By Michael Boland
In a speech yesterday afternoon at the American Enterprise Institute (AEI), House Republican Leader John Boehner (R-OH) laid out how he will tackle the job of Speaker if Republicans “earn back” the majority.
This year, 100 out of 435 districts are in play, a number 80% greater than the historical average. A net win of 39 seats turns over control. Republicans now lead in over 60 races. We reaffirm our prediction of June 24 that Boehner will be the next Speaker. The two most important reasons are:
1. Independent voters say they worry more about a Democratic majority in the House than a Republican one by a 35-point margin (59% to 24%) according to a new Resurgent Republic poll.
2. Liberal turnout will disappoint the Democrats. The “passion gap” between opponents and supporters of the Obama agenda is wide. For example, a recent Politico/GWU Battleground Poll reports that 68% of union households think the country is on the “wrong track.”
Boehner will be completely different than Nancy Pelosi (D-CA) in style and substance. What may surprise many is that Boehner’s style, but not his policy views, will have much in common with that of former Speaker Tip O’Neill (D-MA). For institutional investors, this is a change of 180 degrees and is worth a closer look.
| John Boehner |
What does this mean to hedge fund managers?
Hedge fund managers should note that one of Boehner’s initiatives makes it possible for them to attract greater investments from pension plans without subjecting the hedge funds themselves to ERISA rules.
In 2006, Boehner was House Majority Leader but had served previously as chairman of the House Committee on Education and Workforce for five years. He knew that a half-century of calcified Department of Labor regulations were funneling employee retirement savings into high-cost, low-return funds. He knew that too many American corporations were underfunding pension plans, or skipping payments owed to the plans, or worse. He knew that automatic enrollment would increase savings.
Under the old rules, employees had no freedom, little choice and no access to the kind of investment information companies commonly provided to their upper management employees. The Pension Protection Act of 2006 was an uphill fight, in part because of the indifference of many of his Republican colleagues. He was confronted by a well-funded opposition campaign led by the AFL-CIO. The unions delighted in demonizing hedge funds while they irresponsibly ignored the very real prospects of an imminent failure of the Pension Benefit Guaranty Corporation.
In other words, Boehner understands that the struggle to win pro-investment reform sometimes requires legislators to master highly complex economic subjects, overcome populist but wrong-headed obstacles, all to win a victory few will notice and no one will reward.
In his speech to the AEI, he described the Committee on Education and Workforce when he took the gavel as chairman in 2001 as “a ‘backwater’ panel that nobody wanted to be on.” Boehner changed all that by opening up the internal process of the committee. He calmed down each side’s rhetoric by saying “we can disagree without being disagreeable.” He worked well with such liberals as Rep. George Miller (D-CA) and Sen. Ted Kennedy (D-MA). On education policy, they agreed and launched the first serious attempt to improve K-12 public education. On the 2006 pension reform law, they agreed to disagree. Boehner’s pro-growth version prevailed.
How will Boehner run the House?
As Speaker, he promises to open up participation in the committees and on the floor of the House to all Members, majority and minority alike. He promises to be more accountable to the public.
This is neither wishful thinking nor a toss-away campaign promise; it’s a smart management tool for running a legislative body that badly needs to restore the trust of the public and to channel the inherent competition among and between factions in the House to fair resolution.
It demonstrates that Boehner is planning ahead, understanding that the Congress of 2011 will be comprised of a majority mixed with traditional conservatives and tea party candidates and a minority dominated by dedicated liberals. How will he, as Speaker, impose order? By taking the new Congress back to the open debates fostered by Tip O’Neill.
As a Congressman from Cambridge, Massachusetts, O’Neill opposed then President Reagan’s military budgets. As Speaker, he allowed the House to debate a nuclear freeze resolution capping the U.S. nuclear missile stockpile under an open rule (allowing all germane amendments) over four days. By week’s end, a resolution intended to thwart the Reagan Administration was pulled from the House floor after a series of amendments offered by Republicans (who were in a 71-seat minority at the time) passed by wide bipartisan margins. Speaker O’Neill’s answer to the liberal supporters of the resolution, who thought his decision to allow an open debate defeated them, was that if you don’t win the debate, you won’t win the votes.
Putting Spending on Trial
The big news from the AEI speech is that Boehner proposes breaking up comprehensive spending bills into smaller bills, agency by agency, to help cure what he calls “the dysfunction in Congress” for which “both parties bear the blame” and which has “now reached a tipping point—a point at which none of us can credibly deny that it is having a negative impact on the people we serve.” This will make it easier to reduce federal spending.
I propose today a different approach. Let’s do away with the concept of “comprehensive” spending bills. Let’s break them up, to encourage scrutiny, and make spending cuts easier. Rather than pairing agencies and departments together, let them come to the House floor individually, to be judged on their own merit. Members shouldn’t have to vote for big spending increases at the Labor Department in order to fund Health and Human Services. Members shouldn’t have to vote for big increases at the Commerce Department just because they support NASA. Each department and agency should justify itself each year to the full House and Senate, and be judged on its own.
Delegating Duties to Committee Chairs
It is logical to expect a Speaker Boehner to compile a working agenda for the House that reflects his conservative policy views and those of the new majority. In numerous public speeches leading up to the election, he has shared that he will require his Republican committee chairs – who will be mostly mild-mannered Midwesterners like himself – to win support from the full House on the merits of the legislation assigned to them. Committee leaders cannot expect him to tilt the table towards them. This, in effect, will be his operating system.
Who are these other mild-mannered Midwesterners? The next budget committee chairman will be Wisconsin’s Paul Ryan, an earnest and reasonable conservative familiar to viewers of CNBC. Less widely known are Michigan’s Dave Camp (Ways & Means) and Fred Upton (Energy & Commerce).
As their Democratic rivals try to scare independents away from voting Republican in November, they wave the bloody shirt about who will replace them. No one, absolutely no one, should fear Dave or Fred. Each of these two guys is more like Richie Cunningham than Ron Howard himself. “Happy Days” are here again, but the new Congress will sing the tune of the television show, not the FDR campaign theme.
Responsibility in the Open House
By resisting the temptation to just muscle the votes, Boehner takes the risk that his own conservative views, and those of the majority of his Republican colleagues, will prevail after a fair and open debate. No doubt, he will be right on some days and wrong on others, but this new approach reveals a belief that addressing the country’s biggest problems is only possible if first the atmosphere inside Congress is healthy and recognized as such by the public. Down the road, he increases the chances that highly necessary and controversial matters, such as fundamental reforms of entitlement spending and federal tax policy, can be tackled.
Since the new Speaker won’t be making all the decisions by himself, each representative will be involved in the process of legislation. If a group of Members fails to pass a favorite amendment, they will have only themselves to blame. This means a longer and messier process but it will also be fairer and more representative.
The Organizing Idea
Boehner’s philosophy is embedded in the preamble to the recently released “Pledge to America” of the House Republicans, a document elevated as an alternative to President Obama’s agenda by the President’s attacks upon it. The preamble is the lasting value in the Pledge; it is an intelligent and sentimental tribute to “the idea of America.“ The preamble repeats a line from the Declaration of Independence, “Government’s powers are derived from the consent of the governed.” These words have been mocked as either naïve or pretentious. They are neither.
Boehner told AEI:
The House finds itself in a state of emergency. The institution does not function, does not deliberate, and seems incapable of acting on the will of the people. From the floor to the committee level, the integrity of the House has been compromised. The battle of ideas – the very lifeblood of the House – is virtually nonexistent.
Leaders overreach because the rules allow them to. Legislators duck their responsibilities because the rules help them to. And when the rules don’t suit the majority’s purposes, they are just ignored.
This won’t be Nancy Pelosi’s House any more.
Speaker Pelosi is a smart and strong-willed leader. However, her domination of the House over the last four years has undercut the entire idea of a representative legislative body. Strong commitments to a set of policies are expected in any Speaker’s office, but that should not include the presumption to dictate outcomes by controlling who is allowed at the table with a pen. Besides, the “master control” style eventually fails; the default is a debilitating frenzy of hustling in the back rooms, trading away this or sticking in that, to get the votes. The results are long, incomprehensible, lop-sided laws on spending, health care, finance and energy, pitting one set of constituents against the common good. Politically, she is the mother of the tea parties.
The incoming Congress will be difficult to manage, but ultimately, Boehner asserts that it is better to trust the whole body of 435 elected representatives to “work its will” in a less structured debate with fewer pre-ordained outcomes. If the new Congress operates on “regular order” – meaning that the budget, spending bills, tax bills, defense bills are brought up so that more amendments are allowed than disallowed – a fair vote will determine whether each one is accepted or rejected. The complete failure by Speaker Pelosi to adopt a budget this year is the direct result of her unwillingness to let the House “work its will.” A decent respect for the views of the whole House makes legislation vastly more resilient. It might just make the public feel well represented.
Conclusion:
A new Republican House majority is coming to shore on the midterm election wave, driven by the combined energy of fired-up conservatives and fed-up independents. Once convened in January of 2011, John Boehner’s House of Representatives will run as an “Open House.”
The long process of restoring faith in our government begins when the government delivers on its pledge of allegiance to the consent of the governed.
The new House will observe the first Rule of Holes, i.e., they will stop digging. A new majority means a new direction in federal policy. Breaking up massive appropriations bills into agency-by-agency ones, allowing for numerous amendments under open rules will cut excessive federal spending. Bailouts to state and local governments will end. Slowly, pro-growth policies and fiscal integrity will emerge. It means the economy will be free to grow which leads to increased federal revenues. It means America will put more of its capital to work at home. It means jobs.
Michael Boland is founder and president of Dome Advisors, a policy and political research firm for institutional investors. During the second term of the Reagan Administration, he was chief counsel to the House Republican Whip. The views expressed here are strictly his own.
