What to Expect from a GOP House

Next year will be tailor-made for fans of gridlock. There’ll be an even larger wrench in the machinery of Washington as Republicans gain leverage in next month’s midterm, probably taking control of the House and coming close in the Senate.

Compromise will be hard to find as incumbents on both sides shun the center. They’ll work to keep their respective bases happy, fearing another round of primary knockouts in the 2012 presidential election cycle.

Republicans aim to stop President Obama in his tracks. Big administration initiatives are doomed to fail. But Democrats will stop the GOP as well. Both sides will have enough power to block a big bill, but neither will have enough to push one through.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

A GOP House will appear like a busy legislative construction crew for months, drafting and passing one big bill after another, but knowing major bills will have difficulty in the Senate or face a presidential veto that won’t be overridden. They’ll have to know many of their largest efforts may end up being symbolic until another election or two when the GOP may have a better shot of actually enacting large conservative reforms.

That’ll be just fine politically for Republicans. They’ll have little choice but to take a very ambitious, hard-hitting course in any event next year -- delivering an assault on Democratic power, big government as they see it, deficit spending and a center-left ideology that guides much of Obama’s White House. They’ll need to show the Republican Party base, Tea Party supporters, business backers and independents who have grown weary or cautious of Obama that the GOP is determined to change direction.

What will the gridlock mean for business issues? Climate control legislation is dead. Ditto, a comprehensive immigration law. Labor’s priorities won’t have a chance, including its biggest goal, union card check elections that may make it easier for labor organizers to score wins.

Figure on no movement to overhaul entitlements, namely Social Security, Medicare, Medicaid and veterans’ benefits. Reform will be central in the report later this year from the bipartisan debt and deficit reduction commission, but getting Congress to hold hands on painful fixes to popular automatic benefit programs will prove too much.

And no chance for significantly reforming the tax code, a bear of a project, even in less partisan times. The lame-duck session must deal with the Bush tax cuts that are set to expire Jan. 1, but the likely outcome -- a temporary extension -- will only delay an unpredictable fight. A compromise on estate taxes will finally win approval, either in December or early 2011.

The GOP will try but fail to repeal the health care law. That can’t succeed as long as Obama is president. Republicans will then try to chip away by withholding funds for implementing various provisions, but that won’t work, either. The health industry backs several big parts of the law and believes reopening it now would create many more problems than it would solve. Still, some tinkering is likely. There’s bipartisan agreement, for example, on rolling back some reporting regulations that threaten to burden small businesses and that was included to help finance health care changes.

On government spending, expect something close to a freeze for most domestic programs in the wake of a year of budget battles. The GOP is determined to show that it’s serious about shrinking the government, even if no landmark reduction is possible, such as eliminating an entire federal agency or two.

Congressional earmarks won’t be eliminated. Despite much rhetoric about out-of-control unauthorized earmarks slipped into spending bills, the practice will remain. There may be some curbing of the practice, but large trimming is not in the picture. Even if House GOP leaders tout efforts to cut pork projects, Senate appropriators in each party vigorously defend the right of Congress to steer funding where members see fit for projects in their states.

Big fights, too, over regulations. The GOP will try to block dozens of rules the administration plans on the environment, labor issues and financial services. At best, Republicans will slow some rules and force a few compromises, but that will only add to the uncertainty that is already frustrating many businesses.

Also ahead: A slew of partisan-fired investigations of the administration that’ll tie up officials who must produce reports and testify under subpoena on issues such as the industry bailouts and whether politics influenced decisions or how stimulus funds were spent. In the Senate, meanwhile, a smaller Democratic majority will find it even harder to confirm Obama appointees, especially any controversial judicial picks.

A few bills will pass. A six-year surface transportation spending bill green-lighting projects in every state and district is very likely, after much work over priorities and particulars. A free trade agreement with South Korea looks good to be ratified, also.