Because Republicans are “no longer the opposition party,” they’ll “need to get things done” in the first year of the 114th Congress, says Andy Friedman of The Washington Update.
Speaking Tuesday morning at a breakout session at the Financial Services Institute’s OneVoice conference in San Antonio, Texas, Friedman spoke of the main forces driving Congress now. They include the fact that to Republican conservatives, “if you compromise on legislation, you’re viewed as a moderate, which will hurt you in the primaries.” That’s what led to Eric Cantor losing his seat in Congress, and with it his role as the House majority leader.
“Most House incumbents worry about winning the primary more than the general election,” a changed priority made possible by the 2010 redistricting of Congressional seats, Friedman said.
Friedman said that despite the GOP gaining control of both houses of Congress, “split government will continue” this year. Only when there’s a “forcing event” will Congress pass legislation that requires compromise between the two parties and that President Barack Obama will sign. Among the examples of those forcing events in the past were dealing with the fiscal cliff and raising the debt ceiling.
Friedman listed six dates that will meet his definition of “forcing events” in 2015:
Feb. 27: Homeland Security Department funding expires under the “CRomnibus” law that is funding the government.
March 15: The debt ceiling, which Friedman called the “most important” forcing event, and that neither party will want the U.S. to default.
March 28: The Medicare “doc fix.” Medicare payments to doctors will fall 21% on April 1 if Congress doesn’t act.
May 31: Spending authority for the Highway Trust Fund expires.
June 30: Export-Import Bank authorization ends.
Sept. 30: Government funding for the upcoming fiscal year must be approved.
Dec. 31: The tax extenders renewed at the end of 2014 expire.
The financial markets “don’t like these ‘forcing events,’” Friedman said, but he suggested in the days leading up to them there may well be a “buying opportunity” in the markets. He noted that the markets zoomed in after the fiscal cliff of late 2012 was averted.
However, he said advisors should “keep an eye on the ‘loophole closers’ to pay for these funding bills.” Among the possible ‘closers’ would be raising the federal gas tax to pay for highway funding — a tax that hasn’t increased since 1993, and a move some Democrats would like to see happen while gasoline prices are low. Another potential ‘closer’ would be removing the “stretch” IRA, he said.
One other overlooked issue to watch has to do with Obamacare. By the next presidential election there will be no outright repeal of the Affordable Care Act, he said, since tens of millions of Americans will have had health insurance by then for years. However, the Supreme Court will hear oral arguments in March on whether the ACA authorizes insurance subsidies in states that did not create exchanges, opting to use the federal exchange instead. About 80% of Obamacare enrollees live in those states.
“This could be the biggest challenge” to Obamacare, Friedman said. The court is scheduled to rule on the issue in June.
Friedman also said in response to an audience question that there will be no Social Security funding reform efforts in this Congress. There may well be some corporate tax reform, and he suggested that if such reform occurred, that the sectors that would be “big losers” as a result would be oil and gas, technology and manufacturing.
— Check out Rove, Gibbs: How Advisors Can Distance Themselves From Wall St. on ThinkAdvisor.