NATSO ANALYSIS: A Deep Dive Into The 2018 Midterm Election Results

The 2018 Midterm elections played out largely as expected: Democrats recaptured the House of Representatives for the first time since 2010, while Republicans retained their Senate majority by picking up at least two Democrat-held seats.  Democrats also managed to pick up at least four governorships and several state legislatures. 

The Midterms will usher in a new chapter of the Trump Administration and will have wide-ranging consequences for NATSO’s policy priorities.

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Big Picture Overview

On the heels of perhaps the most surprising Presidential election in U.S. history, the 2018 midterms yielded relatively few surprises.  It did not result in the “Blue Wave” that some had expected, but it was by no means a disappointment for the Democratic Party.  Democrats won control of the House by picking up (as of this writing) at least 34 seats.  In the Senate, Republicans were able to defeat at least two Democratic incumbents in Indiana and North Dakota, while a handful of other races remain too close to call and subject to potentially lengthy recounts.  

Democrats also managed to pick up at least four governorships and several state legislatures, which will help the Party compete in the 2020 presidential election and the next round of congressional redistricting battles.  (NOTE: NATSO will be releasing a separate post-election analysis focusing on state ballot initiatives in the coming days.)

The election results largely reflect the different geographic regions that represented the “center of gravity” in the key Senate and House races, and in turn underscore the U.S. electorate’s rapid, dramatic realignment in recent years.  The key Senate elections were primarily held in states with large rural and exurban populations that have begun gravitating toward the Republican Party, while Democrats’ retaking the House is due to the Party’s growing success in metropolitan and suburban areas.  Indeed, Democrats took control of the House not merely by making gains in coastal states that Hillary Clinton won, but also by penetrating into suburbs of traditionally conservative southern and Plains states such as Georgia, Texas, and Oklahoma.

As a general matter, the Congressional incumbents who lost were mostly Republicans representing districts that Hillary Clinton won in 2016, and Senate Democrats representing states that President Trump carried easily.  A serious red flag for President Trump heading into 2020, however, is the fact that Democrats picked up 28 House seats in districts that President Trump won in 2016. 

The relatively few legitimate “surprises” on Election Day underscore this political realignment, where Republican congressional incumbents Mia Love (Utah) and Steve Russell (Oklahoma), who each represent metropolitan districts in red states, were upset by lesser known Democratic challengers. Congressman Russell’s district favored President Romney over President Obama by 18 points in 2012, and Trump over Hillary Clinton by 13 points in 2016. 

The growing chasm between urban and rural America should leave both parties concerned: Republicans’ dwindling support in cities and suburbs (the latter having been a key to Republican support over the past two decades) should be matched by Democrats’ concern over the Party’s struggles to win over working class voters in rural America, which were a key to Democrats’ success for much of the 20th Century.

This has important consequences for NATSO’s government affairs and political engagement efforts: Given that most travel centers tend to be located in rural communities, NATSO’s membership will, in the near-term, increasingly be represented by Republican lawmakers.  It is imperative that NATSO continue to harness relationships with these elected officials.  At the same time, NATSO must also ensure that Democrats, even those who may not have many travel centers in their districts, understand that policies that facilitate robust growth in the travel center industry benefit surrounding communities and economies as well.  (For example, products that a truck delivers to an urban area represented by a Democrat may well have refueled at a rural travel center outside the city’s congressional district, and the price the truck driver paid for fuel implicates the price consumers pay for delivered goods.)

2020 Implications?

Midterm elections are historically a poor predictor of electoral outcomes two years later.  Looking to recent history, Republicans recaptured the House in 2010 only to see President Obama reelected two years later.  Democrats picked up seats in the 1998 midterms and saw Republican George W. Bush elected two years later, and the 1994 “Republican Revolution” gave way to an easy Clinton reelection in 1996. That being said, with an eye toward 2020, the 2018 midterms do offer some potentially interesting nuggets if one focuses on those states that caused Democrats so much trouble in 2016.

In Michigan and Wisconsin – two traditionally blue states that surprisingly voted for President Trump in 2016 – Democrats picked up governors’ mansions while also easily winning two senate races.  In Ohio, which supported President Trump by more than seven points in 2016, Democratic Senator Sherrod Brown was reelected.  Pennsylvania, another blue state that surprisingly supported Trump in 2016, elected a Democratic governor and Democratic senator and several additional Democratic members of Congress.

Perhaps most concerning for President Trump is the results in Iowa, where he easily won in 2016 and concentrated substantial resources to mitigate damage associated with the escalating trade war with China (including by directing EPA to permit year-round sales of E15). Democrats in Iowa picked up two Republican-held House seats, and Republican Gov. Kim Reynolds narrowly pulled out a win over Democratic challenger Fred Hubbell in what was the closest gubernatorial race in years. Gov. Reynolds garnered 50 percent of the vote, compared with Hubbell’s 47 percent. During the Presidential election, President Trump carried Iowa by the largest margin of any Republican candidate since Ronald Reagan in 1980. The Iowa Midterm results should be a wake-up call to the Trump Administration that for it to succeed in the Midwest in 2020, it must support a robust Renewable Fuel Standard (RFS) and begin repairing the damage it has caused to the RFS over the past two years.

Divided Government: Policymaking Outlook

Conventional wisdom is that the most likely outcome for the next two years is more gridlock.  Not only is compromise between House Democrats and Senate Republicans (to say nothing of the Trump Administration) going to be hard to come by, but Democrats have little interest in providing the President large-scale policy achievements that he can tout in his 2020 reelection campaign.

One of the most interesting angles to watch in the House next year will be how presumptive Speaker Nancy Pelosi (although it remains possible that Rep. Pelosi will face a serious challenge to the leadership role, it is likely that she will regain the Speakership in 2019) handles her extraordinarily diverse caucus next year. 

The incoming class of House Democrats is notable not just because of its demographic diversity but also the geographic and ideological diversity.  Democrats won in the Northeast, California, Chicago suburbs and Minneapolis, but they also picked up key seats in Colorado, Oklahoma, and Texas.  Many of these freshman Democrats won their election by supporting liberal policies such as Medicare-for-all and $15 minimum wage, while others won by convincing traditionally Republican voters to support them.  These members will have very different agendas in 2019, and it will be up to Nancy Pelosi to keep them all happy while putting the party in the best possible position to win in 2020. 

This will not be an easy task.  Bringing up for a vote legislation that propelled liberal Democrats to office may put more moderate Democrats that just won traditionally Republican districts in a difficult position: either support the policy and turn off many general election voters, or oppose the policy and become vulnerable to primary challenges from the left.

The Senate will likely continue churning through judicial and other executive nominations without considering major policy legislation.  Senate Majority Leader Mitch McConnell (R-KY) has done a masterful job in ensuring confirmation of executive appointees, and as long as there is gridlock in Washington, continuing to focus on confirming nominees presents the natural fallback for the Republican leader. 

The Senate Democratic caucus moved further to the left on Election Day, losing moderates Joe Donnelly (IN), Heidi Heitkamp (N.D.) and Claire McCaskill (MO).  On top of this, we can expect the opening battles of the 2020 Democratic Presidential Campaign to begin in earnest in the Senate, where more than a handful of Democratic senators have expressed interest in exploring a presidential run and will no doubt compete with one another on the Senate floor for the attention of Democratic primary voters.  Along similar lines, look to see House Democrats utilize their committee gavels to raise issues and ideas that they hope will become part of 2020 messaging. (Remember, the reason we found out about Hillary Clinton’s email server was because House Republicans were investigating the attacks on our embassy in Benghazi.)

Infrastructure: Potential for Compromise

Infrastructure policy – one of NATSO’s top tier priorities – is often cited as a potential area for “bipartisan compromise” and the prospect of divided government has reignited such discussions.   Although NATSO is eager to help facilitate such discussions, it remains a narrow path to enactment in the near term. 

That being said, Congress – particularly the Democratic House – will undoubtedly conduct multiple hearings and in-depth policy negotiations on infrastructure policy, NATSO is extraordinarily well positioned to achieve its objectives in the House as infrastructure talks commence.  It is critical that NATSO members play an active and engaged role, as these policy deliberations will form the foundation for future infrastructure legislation, and the next “highway bill” must be enacted by the end of 2020. 

NATSO's objective in working with Congress is to participate in a process whereby the United States can potentially recalibrate how it pays for infrastructure as it moves into the middle part of the 21st Century (potentially including, for example, a Vehicle Miles Traveled tax) while at the same time ensuring sufficient infrastructure investment in the near-term as the process plays out (i.e., increasing the motor fuel excise tax). At the same time, NATSO will actively oppose revenue measures that undercut the travel center industry’s ability to grow and prosper, such as commercializing Interstate rest areas and tolling existing Interstates.

On all of these fronts, incoming House Transportation Committee chairman Peter DeFazio (D-OR) is a strong ally.  Soon-to-be-Chairman Defazio strongly opposes tolling and commercialization (he recently referred to such privatization proposals as generating “pretend” infrastructure money) and has historically introduced legislation to raise fuel taxes and index those taxes to inflation.   Although President Trump’s infrastructure plan released in early 2018 advocated for tolling and rest area commercialization, many of the staffers that designed and pushed for those concepts have left the Administration, and the President himself is reportedly lukewarm on privatization.

Assuming House Democrats are comfortable sharing credit with President heading into an election year, there is undoubtedly the potential for compromise between House Democrats and the President on infrastructure.

The Senate is another matter.  John Barrasso (R-WY), Chairman of the Environment and Public Works Committee, strongly opposes raising fuel taxes, as do most Senate Republicans.  Senator Barrasso is, however, a strong champion for NATSO on tolling and rest area commercialization, having sent a letter to Transportation Secretary Chao urging her to oppose rest area commercialization.  Because of this, and his indisputable recognition of the importance of infrastructure investment, NATSO considers Senator Barrasso a strong ally as well. 

Fuels Policy and the Biodiesel Tax Credit

In what has become an annual tradition, in November and December Congress will consider extending a slew of expired tax provisions, including the biodiesel tax credit.  NATSO is cautiously optimistic that this tax credit will be extended at least for 2018 (retroactive to Jan. 1) and perhaps 2019 and beyond.  It remains unclear whether this will occur in the lame duck session of Congress at the end of this year, or in the first half of 2019.  As a general matter, if Congress considers the tax credit and other “tax extenders” in 2018, it is more likely to be just a one-year retroactive package; if consideration gets pushed to 2019, prospects improve for longer-term extensions. 

With respect to the Renewable Fuel Standard, there was intense discussion surrounding comprehensive RFS reform during much of 2018, but that has since dissipated.  Momentum stalled primarily because the Trump Administration took regulatory steps that obviated the need for certain interest groups to “come to the table” for legislative reform. 

Most significantly, the Administration announced it planned to scale back fuel economy requirements, and much of the impetus for several sectors to participate in RFS reform talks was to preserve the longevity of liquid fuels in the face of increasingly onerous fuel economy standards.  Additionally, the Administration announced that it was initiating a rulemaking to permit E15 to be sold year-round, which was a primary motivator for the ethanol community to come to the legislative table. 

In light of these ongoing regulatory proceedings, prospects for legislative movement on RFS issues in 2019 are slim.  That being said, at some point over the next several years Congress will inevitably consider RFS reform legislation, and the discussions that took place in 2018 and will continue to occur in 2019 will form the basis of such consideration.  NATSO will continue to play an active role in these discussions.

CONCLUSION

This is the lay of land as the 2018 Midterms draw to a close.  If the last two years have taught us anything, it is that the political landscape can shift dramatically on very short notice.  For example, the looming Mueller investigation combined with President Trump demanding the resignation of Attorney General Jeff Sessions leaves open the very real possibility that all of Washington, D.C., becomes paralyzed with indictments, scandals, and impeachment proceedings that would grind all legislation to a halt and disrupt many preexisting political relationships and expectations. 

Whatever happens, 2019 promises to be a critically important year for travel center owners and operators and the regulatory and political landscape within which they operate.  NATSO will continue keeping you informed, working to make sure your interests are well represented in the nation’s capital.

David Fialkov's photo

David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov directs NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More
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