Democrats Face Biggest House Midterm Defeat in Years

The Republicans are poised to retake the U.S. House and narrow Democrats’ margin in the Senate, delivering a rebuke to President Barack Obama’s party in a campaign shaped by voter anxiety over jobs and the economy.

Republicans, who need a net gain of 39 seats to take control of the House, may pick up at least 50 in today’s elections, capitalizing on concerns about government spending and a 9.6 percent unemployment rate. The party may win as many as eight seats in the Senate, just shy of the 10 needed for a majority.

“It’s going to be one of those elections that 10 to 15 years from now people look back and point to as a midterm bloodletting,” said Stuart Rothenberg, editor of the Washington-based Rothenberg Political Report. Voters “are just in a foul mood,” he said.

Amid criticism of Obama’s domestic agenda, including health-care and economic-stimulus measures, Democratic losses in the House could top the 54 seats Republicans gained in their 1994 resurgence. The Democrats’ losses could be the deepest since the 1938 midterms, when the party lost 72 seats.

The Rothenberg Political Report predicts Republican gains of 55 to 65 seats in the House. The Washington-based Cook Political Report puts Republican House gains at 50 to 60 seats, possibly higher. Both reports see Democrats losing six to eight seats in the Senate, where Democratic leaders are working to stop Republican inroads.

Business Policies

With Republicans winning control of the House and gaining seats in the Senate, companies from Goldman Sachs Group Inc. to health insurer Wellpoint Inc. may gain support in efforts to undermine what they consider anti-business policies of Obama on taxes, health care and financial regulation.

Exporters from Caterpillar Inc. to United Parcel Service Inc. say a Republican-controlled House is more likely to work with Obama to approve pending free-trade agreements with South Korea, Colombia and Panama. Nuclear power may win more support from the new Congress also, said David Crane, chief executive officer of Princeton, New Jersey-based electricity producer NRG Inc.

Legislative Goals

The shift in power also would mean unions face little chance of achieving their major legislative goals, such as easier organizing rules, mandatory paid sick leave, bigger fines for workplace safety violations and tougher mine-safety rules, according to Harley Shaiken, a professor of labor relations at the University of California at Berkeley.

Airlines such as United Continental Holdings Inc. and Delta Air Lines Inc. would benefit because Republicans oppose legislation to limit the outsourcing of maintenance work abroad and to subject global airline alliances to antitrust regulation. A shift in lawmakers setting House transportation policy also would benefit FedEx Corp. by scrapping Democratic efforts to ease union organizing at the company’s Express unit.

The S&P 500 Index rose 3.4 percent in October after surging 7.5 percent last month, the best September since 1939. Chances that Republicans will win control of the U.S. House rose to 93.2 percent yesterday, according to bets placed on Intrade, a Dublin-based online prediction market. Democrats retaining leadership of the Senate was about 46.3 percent likely at close yesterday, Intrade data show.

Anticipated Gains

The anticipated Republican gains may increase calls for greater transparency at the Federal Reserve. Split power in Congress may also place greater onus on the central bank to revive the economy in the event Republicans and Democrats are unable to find common cause on fiscal policy.

Fed policy makers meeting today and tomorrow will consider steps to support an economy growing too slowly to reduce unemployment near a 26-year high. The central bank has asked bond dealers and investors for projections of central bank asset purchases over the next six months as it seeks to gauge the possible impact of new efforts to spur growth.

In the Senate, Republicans are poised to pick up seats of retiring Democrats Evan Bayh in Indiana and Byron Dorgan in North Dakota, as well as oust Democratic incumbent Blanche Lincoln in Arkansas. Democrats also risk losing Obama’s old seat in Illinois to Republican Representative Mark Kirk.

Some longtime Democratic senators also find their careers imperiled. In Wisconsin, Russ Feingold faces a loss after 18 years in Congress. Patty Murray, a three-term senator from Washington, is fighting for her career against Republican Dino Rossi.

Challenge to Reid

Even Majority Leader Harry Reid, the most powerful senator in Washington, faces a challenge in his home state after helping Obama win Nevada by 12 percentage points two years ago.

His opponent, Sharron Angle, a former state assembly member, saw her electoral fortunes rise with help from Tea Party activists and independent voters frustrated with the state’s 14.4 percent unemployment rate. Her closing message was an attack linking Reid to Obama and the state’s economic struggles.

“Harry Reid and Barack Obama — together they promised change,” an announcer says, over images of Obama campaign rallies. “What change did that bring to Las Vegas? We now suffer heartbreaking job losses while our state now leads the nation in home foreclosures and bankruptcies.”

Anger over record federal deficits and government spending fueled the emergence of the Tea Party in Nevada and nationwide. The groups were championed by former Republican vice presidential candidate Sarah Palin, South Carolina Senator Jim DeMint and Fox News commentator Glenn Beck.

Senate Leadership

A loss by Reid, a former boxer, would kick off a leadership battle, as Democrats vie to replace the four-term senator. New York’s Chuck Schumer and Illinois’ Dick Durbin are expected to be top contenders.

Republican control of either chamber would open the door to investigations of the Obama administration by new committee chairmen armed with subpoena power and the ability to influence policy on everything from the implementation of the new health- care law and overhaul of the U.S. financial-regulatory system.

Both parties made their closing arguments to voters yesterday. Republican House leader John Boehner of Ohio, who is set to lead his party as House speaker, criticized Obama in a rally in Cincinnati last night as a champion of big government who isn’t listening to the American people.

‘Out of Control’

“Your government is out of control,” Boehner said, in prepared remarks to the crowd. “Do you have to accept it? Do you have to take it? Hell no, you don’t.”

Obama and Democrats say electing Republicans will be a return to policies favoring corporate and special interests that led to the deepest economic crisis since the Great Depression.

“Washington Republicans have tried to block our progress at every turn,” Obama said in an e-mailed appeal to voters. “They’re campaigning on taking us back to the exact same agenda that brought us to the brink of disaster.”

Over the weekend, Obama campaigned in four states, Pennsylvania, Connecticut, Illinois and Ohio, in an effort to limit losses.

The election is the most expensive non-presidential contest in U.S. history, with spending expected to reach $4 billion, according to the Center for Responsive Politics.

Outside groups that aren’t required by law to disclose their donors, such as Karl Rove’s Crossroads GPS, emerged as pivotal forces. Such groups spent more than $100 million on the elections in September and October.

The Federal Election Commission also approved the creation of political action committees that can take in unlimited corporate, union and individual donations to pay for spending independently of campaigns.

House Leaders

A Republican victory in the House may force California’s Nancy Pelosi, 70, to consider stepping aside as party leader, according to two House Democratic leadership aides who spoke on condition of anonymity.

House Speaker Dennis Hastert, the last Republican to hold the position, gave up his leadership post after his party lost control of the House to Democrats in the 2006 election. He resigned from the House in November 2007.

Nadeam Elshami, a spokesman for Pelosi, declined to comment on the possibility that the speaker would step aside as party leader if Republicans capture the House.

“The Democrats continue to campaign throughout the country on behalf of America’s middle class and we will be in the majority,” he said.

Endangered Incumbents

A Republican wave may end the careers of several veteran lawmakers in close races, including Budget Chairman John Spratt, a 14-term incumbent from South Carolina.

Other long-timers facing defeat are Chet Edwards of Texas, a 10-term lawmaker who is chairman of an appropriations subcommittee; Missouri’s Ike Skelton, elected in 1976 and head of the Armed Services Committee; Earl Pomeroy from North Dakota, who is seeking his 10th term, and Jim Oberstar, who has represented his northern Minnesota district for 36 years.

Today’s elections may also push out first-term Democrats swept into office on the popularity of Obama in 2008, including Tom Perriello and Glenn Nye of Virginia, Frank Kratovil of Maryland, Debbie Halvorson of Illinois, Betsy Markey of Colorado, Mary Jo Kilroy of Ohio and Suzanne Kosmas of Florida.

Former President Bill Clinton, who has crisscrossed the country to try to help Democrats, campaigned yesterday in Watertown, New York, for Democratic Representative Bill Owens, who is locked in a close race with Republican challenger Matt Doheny, a former Deutsche Bank managing director.

New York Lineup

New York epitomized Democratic gains in recent elections. In 2002, the breakdown of House members was 19 Democrats and 10 Republicans. It’s now 26 Democrats and two Republicans, with one seat vacant.

Republicans are now looking to win back as many as six seats in the state.

“On the House side, it looks like a walloping,” Rothenberg said.

In some Senate races, Tea Party groups succeeded in muscling out Republican incumbents in favor of their own, often less-experienced nominees.

In Florida, Governor Charlie Crist opted to run for the Senate as an independent after Tea Party backers boosted the candidacy of former state House Speaker Marco Rubio. Polls in the last week show Crist trailing Rubio by double digits.

Tea Party

Tea Party candidates like Ken Buck in Colorado and Angle in Nevada are attempting to beat out more experienced Democratic opponents.

Democrats painted Tea Party-backed candidates as extremist, citing their support for ideas like abolishing the Federal Reserve, eliminating government agencies like the Department of Energy, and outlawing abortion even in cases of rape or incest.

“Colorado’s no place for Ken Buck’s extreme ideas,” an announcer says in an ad by the campaign of Democratic Senator Michael Bennet.

In some cases, Tea Party candidates could cost Republicans the race. In Alaska, Tea Party-backed candidate Joe Miller, with his primary defeat of incumbent Republican Senator Lisa Murkowski, forced her into a write-off campaign. The three-way race has given Democrats an opportunity to pick up the seat.

In Delaware’s primary contest, Christine O’Donnell upset Republican Representative Mike Castle, who had been considered a sure bet to win the seat once held by Vice President Joe Biden. Democrats now are on course to hold the seat.

To contact the reporters on this story: Catherine Dodge in Washington at Cdodge1@bloomberg.net; Lisa Lerer in Washington at llerer@bloomberg.net.

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net




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