The Path to Victory

Click here to see Map

The Current Electoral Map: Battlegrounds

President Obama and Governor Romney are each widely expected to win the states that have, in recent presidential elections, become reliably Republican or Democratic.

Barring some major unforeseen event, Governor Romney will almost certainly prevail in most of the states of the South (Alabama, Arkansas, Georgia, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, Texas), Alaska, the Great Plains states (Idaho, Kansas, Montana, Nebraska, North Dakota, South Dakota, Wyoming), Utah, Kentucky and West Virginia. Most analysts believe that Arizona, Missouri and Indiana also currently “lean” Republican.

Also barring some major unforeseen event, President Obama will almost certainly win the states on the West Coast (California, Hawaii, Oregon, Washington), his home state of Illinois, and the states of the Mid-Atlantic and nearly all of New England (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Vermont, Washington, DC). There are a number of other states that most analysts believe currently “lean” in the direction of the Democrats this election: Michigan, Minnesota, New Mexico, Ohio, Pennsylvania and Wisconsin (although Governor Romney is expected to continue pursuing an all-out effort to win Ohio and Wisconsin, and thereby broaden his potential path to victory).

Even if President Obama and Governor Romney each prevail in all of the above-mentioned states that they are expected to win, neither candidate would receive enough electoral votes to become the next president of the United States. This means that, to prevail in this fall’s election, President Obama and Governor Romney will each need to win some combination of the remaining “battleground” states.

The most important battleground states for 2012 include Colorado, Florida, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Virginia and Wisconsin. Collectively, these states account for 110 electoral votes, the distribution of which will likely determine who becomes the next president of the United States. The battleground states have a history of highly competitive elections, or other demographic or economic attributes, that make these states the focus of extraordinary efforts–and advertising–by the presidential candidates.

The president’s small, but persistent, lead in national polls and some key battleground states could all fade away by Election Day. Nonetheless, because approximately 30 states have begun or are about to begin early voting, and several more will do so by the week before the election, the candidate with the current lead may be able to take advantage of this to lock in support well before November 6.

Colorado

Colorado has become one of the biggest prizes in the West; its nine electoral votes were won by President Obama in 2008. President Obama won Colorado with 54 percent over Senator McCain’s 45 percent in 2008, but the outcome this year remains uncertain. Even though the state has voted Republican in eight out of the last nine elections, Colorado is considered a swing state due to the independent nature of its electorate and the growth in Democratic votes in 2008.

Since 2008, the number of unaffiliated or independent voters has grown in Colorado. Colorado’s suburbs may be the deciding factor in this state’s decision. Arapahoe, Larimer and Jefferson counties in the Denver area will play a key role. Denver and Colorado Springs have been two of the nation’s top five media markets in terms of ad buys because of Colorado’s importance in this year’s election.

Demographics will play a large role in each party’s strategies in Colorado. The Obama campaign will target Latino and women voters. Women voters were critical in electing Democrat Michael Bennet to the US Senate in 2010, and the Obama campaign will reach out to that base. Colorado also boasts a politically active evangelical Christian community and a strong military influence, which the Romney campaign will turn to for support. Economic conditions are mixed. The state’s unemployment rate remains close to the national average, but recently there has been a pickup in the housing market and the manufacturing sector. Currently, President Obama holds a small lead in the polls. Nevertheless, Colorado remains up for grabs in this election.

Florida

A perennial battleground, Florida is the largest battleground state in this year’s race. With 29 electoral votes, it has been a frequent stop on the campaign tour for both candidates. President Obama carried this state in 2008, while President George W. Bush took the Sunshine State in 2004.

Both Romney and Obama have been courting two of Florida’s most influential populations—the elderly and Hispanic communities. Romney hopes to hold and motivate conservative retirees and Cuban-American voters, who have historically voted Republican. Governor Romney is likely to be strong with Cuban Americans, but it remains to be seen whether the broader Hispanic population, which is expected to trend toward Obama, will do so on a scale to offset the Cuban-American vote. The Obama campaign will be wooing the 18 to 29-year-old demographic in Florida particularly hard; young people backed him by a record margin in 2008. Both campaigns are working hard to win the confidence of older voters. While such voters have historically supported Republicans, concerns about the future of Medicare have some thinking that a number of older voters will move in the Democratic direction.

Florida’s economic climate is also sure to influence the outcome of the presidential election. Florida has been hit by a wave of foreclosures and has an unemployment rate slightly above the national average, complicating the path to another victory for Obama. Florida will be hard-fought right up to election day, and will continue to be the target of major Super PAC spending.

Nevada

Despite Nevada having only eight electoral votes, the state proved to be an important win for Democrats in the 2008 presidential election. Nevada’s unemployment and home foreclosure rates are well above the national average, and have given Governor Romney a messaging opportunity in the state. President Obama has been well received by Nevada’s Hispanic communities, which have increased significantly over the past 10 years. Additionally, Obama will be able to rely on the political inroads Senate Majority Leader Harry Reid (D-NV) has made for the Democrats and the strong political organization Reid has built during his tenure as Nevada’s most influential lawmaker. Romney’s support will be bolstered by the votes of Nevada’s large Mormon population.

Nevada’s economy, which has been slowly recovering from the economic downturn, is inextricably linked to the gaming industry and related businesses. Clark County is of particular importance not only because it contains Las Vegas, but also because it was home to two-thirds of all votes in the state in 2008. Unemployment in the Silver State is among the highest in the US, which has made some observers skeptical that President Obama can retain his small lead in the current Nevada polls.

Should the president carry Nevada with a large Democratic turnout, it could be sufficient to allow Congresswoman Shelley Berkley (D-NV) to defeat the incumbent Senator Dean Heller (R-NV). If Governor Romney wins Nevada, it is almost certain that Senator Heller will win re-election. Former New Mexico Governor Gary Johnson is on Nevada’s presidential ballot as the candidate of the Libertarian party. Johnson’s inclusion on the ballot will probably make it more difficult for Governor Romney to win the state.

Wisconsin

Wisconsin has been a Democratic state in recent presidential elections, but it is the home state of Rep. Paul Ryan. Moreover, the Republican party is currently resurgent there, at least at the state level. Republicans have had a string of victories, including the referendum on legislation to limit collective bargaining for public unions and the recall vote on Governor Scott Walker. The Romney-Ryan ticket enjoyed a bump following Ryan’s selection as Governor Romney’s running mate, but the ticket has not retained those gains. The president enjoys a small, but persistent, lead in Wisconsin polls. Nonetheless, Wisconsin remains one of the opportunities for the Republican ticket to take away an Obama state from 2008. Wisconsin has been central to the Romney strategy to take away a string of industrial states that ranges from Minnesota and Wisconsin to Ohio and Pennsylvania. While this industrial strategy has not yet proven to be successful, the state is expected to be heavily contested right up to election day, and the presence of native son Paul Ryan on the ticket could produce a late Romney surge.

New Hampshire

Now that Maine appears to be a “blue” state in presidential politics, New Hampshire is the last hope in this election for New England’s rock-ribbed Republicans. While the state appears to be trending toward the Democratic side, the GOP remains strong here, unlike neighboring Vermont, where the president holds a larger lead than in any other state. Governor Romney has also proved to be a favorite with some New Hampshire voters. He was governor of neighboring Massachusetts (his TV ads have long been seen in NH), and his family has spent the summers at their home in New Hampshire. The Romney camp will continue to contest New Hampshire because the polls remain close there—perhaps a low, single-digit Obama lead—and its four electoral votes could be decisive in a close election. Winning here is important to the Romney electoral strategy—for his potential path to 270 electoral votes is narrower and more dependent upon winning as many small states as possible.

Iowa

Iowa was a strategically important state for the Obama campaign in 2008, but his support there has eroded. This summer polls in Iowa showed the lead bouncing back and forth, and now show a very close contest, with an Obama edge that is growing but still inside the margin of error. This year’s drought and the failure of Congress to pass a farm bill are important issues in Iowa that could produce a backlash against the administration. Both campaigns are contesting Iowa vigorously, but it might be called a “second tier” swing state, which has not received the focus and resources lavished upon such states as Ohio and Virginia. Late Super PAC spending could have an impact here and in other rural states, where television ad rates are comparatively inexpensive. Iowa could also become even more of a Romney priority if his chances narrow in states like Ohio and Virginia.

Michigan

Michigan historically has been a strong state for Democratic presidential candidates; it’s been blue in presidential contests since 1992. But Mitt and Ann Romney were born and raised in Michigan, and the first Governor Romney, Mitt’s father George Romney, was an iconic political figure in the state. Romney strategists seemed to target Michigan in the early going as a “takeaway” from the roster of states Obama carried in 2008. President Obama and Governor Romney took starkly different approaches to the bailout of General Motors, and the president is touting the current health of GM and the auto industry generally as a reason for Michigan voters to support him again. President Obama enjoys a mid-single digit lead in Michigan, but has yet to pull away to such a degree that the Romney camp has pulled out.

Ohio

Ohio will see more top-of-the-ticket spending per voter than any other state. How this saturation will affect the ground game in the Senate and House races is unknown, though many argue that the ground game during the 72 hours before election day will be far more important to the election’s outcome than the air war. The voting impact of the improving economy in Ohio also remains uncertain. The Obama campaign has claimed credit for this development and cites the auto bailout as a significant factor in producing this achievement, while current Republican Governor John Kasich, the former chairman of the House Budget Committee, argues that reigned-in spending and reduced governmental regulation have created a climate for growth.

In this environment, Democratic Senator Sherrod Brown faces a spirited challenge from former Ohio State Treasurer Josh Mandel. However, Brown is still comfortably leading Republican Mandel in the most recent polls. With just a few weeks left until election day, Mandel—who has never led in a single public poll—is running out of time to catch up to the incumbent.

Ohio is the most watched state in this election cycle. It has successfully chosen the winning candidate for the presidency in the last four election cycles, hence the expression, “As Ohio goes, so goes the nation.” In the past four elections, Ohio split down the middle, favoring Clinton and Obama in 1996 and 2008, while favoring Bush and his fellow Republicans in 2000 and 2004. The 18 electoral votes in the Buckeye state have proven to be invaluable for Republicans, as a Republican has never won the presidential election without capturing Ohio.

Both parties are giving it everything they’ve got as we enter the final stages of the campaign. The conventional wisdom among electoral vote counters is that it could be difficult for Governor Romney to find his way to 270 electoral votes without Ohio. It could be difficult for President Obama as well, but he has more scenarios under which he could win the election without Ohio’s support. Given Ohio’s central importance to the election’s outcome, both parties can be expected to make a maximum effort in the state, unless one of the candidates concludes that the state is no longer winnable.

Virginia

Virginia is one of the most closely watched battleground states in the 2012 election. The Old Dominion backed President Obama in 2008, the first time this historically Republican commonwealth voted for a Democrat in a presidential election since 1964. Both Romney and Obama have been campaigning hard in Virginia. While Virginia may have turned blue in 2008, voters put Republican Bob McDonnell into the governor’s mansion in Richmond the following year.

The 2012 Senate race between Republican and former Senator and Governor George Allen and Democrat and former Governor Tim Kaine currently is the best bellwether for the commonwealth’s political leanings. Both candidates have tightly linked their campaigns to those of their respective presidential candidates. Both will benefit from the massive resources the national ticket of their party will lavish on Virginia’s voters. This strategy has been proving moderately successful for Allen and Kaine. After a recent surge in the polls for Kaine, the latest statewide poll shows a dead heat.

Former Republican Congressman Virgil Goode has secured a spot on the Virginia ballot as the candidate of the Constitution Party. He is expected to garner the votes of a small number of conservative voters, but this may be enough to create an obstacle to a Romney win in tightly contested Virginia.

Virginia provides a good example of the impact of demographic changes on the election. In the Old Dominion, there is growth among Latino voters, Asian Americans and young voters. In addition, the more liberal suburban areas of Northern Virginia are growing as a portion of the electorate. These changes all should aid the president, but could be offset by even a small drop in turnout by African-American voters, a possibility that is suggested in some current poll numbers of likely voters. Virginia may be the most important swing state this year, with the possible exception of Ohio. Currently, the president enjoys a very small lead in most polls, but the commonwealth is considered to be a true toss-up.

The Senate Elections

Along with the presidential race, the November elections will also determine which party controls the Senate for the next two years. Of the 33 Senate seats being contested this year, Democrats must defend 23, while Republicans have only 10 currently held seats on the ballot.

Democrats this year are faced with seven retirements, two of which fall in solid GOP states. In Nebraska, the open seat formerly held by a Democrat has been labeled as likely Republican. Other races considered to be toss-ups include: Montana, North Dakota, Virginia and Wisconsin, while Hawaii and New Mexico currently lean Democratic. Republicans have open seats in Arizona, Maine, Texas and Indiana. Former Maine Governor Angus King is running as an Independent and is expected to caucus with Senate Democrats if he wins election. Texas is labeled as likely Republican, Arizona and Indiana lean Republican, while Massachusetts and Nevada are considered to be true toss-ups. Early observers speculated that Democrats didn’t have a fighting chance to maintain control of the Senate, but, in recent weeks since their party convention, Democratic prospects have improved.

Governor King’s decision to run for Senator Snowe’s seat (and likely caucus with the Democrats), and Claire McCaskill’s increasingly likely election, have improved Democratic prospects of maintaining control of the Senate. If Governor Romney is elected president, Republicans would need a net gain of three seats to gain effective control of the chamber with the vote of Vice President Paul Ryan required to break a 50-50 tie. If the president is re-elected, Republicans must have a net gain of four Senate seats to gain control.

Regardless of the outcome of the battle for control, the retirements of several long-serving Senators—such as Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM)—will result in a restructuring of the leadership and membership of many Senate committees. Thus, even if the Democrats retain control of the Senate, there could be significant changes in the agendas for the various committees and in how the committees prioritize the issues under their jurisdiction.

The House Elections

While all 435 seats in the House of Representatives are contested every two years, most analysts currently believe that, barring some major unforeseen event, the GOP is likely to retain its majority. In 2010, Republican successes in the election enabled GOP candidates to win in Democraticleaning districts. Most of those candidates will face tough re-election contests. Democrats also face some challenges; they are expected to narrow the Republicans’ margin of control, but it is currently considered unlikely that the Democrats will win the net 25 seats they need for control of the chamber, even if there is a late Democratic trend. A Democratic takeover would require a “wave” election, an outcome that is not presently indicated in the polling.

Nevertheless, as with the Senate, the retirements of dozens of members of Congress at the end of this session will result in changes to the leadership and membership of the various House committees in the next Congress. These changes also could result in significant changes to the agendas for the various committees.

State Governors

Republicans currently hold 29 of the country’s governorships. Democrats control another 20, and there is one Independent governor. However, Democrats are defending eight governorships during the 2012 cycle, while Republicans must defend only three. Most observers believe that Republicans have a chance to gain as many as three seats.

Continuing Resolution (CR)

Following the close of both the Republican and Democratic National Conventions, Congress returned to Washington the week of September 10 for an abbreviated, two-week work session before returning to full campaign mode leading into the November 6, 2012, election. Prior to their departure, the Senate managed to pass a six-month continuing resolution (CR) to avoid a government shutdown and fund government operations through March 27, 2013, which the president signed on September 28, 2012. (The CR had been passed by the House on September 13.)

Republicans agreed to temporarily accept a small bump in spending to get Democrats to agree to delay final spending decisions until the next Congress. With each party claiming they will hold the majority following the election, the idea behind delaying such a decision is to potentially gain more influence with regard to fiscal year 2013 spending bills following the November election, while preventing a possible repeat of a near government shutdown prior to the election. In 2008, Democrats, then in control of Congress, utilized the same strategy, putting in place a fiscal year 2009 CR.

Continuing Resolution Summary

The CR continues funding at the current rate of operations for federal agencies, programs and services. To meet the bipartisan agreement between the House, Senate and White House that ensured a total rate of operations at US$1.047 trillion, the CR includes a government-wide, across-the-board increase of 0.6 percent to most accounts. In total, including all discretionary spending, the annual spending level of the CR is US$26.6 billion below last year’s level.

The bill continues funding for the FEMA Disaster Relief Fund at last year’s level of US$6.4 billion. This funding is used to provide relief and recovery efforts following disasters, such as the recent Hurricane Isaac. The bill also provides US$88.5 billion in war-related funding for Department of Defense (DOD) Overseas Contingency Operations (OCO), the amount requested by the administration.

Nearly all policy and funding provisions included in currently enacted appropriations legislation will carry forward in the CR. However, some changes to current law were needed to prevent catastrophic, irreversible or detrimental changes to government programs, or to ensure good government and program oversight. Some of these provisions include:

  • A provision allowing the DOD to acquire supplies in other countries for use in Afghanistan.
  • A provision allowing additional funding for nuclear weapons modernization efforts to ensure the safety, security and reliability of the nation’s nuclear stockpile.
  • A provision allowing flexibility for the Customs and Border Patrol to maintain current staffing levels.
  • A provision allowing additional funding and flexibility to sustain Homeland Security cybersecurity efforts.
  • A provision allowing additional funding for the Interior Department and the Forest Service for wildfire suppression efforts.
  • A provision allowing additional funding for the Veterans Administration to meet an increase in the disability claims workload.
  • A provision extending the current pay freeze for federal employees, which includes members of Congress and senators.
  • A provision allowing the launch schedule of new weather satellites to move forward, ensuring the continuation of critical weather information, especially in the event of weather-related natural disasters.
  • A provision requiring every federal agency to provide spending plans to Congress to ensure transparency and the proper use of taxpayer dollars.

Fiscal Cliff and the Lame-Duck Session

The Budget Control Act (BCA) of 2011 provided for an increase in the limit of the public debt in conjunction with the adoption of various measures to reduce the budget deficit. Included among these measures was the Joint Select Committee on Deficit Reduction that was tasked with submitting a plan to Congress containing US$1.2 trillion in deficit reduction from fiscal year 2012-2021. However, because the committee couldn’t reach an agreement, acrossthe- board spending cuts, also known as sequestration, were automatically triggered and are set to begin on January 2, 2012, should Congress and the president not reach an agreement on a path forward to avoid these cuts.

The fiscal cliff, as it has been described, consists of the combination of expiring tax provisions and across-theboard spending cuts (sequestration) that are set to take place on January 2, unless something is done to stop them from taking place. Thus far, the administration has advocated a deficit-reduction agreement, including both spending cuts and tax increases, while Republican members are opposed to tax increases and cuts to defense and have instead pushed to see further reduction of domestic programs.

Please find below a description of various fiscal cliff issues.

  • Expiration of Bush-era tax cuts
  • Sequestration, including US$55 billion in defense cuts and US$55 billion in non-defense cuts
  • 3.8 percent Medicare tax on wages and investment income and the excise tax on medical device makers
  • Unemployment insurance
  • Sustainable growth formula “doc fix”
  • 2 percentage-point reduction in the payroll tax
  • Retroactive extension of expired provisions—AMT patch, research and development tax credit, the production tax credit (PTC) for renewable energy and other extenders
  • Current estate and gift tax rules

Many analysts believe there is simply not enough time to reach an agreement on these issues during the lame-duck session, which has led to further speculation that the fiscal cliff issues will be ”punted” to the next Congress. Please find below a discussion of potential scenarios, depending upon the election’s outcome.

Political Scenarios

Click here to see Diagram

If President Obama wins the White House and Congress remains divided, it appears likely that the Bush-era tax cuts will be temporarily extended with a push by the Obama administration to increase taxes on those making more than a million dollars a year. To win the GOP over on increasing the debt ceiling, Democrats would likely need to agree to some cuts to entitlements. In regards to sequestration, both parties would likely put off sequestration for one year, instead of tackling it as part of a larger deficit reduction or tax reform plan.

If Governor Romney wins the White House, whether Republicans win the Senate or Congressional control remains divided, Republicans are likely to delay addressing these issues to allow the new president to put forth his legislative proposals (obviously, it will be easier for Governor Romney to implement his proposals should Republicans retain control of the House and gain control of the Senate).

If Democrats were to take control of both chambers, the Bush-era tax cuts would likely be extended for families earning under US$250,000 a year and would increase taxes on those making more than US$250,000. Democrats would also likely raise the debt limit, and as described in President Obama’s FY 2013 budget, sequestration would likely not occur. However, some federal agencies might be subject to further spending cuts.

For additional details on these fiscal cliff issues, please see this recent client alert.

Click here to see Senate Projection Scorecard