What Now? An Epic Election Meets the Future

So now what?

We'll hear from President Obama at a press conference today and then on 60 Minutes, Sunday. Expect humility, determination and no hint of "moving toward the center."  Work together, times are tough, too  much rancor in Washington, etc.

And then -- the country will meet the new personalities in charge. John Boehner, comfortable as a leather glove and skin texture to match, a country-club Republican who has humble beginnings. Eric Cantor, who won't escape the casual racism of being referred to as the "first Jewish majority leader," will appear as the voice of policy and conciliation.

Most of the White House policy apparatus is focused on the trip to Asia, and Obama might drop in a few forward-looking hints about how he views his job antebellum. He wants to double American exports in the next five years. He's visiting Asia, where he'll talk about mutual interdependence and put on his America Works hat.  Obama will be surrounded by themes and images of business and industry as he visits Mumbai, South Korea (for a G20 summit) and then the special country of Indonesia, where the Secret Service has to worry about whether it can fit "The Beast" -- his limousine -- through the narrow roads of Jakarta.

Privately, White House officials hope that Republicans immediately adopt a celebratory, no-compromise, "we're back!" posture, and hope that they don't take the advice of Sen. Mitch McConnell, who will call the election a mere "course correction."  Before or after Asia, he is almost certain to invite the new leaders of Congress to the White House, or to Camp David. There will be private meetings and a public photo op. Message: It's easy to say no, guys, but now this big pile of problems is on you, too.

Amid all of the post-morterms, Republicans will be exceptionally busy. Many in the party will try to discredit the very idea of a rump session of Congress given the magnitude of the defeat. Watch for groups like American Crossroads to spend money on television advertising here -- they've got to spend at least 51% of it on things other than candidates, and they have plenty left over.  Rush Limbaugh, Mark Levin, Sarah Palin, Fox News, and the Tea Party contingent of new House members will argue that a rump session is a chance for Democrats to ram unpopular policies through America's throats after they've made a decision to change direction.  Will Speaker-elect Boehner face a challenge? Will the Republicans have to incorporate someone with Tea Party credentials into the leadership, especially if Rep. Mike Pence leaves the ranks to run for President?  (Rep. Kevin McCarthy is a logical candidate for a promotion.)

Since the presidential election cycle begins today -- the political equivalent of Black Friday -- it will be interesting to see how the potential '12ers juke and jive for attention.  Obama's team has already met several times to discuss the timing and structure of a campaign. Several personnel announcements are expected before the end of the year.

Democrats are already playing down the notion that they'll get much done in a lame duck session.  They'd rather punt to January particularly the big issues, like tax cuts. "Don't Ask, Don't Tell"?  Don't even bother.  On taxes, the outline of a compromise is there, having been floated by Vice President Biden: the rates might stay in place for a larger number of wealthier Americans. The Estate Tax, which jumps up to 55% in January, will probably be restored at a lower rate. Capital gains taxes will also be higher, but not as high as they're slated to be.  Supporters of the START treaty are very worried.

Assuming that there is no leadership battle among Republicans....

The chief lobbyist for a Fortune 500 company that has significant health care interests thinks that Republicans on the appropriations committee will simply try to defund programs that the Department of Health and Human Services needs to continue to put parts of the health care into place.  At the very least, they'll make a strong show of it.  It will be difficult for Republicans to play too many head games with health care, like combining unpopular appropriations bills with popular ones to force the presidents hand.

According to Newsweek, the White House plans to aggressively enforce environmental regulations as they anticipate efforts from Republicans to strip authority from the EPA.  Compromise on renewable energy standards is possible, but the posturing between Rep. Joe Barton, the chairman of the energy committee, and the administration, may make this terribly difficult.  The GOP plans to hold high profile hearings examining the alleged "scientific fraud" behind global warming, a sleeper issue in this election that motivated the base quite a bit.

In December of 2009, Congress agreed to raise the debt limit by $290 billion. Two months later, it added $1.9 trillion worth of financial give to avoid having to vote to increase the limit again before the election. At $14.9 trillion, with deficits increasing, the administration will ask Congress to extend the limit in early 2011, probably after the State of the Union. (There is a chance that Congress could sneak the vote in in 2010 to avoid the much harder task of increasing it in 2011.)  Either way, expect an energized Republican majority to vigorously attempt to limit the size of the increase, which is based on Treasury projections.  Failing to increase the debt limit would not necessarily lead the nation to default on its obligations, as the Treasury can take drastic (but legal) action to avoid increasing the debt in the near term. But it can't stop-gap without harming confidence in the economy itself.

Alan Simpson, the co-chair of the President's debt commission, has said that the midterm elections could be "disruptive" to the work of his commission, which will recommend a series of spending cuts, means testing schemes and revenue raisers to put the country on a path toward reducing the percentage of debt relative to gross domestic product.  The recommendations are due on December 1.  A 7/9th vote of the commission would send them directly to Congress.

The three main entitlements, Social Security, Medicare and Medicaid eat up all the revenue that the government takes in yearly.  Everything seems to be on the table. A coalition of 50 House Democrats and some Republicans want to dramatically cut the defense budget, which exceeds $700 billion.  That's a non-starter for the White House, but Obama specifically instructed commissioners to consider "everything."  That's one reason why Secretary of Defense Robert Gates has prophylactically and fairly boldly attempted to trim the defense-industrial behemoth.

As Republicans campaigned on spending cuts, they refused to identify where and how they'd do it. (Sen John Cornyn and Boehner have both said that the debt commissions recommendations will be a starting point, essentially punting on this hardest of questions.)  Obama's past few budgets have included some give, anticipating that he might have to cut non-domestic discretionary spending in future years, But Republicans will draw a much lower line. Pence, a leader of the Republican Study Committee and potential presidential candidate, made it clear before the election that he would countenance "no compromise" on such matters.  Pence might not be around, though: He is said to be contemplating a step away from the leadership ranks in order to prepare said presidential bid.

The main questions are these: How does Obama incorporate the debt commissions suggestions in his budget outline?  Does Congress take them seriously? Do Republicans propose a significant cut in discretionary spending? Will voters understand that cutting waste and finding efficiencies in the budget can't begin to generate the type of savings they expect?  Will Obama, who has increased education spending by $20 billion, declare that part of the pie sacrosanct? Will Speaker Boehner, who helped write No Child Left Behind, yield to his new Tea Party base and refuse to compromise on education.

Both parties have promised to crack down on earmarks, and Republicans will face significant pressure from their base to do so.

Do Republicans force the government to shut down, and wait it out? In 1995, many Republicans believe that Newt Gingrich capitulated too quickly to President Clinton in coming to an agreement.  The tactic in 2011 would be to shut the government down, bring it to the abyss, wait and let Americans see that it's not bad...and then, on their own terms, press the on button again.

House Republicans may try to force the President's hand on Afghanistan and defense spending.

Additionally, the tone matters. Gingrich was petulant. Speaker Boehner needs to be convivial. The machinations of Rep. Darryl Issa are dispositive here. If his investigations are perceived as intrusive or politically-driven, it will make the entire Republican conference look wispy.  If he investigates the right things and does so modestly enough, he could become quite powerful. Again, the paradox is that the White House hopes Republicans are more aggressive in cutting, shutting and subpoenaing than they actually might be.