – and if they were going to vote for the Republican or Democratic candidate.
 
Exit polls in these six states showed that the voters who somewhat disapproved of President Biden were about 10% of the total sample of voters, but they made up a significant amount of the swing voters in four of the six states.
  • In Georgia, this group backed Republican Governor Brian Kemp by 16 points, but backed Democratic Senator Raphael Warnock by 6 points.
  • In New Hampshire, they backed Republican Governor Chris Sununu by 20 points, but backed Democratic Senator Maggie Hassan by 47 points.
  • In Nevada, they backed Republican gubernatorial candidate Joe Lombardo by 12 points, but supported Democratic Senator Catherine Cortez Masto by 3 points.
  • In Wisconsin, they backed Democratic Governor Tony Evers by 15 points, but supported Republican Senator Ron Johnson by 3 points.
 
It may also be worth noting that Democrats’ efforts aimed at Generation Z voters paid off and may have made the difference in many close races.  As one example, exit polls show that 72% of young women aged 18-29 voted for the Democrat candidate in House races nationwide. 
 
The Republican message during the election was that Democrats were the party in power, and they either created or were responsible for inflation, the spike in crime, and ballooning illegal immigration. The Democratic message was that this election was not a referendum on President Biden. Rather, it was a choice between Republicans and Democrats, and that extremist Republicans can’t be trusted to be competent and return America to the relatively normal life we had before the pandemic.
 
Republicans turned out their voters, but some Republicans also turned off Independents.
 
The Reaction
Democrats in Washington, D.C., as you can imagine, are a little giddy. As Winston Churchill famously said, “nothing in life is so exhilarating than being shot at with no result.”
 
Republicans are working to digest the election and plan for the future. House Republicans on Tuesday nominated Congressman Kevin McCarthy to be their candidate for Speaker of the House, surviving a challenge from Congressman Andy Biggs. Congressman Steve Scalise (R-LA) was unopposed to be Majority Leader. Congressman McCarthy will have to find a way to get 218 votes for Speaker when the House convenes in January.
 
Senate Republican leader Mitch McConnell was opposed by Senator Rick Scott, who was Chairman of the National Republican Senatorial Committee this past election cycle. Senator McConnell said for months that he had the votes he needed to be reelected, and he did. Senator McConnell was reelected Wednesday by a 37-to-10 vote, which sets him up to break the record next January as the longest serving Senate leader.
Washington Whispers
By Patrick Robertson, Total Spectrum Strategic Consultant
 
As Congress returns to Washington and the dust settles after this month’s midterm elections, Members of Congress and advocates have a long list of potential to-do items in the lame duck session, which began this week.
 
A lame duck session of Congress occurs when Congress still has business to do between the elections and the swearing in of the newly elected Congress. The 118th Congress will be sworn in on January 3, 2023. The largest factor driving the lame duck is the expiration of government funding on December 16. But since Congress is in session, there are all kinds of issues they could resolve before adjourning to end the 117th Congress. Those issues, in order of likelihood to happen, are:

  1. Marriage bill. The Senate is currently considering a House-passed bill to codify the Supreme Court’s decision from last decade to allow same-sex marriage. The bill is borne out of concern post-Dobbs that the current court could revisit other precedent. The bill received 62 votes for cloture this afternoon, and its passage by the full Senate is likely.
  2. National Defense Authorization Act. This annual defense policy bill has been passed for nearly six decades and Congress watchers expect this year to be no exception. At this point, the House has passed its version of the bill with some significant non-defense provisions, and the Senate is set to pre-conference a final version with the House while the Senate also has its debate on the bill. 
  3. Government funding. With government funding running out December 16th, Congress will need to pass either a continuing resolution (CR) or an omnibus appropriations bill to fund the government. There are some in the newly elected House Republican majority who want to try and save this bill for leverage next year, but it seems likely that Congress will fund the government until the end of the fiscal year, Sept. 30, 2023, and save the fight on government funding in a divided government for another day. In addition to government funding, there are a large number of earmarks for retiring and returning Members tied up in this package. Appropriations leaders are currently negotiating a total number for the spending bill, and they will need to arrive at an agreement by the end of next week, or sooner, if they have any chance of getting this done this year.
  4. Secure Act 2.0. This retirement security bill has broad bipartisan support and should be able to be folded into any package that moves, although this bill does have a number of tax provisions, which could be excluded if a broader agreement on taxes is not reached.
  5. Increase in the debt ceiling. The United States is expected to reach the limit of its borrowing authority sometime in the spring or summer of 2023. In order the avoid a massive fight in a divided Congress, some leaders are considering raising the debt ceiling now to ensure that the full faith and credit of the United States lasts through the next presidential election. Democrats are saying this effort must be bipartisan, even as some Democrats suggest it would be best for them to use the filibuster-proof budget reconciliation process. Look for this conversation to be resolved before other items move.
  6. Medicare cuts. These cuts to doctors are a product of congressional “pay-as-you-go” (PAYGO) rules and are often described as sequestration. Congress is likely to take care of doctors.
  7. Tax items – There is a lot of pent-up demand, especially among House and Senate tax writers, for some tax provisions. Republicans are currently discussing fixing the amortization of the Research and Development Tax Credit (IRC Section 179), while Democrats want to temporarily or permanently revive the Child Tax Credit that was part of the American Rescue Plan. These two items cost wildly different amounts, and as a result, a compromise may be hard to reach. However, it is not clear what other items either side might want in such a package, which is why this is so far down on the list.
  8. Nominations. Before it was clear that Democrats would hold the Senate, most congressional watchers assumed Senate Majority Leader Chuck Schumer (D-NY) would spend most of the lame duck session moving Biden Administration and judicial nominees. With the majority assured, he will likely have most of these nominees wait until the 118th Congress.
  9. Electoral Count Act. This bill would make some changes to the law governing the certification of elections in Congress. It is working toward 60 votes, much like the marriage bill.
  10. Permitting reform. Senator Joe Manchin (D-WV) has been pushing for a permitting reform bill. He tried to attach it to the continuing resolution in September but was thwarted by Republican opposition. He continues to push for its inclusion in the defense bill, but it is not clear that he has 60 votes.
 
The Congress is hoping to accomplish some or all of these items while American consumers do their Christmas shopping. The continuing resolution on government funding runs through December 16th and if a deal on other issues is close, it could very well be extended about a week to allow the Congress to finish its work. The toxic mix of jet fuel and mistletoe will certainly overtake negotiations by December 21 or 22 and all Members will likely be gone from Washington by December 23. In years past, they have returned after Christmas, but with the calendar this year, it is more likely than not that they will get their work done and adjourn to return for the swearing in of the new Congress in January.
Arizona Election Recap
By Michael DiMaria, Total Spectrum Vice President of Business Development and Southwest Regional Director
 
The best way to sum up election night (week) in Arizona is an often-used quote from former Secretary of Defense Donald Rumsfeld: “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.”
 
The long arduous task of counting votes in Arizona leaves much to be desired for those wishing for quick outcomes. We had a little over 1.5 million votes cast this cycle. As of this update, we know:
  • Katie Hobbs (D) pulled out a tight victory for Governor of Arizona,
  • Mark Kelly (D) won the United States Senate seat, and
  • We will have two new Republican Congressmen in Eli Crane and Juan Ciscomani.
Arizona’s legislature will continue with the smallest of margins for Republicans again. Most of the ballot propositions will pass. Let’s do a rundown of the results:
 
Congress
  • CD1 – David Schweikert (R)
  • CD2 – Eli Crane (R)
  • CD3 – Ruben Gallego (D)
  • CD4 – Greg Stanton (D)
  • CD5 – Andy Biggs (R)
  • CD6 – Juan Ciscomani (R)
  • CD7 – Raul Grijalva (D)
  • CD8 – Debbie Lesko (R)
  • CD9 – Paul Gosar (R)
 
Statewide Offices
  • Governor – Katie Hobbs (D)
  • Secretary of State – Adrian Fontes (D)
  • Attorney General – Kris Mayes (D)
  • Treasurer -  Kimberly Yee (R)
  • Secretary of Public Instruction – Tom Horne (R)
 
State House: 31 Republicans/29 Democrats
Republican Leadership:
  • Speaker Ben Toma
  • Majority Leader Leo Biasiucci
  • Minority Whip Teresa Martinez
 
Democrat Leadership:
  • Minority Leader Andrés Cano
  • Assistant Minority Leader Lupe Contreras
  • Co-minority Whips Melody Hernandez and Marcelino Quinones
 
State Senate: 16 Republicans/14 Democrats
Republican Leadership:
  • Senate President Warren Petersen
  • President Pro Tempore T.J. Shope
  • Senate Majority Leader Sonny Borelli
  • Senate Whip Sine Kerr

Democrat Leadership:
  • Senate Minority Leader Raquel Terán
  • Assistant Minority Leader Mitzi Epstein
  • Co-minority Whips Lela Alston and Rosana Gabaldon 
 
Corporation Commission
  • Kevin Thompson (R)
  • Nick Myers (R)
 
It is possible the Attorney General’s race will have a recount as the margin is within 3,000 votes. Arizona has not seen its government this divided since 2009. 
Interchange Fee Issue Coming to a Head 
By John McKechnie, Total Spectrum Senior Partner
 
Will the Durbin-Marshall credit interchange bill become law? This seems to be one of the predominant questions in the lame duck session, as both the financial services and retail industries once again prepare for the latest chapter in a long-running battle over fees charged for electronic payments. 
 
To review the bidding, on July 28, Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) introduced the Credit Card Competition Act of 2022, which would require multiple competing networks to be available for the routing of credit card payments, beyond Visa and Mastercard. According to the Senators, “the Federal Reserve would issue regulations, within one year, ensuring that banks that have assets of over $100 billion cannot restrict the number of networks on which an electronic credit transaction may be processed…at least one of which must be outside of the top two largest networks (Visa and Mastercard).” 
 
Interchange fees, whether associated with debit or credit transactions, are charged by credit card companies to create, maintain, and update electronic payment transaction networks. Additionally, the companies, the banks, and the credit unions that issue cards to consumers use income from these interchange fees to protect data sent through the networks, an increasingly complex and expensive process given the prevalence of data breaches and other financial cybercrimes. 
 
The merchant lobby hailed the legislation, which would act as a companion to a similar amendment governing debit transactions that Senator Durbin inserted into the Dodd-Frank Act in 2010. Controversial at the time of passage, the original Durbin amendment sought to cap debit card interchange fees charged by credit card companies and the financial institutions that issue them. In the decade that followed, critics have said that the Durbin amendment amounted to a giveaway to large retailers—a 2015 study by the Richmond Fed found that 98% of merchants did not pass savings from debit regulation to consumers and over 20% of merchants actually increased prices.
 
Senate sources say that Senator Durbin and Senator Marshall are now floating a plan to attach their bill to either the annual defense bill or the federal spending bill that is needed to fund the government past the December 16 deadline. Although there is a possibility that Majority Whip Durbin will maneuver his way into a recorded vote on the Senate floor, Senators on both sides of the issue say that passage is unlikely for several reasons:
 
1.    The issue is generally unpopular because it forces Senators and Congressmen to choose sides in the bitter, expensive, and exhausting war between two powerful lobbying groups – financial services and retailers.
2.    The financial services industry has made a relatively strong argument suggesting that this bill would lead to transactions being routed to payment networks that, while cheaper to use, are also not secure and easily breached by cybercriminals.
3.    Attaching anything to either the defense or spending bills will further complicate an already tortured path as Congress tries to dispose of its year-end business in a very limited timeframe. The two legislative options would require broad bipartisan support and this effort is still too politically contentious. A Republican Senate leadership staff member told me that “putting the Durbin amendment onto already controversial bills doesn’t make sense to anyone. Hard to see it happening.” 
 
The latest Durbin-Marshall credit interchange bill has its share of Senate supporters. Some sources say as many as 20 Republicans could join most Democrats in voting for the bill if it is offered as an amendment on the Senate floor. In theory there are legislative avenues for Durbin and the merchant lobby to pursue, but it appears that the political arithmetic is against passage in the remaining weeks of the 117th Congress. 
Hearing Report
By Ramona Lessen, Executive Director, Total Spectrum
 
Senate Banking, Housing and Urban Affairs Committee Hearing on the Oversight of Financial Regulators: A Strong Banking and Credit Union System for Main Street
Tuesday, November 15, 2022; 10:00 a.m.
 
To view a livestream of the hearing please click here.
 
Senator Sherrod Brown (D-OH), Chairman
 
Senator Patrick J. Toomey (R-PA), Ranking Member
 
Witnesses:
The Honorable Michael S. Barr
Vice Chair For Supervision
Board of Governors of the Federal Reserve System
 
The Honorable Todd M. Harper
Chair
National Credit Union Administration
 
The Honorable Martin J. Gruenberg
Acting Chair
Federal Deposit Insurance Corporation
 
Mr. Michael J. Hsu
Acting Comptroller
Office of the Comptroller of the Currency
Congressional Calendar
All times EST
 
Tuesday, Nov. 15
  • 9:30 a.m. House Homeland Security Committee hearing on worldwide threats to the homeland. DHS Secretary Alejandro Mayorkas and FBI Director Christopher Wray testify.
  • 10 a.m. House Financial Services Housing and Insurance Subcommittee hearing on “addressing chronic disinvestment in Colonias, the Southern Black Belt, and the U.S. Territories.”
  • 10 a.m. House Foreign Affairs Africa, Global Health, Global Human Rights and International Organizations Subcommittee hearing on U.S. foreign assistance, with respect to addressing the root causes of instability and conflict in Africa.
  • 10 a.m. House Oversight Civil Rights and Civil Liberties Subcommittee hearing on developments in state cannabis laws and bipartisan cannabis reforms at the federal level.
  • 10 a.m. Senate Agriculture Committee hearing on the 2023 farm bill, with an emphasis on rural development and energy programs.
  • 10 a.m. Senate Banking Committee hearing on “a strong banking and credit union system for Main Street.” Federal Reserve Board Vice Chair for Supervision Michael Barr and acting FDIC Chair Martin Gruenberg testify.
  • 10 a.m. Senate Judiciary Committee hearing on six nominations , including Anthony Johnstone’s nomination to be a U.S. Circuit Court judge for the Ninth Circuit and five U.S. District Court judgeships. 226 Dirksen.
  • 2 p.m. House Financial Services Investor Protection, Entrepreneurship and Capital Markets Subcommittee hearing on U.S. capital flows to foreign rivals and adversaries around the world.
  • 2:30 p.m. Senate Environment Transportation and Infrastructure Subcommittee hearing on opportunities for local jurisdictions to address transportation challenges.
  • 2:30 p.m. Senate Homeland Security Investigations Subcommittee hearing on medical mistreatment of women in ICE detention. DHS IG Joseph Cuffari testifies.
 
Wednesday, Nov. 16
  • 10 a.m. House Foreign Affairs Europe, Eurasia, Energy and the Environment Subcommittee hearing on Russia’s waning global influence. DOE Secretary Ernest Moniz testifies.
  • 10 a.m. House Oversight National Security Subcommittee hearing on protecting JROTC cadets from sexual abuse and instructor misconduct.
  • Wednesday, Nov. 16 | 10 a.m. House Rules Committee hearing on legal and procedural factors related to seating a Cherokee Nation delegate in the U.S. House of Representatives.
  • 10 a.m. Senate Foreign Relations Committee hearing on U.S. policy in the Caucasus.
  • 10 a.m. Senate Judiciary Committee hearing on DHS oversight.
  • 10 a.m. House Financial Services Committee hearing on eight bills, including one that would require the Federal Reserve to develop and conduct financial risk analyses relating to climate change, and on ensuring the safety, soundness, diversity and accountability of depository institutions. Federal Reserve Board Vice Chair for Supervision Michael Barr and acting FDIC Chair Martin Gruenberg testify.
  • 10 a.m. House Natural Resources Committee markup of H.Res. 1378 , which would request the president, and direct USDA, to transmit, respectively, “certain documents to the House of Representatives relating to Resolution Copper mine.”
  • 10:30 a.m. House Science Space Subcommittee hearing on initial science results from the James Webb Space Telescope.
  • 10:30 a.m. Senate Aging Committee hearing on promoting healthy and affordable food for older Americans.
  • 2 p.m. House Oversight Government Operations Subcommittee hearing on “The Holiday Rush: Is the Postal Service Ready?” USPS IG Tammy Whitcomb testifies.
  • 3 p.m. Senate Veterans’ Affairs Committee hearing on VA implementation of the Honoring our PACT Act of 2022 .
  • 2:30 p.m. Senate Indian Affairs Committee business meeting to consider three bills, including one that would authorize the Colorado River Indian Tribes to enter into lease or exchange agreements and storage agreements relating to water of the Colorado River allocated to the Colorado River Indian Tribes, and a legislative hearing on three bills, including one that would approve the settlement of the water right claims of the Tule River Tribe.
  • 4:15 p.m. Senate Homeland Security and Governmental Affairs Committee business meeting to consider two nominations, including Robert H. Shriver III’s nomination to be the deputy director of the Office of Personnel Management, and two bills, including one that would direct DOT to establish a national aviation preparedness plan for communicable disease outbreaks.
  • TBD Senate HELP Committee business meeting to consider three nominations, including Karla Gilbride’s nomination to be general counsel at the EEOC.
 
Thursday, Nov. 17
  • 9 a.m. Senate Judiciary Committee business meeting to consider 14 nominations, including three for U.S. Circuit Court judgeships, nine for U.S. District Court judgeships, McLain Schneider’s nomination to be a U.S. attorney for the District of North Dakota and David Davis’ nomination to be a U.S. marshal for the Southern District of Illinois.
  • 10 a.m. House Foreign Affairs Committee hearing on the Biden administration’s U.S. strategy toward sub-Saharan Africa.
  • 10 a.m. House Natural Resources Committee hearing on Puerto Rico’s post-disaster reconstruction and power grid development.
  • 10 a.m. House Transportation Aviation Subcommittee hearing on addressing challenges for passengers with disabilities.
  • 10 a.m. Senate Environment Superfund and Waste Management Subcommittee hearing on Stephen Owens’ nomination to be the chair of the Chemical Safety and Hazard Investigations Board and Catherine Sandoval’s nomination to be a member of the board.
  • 10:15 a.m. House Education and Labor Subcommittee on Workforce Protections hearing on workplace protections for warehouse workers.
  • 10:15 a.m. Senate HSGAC hearing on threats to the homeland. DHS Secretary Alejandro Mayorkas and FBI Director Christopher Wray testify.
  • 10:15 a.m. House Education and Labor Committee business meeting to approve new subcommittee assignments.
  • 11 a.m. Senate Energy and Natural Resources Committee hearing on three DOE nominations, including David Crane’s nomination to be the under secretary of Energy (Infrastructure).
This e-newsletter is produced by Total Spectrum/SGA and Total Spectrum Arizona. The views expressed herein may include subjective commentary and analysis that are the views of the editors and authors alone. Information in this e-newsletter is obtained from sources believed to be reliable, but that cannot be guaranteed as independently investigated or verified. Information in this e-newsletter is not an endorsement, advertisement, recommendation, or any type of advice, political, legal, financial, or otherwise. With questions about the content of this e-newsletter, please contact Total Spectrum Arizona.