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The dust is still settling following the November 8 midterm elections, which were remarkable in that control of both chambers has remained undecided days later. As Punchbowl reported November 10, “Top Democrats maintain that control of the House is still in play despite the fact that Republicans have claimed victory already,” and that some races in western states are breaking in favor of Democrats while others are still undecided. Regarding the Senate, Nevada and Arizona remained too close to call and, depending on the outcome of those races – which could remain unknown into the weekend and beyond – Senate control could come down to a December 6 Georgia runoff, as it did in the 2020 election.

Politico reported this morning: “Republicans still have a wider path to the House majority than Democrats — but it’s narrowed a lot over the past 24 hours. As the vote count continues, particularly in mail-heavy Western states, Democrats continue to win most of the contested races, keeping them in the hunt and meaning news organizations won’t declare a winner in the overall fight for the chamber.”

The Arizona Senate race is said to favor Senator Mark Kelly (D-AZ). AZ Central reported that Kelly now leads opponent Blake Masters by nearly 115,000 votes, or 5.6 percentage points, and there are roughly 500,000 ballots still to be counted statewide.

The Washington Post said of the Nevada race: “Republican Adam Laxalt leads by about two points with four-fifths of the vote in. But there, the late-counted mail ballots — particularly in Clark County, home to Las Vegas — will help the Democrat, Sen. Catherine Cortez Masto. Renowned Nevada political analyst Jon Ralston now estimates that Cortez Masto has a good shot, as long as she keeps racking up something close to the 65 percent of late-counted mail ballots that she has been.” As of this morning, NBC News reports that Cortez Masto trails by just under 9,000 votes with 100,000-plus ballots left to count.

Leadership elections – Despite the unsettled outcome, both parties are moving toward leadership elections for the next Congress. Democrats have signaled that their leadership elections will be held November 30, after Thanksgiving, and it remains to be seen if current Speaker Nancy Pelosi (D-CA) will seek to remain at the top of the House Democratic leadership line-up.

House Republican leadership elections, including the Republican nomination for Speaker, majority leader, whip, and others, are set for November 15. These elections are conducted by a secret ballot of Republican members and candidates must win a majority of the vote to be selected. The nominee for Speaker, however, must also be backed by a majority of the entire House in a public vote on January 3, once the new Congress is seated. Current GOP Leader Kevin McCarthy (R-CA) is the frontrunner for Speaker should Republicans ultimately control the chamber, though, as has been foreshadowed in press stories over the past two months, the Freedom Caucus could complicate McCarthy’s bid for Speaker and significantly steer the House agenda in a narrowly held Republican majority.

Axios reported November 9 that it is less likely for conservative Freedom Caucus members – Jim Jordan (R-OH) is chair emeritus and the most high-profile member – to mount a challenge to McCarthy for the speakership on January 3 but would be expected to seek concessions. “More realistic, they say, is a scenario in which McCarthy fails to reach the magic number of 218 or must give away a serious amount of political capital to do so,” the report said.

Rep. Scott Perry (R-PA), the current Freedom Caucus chair, was quoted in this morning’s Wall Street Journal as saying, “We want to support a leadership team that supports more member engagement.” The report cited other members as saying it is not a foregone conclusion that Rep. McCarthy wins the Speakership and that no one currently has the requisite 218 votes that will be necessary in January.

There is also a potentially contentious race for Majority Whip between Reps. Tom Emmer (R-MN), Jim Banks (R-IN), and Drew Ferguson (R-GA).

Senate Republicans will hold leadership elections on November 16, and the current team led by GOP Leader Mitch McConnell (R-KY) is expected to stay largely intact aside from choosing a replacement for fourth-ranking Senator Roy Blunt (R-MO), who is retiring.

Freedom Caucus – The power of the Freedom Caucus is seen as being increased with a House Republican majority that could number in only the single digits, and the group is expected to seek representation on the GOP Steering Committee and input into what members sit on committees.

Beyond the formation of the new Congress, should Republicans prevail in the House, Freedom Caucus members like Rep. Chip Roy (R-TX) continue to threaten to use fiscal deadlines such as on government funding to force policy demands in areas such as immigration on the US southern border. Rep. Roy said November 4, “We’re going to fund it saying that you’re going to have a rider demanding that you turn people away or detain them fully… If we put that into the appropriations bill, if we say that ‘you have to end this and take these steps,’ then they’ll have to react to that. If they refuse to do it… the Democrats in the Senate … in the White House, President Biden – they would be shutting down the government.”

Lame-duck session – Amid all the uncertainty brought on by undecided races and control of Congress, as well as intraparty politics, lawmakers are about to embark on a pivotal lame-duck session. Conservatives’ inclination to use fiscal deadlines has prompted discussion of Democrats using the reconciliation process to address during the lame-duck session the federal debt limit, which otherwise probably doesn’t require attention until the second half of 2023. Doing so would require revisiting the budget process and occupy significant floor time, however.

The first item on tap upon the Senate’s return the week of November 14 had been expected to be the National Defense Authorization Act, which the House passed over the summer and will involve a lengthy floor debate with hundreds of amendments already filed and potentially include energy permitting reform. However, Bloomberg reported November 10 that Senate Majority Leader Chuck Schumer (D-NY) is instead planning to focus on judicial nominations next week.

Congress will also need to pass a spending bill – likely an omnibus appropriations measure – to fund the government beyond December 16, and how massive or austere that bill will get depends on the various uncertainties and moving pieces surrounding the elections and other elements.

It has been well-reported that, regarding a tax package, there may be a partisan standoff between Democrats who insist that the Child Tax Credit (CTC) be expanded if business tax items are to be addressed, and Republicans who say the 2021 CTC expansion was too expensive and rife with implementation problems. Less expensive options are likely available. In Politico Morning Tax November 10, House Ways and Means Committee Ranking Member Kevin Brady (R-TX), who is retiring, said he has been discussing a tax package with Democrats, but the CTC is a “big challenge.”

WCEY’s Ryan Abraham was quoted in Tax Notes as saying, “If we’re going to see tax policy, the lame duck is the best chance to clear the decks to get 174, 163(j) done.” The tax package could address the TCJA “cliffs” that took hold this year on the IRC Section 174 requirement for five-year R&D amortization and on the IRC Section 163(j) interest deduction calculation, plus the phasedown of bonus depreciation after this year, non-energy tax extenders, and other items.

On another matter, “Brady said he would love to move a package of retirement incentives he’s been working on with House Ways and Means Chair Richard Neal (D-Mass.) before leaving,” the report said. Some issues likely to be addressed in such a package include increasing catch-up contribution amounts and increasing the age at which minimum distributions are required.

Any year-end spending bill for 2023 is also likely to include at least some health care provisions – as Congress faces several looming deadlines that impact everything from provider payments, key health care and pharmaceutical program expiration dates, telehealth flexibilities, and more. For example, provider groups are calling on Congress to address a potential combined ~10% cut to 2023 Medicare reimbursements. While it’s likely Congress will prevent some of the cuts from taking effect in 2023, it’s unclear if there is enough support to fully ameliorate looming provider-focused cuts, as well as other cuts such as to laboratories.

Congress also is expected to take action on several health care items that were partially or temporarily extended in the CR including payment adjustments for certain hospitals, add-on payments for ambulances, and funding for pharmaceutical programs, such as those for pediatric medicines and orphan drugs. There also is some momentum for Congress to further extend Medicare telehealth flexibilities, such as those allowing patients to receive telehealth in their home and via the telephone, as well as a CARES Act telehealth policy set to expire December 31, 2022, that allows people with high deductible health plans to access telehealth coverage before their deductible.

Congressional committee members also will be looking to include their year-end priorities, as well as health care policy riders that were left out of the recently enacted FDA User Fee reauthorization package. But some of those year-end priorities may be pushed to the next legislative session as lawmakers grapple with covering costs and, in the case of mental health reform and pandemic preparedness, finessing policies to achieve the desired bicameral and bipartisan support.

IRS – President Biden will nominate Daniel Werfel to lead the Internal Revenue Service, the Washington Post reported. He served as acting commissioner in 2013. 

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