Startups Should Prepare for Midterm Elections and a GOP Majority Next Year

If I were a betting man, I would put money on Republicans taking back the majority in the House of Representatives next year. A perfect storm is forming that is going to create severe headwinds for many Democrats running for re/election this year. When you combine these factors with the House’s long-standing bias toward Republicans and historical midterm election trends, things are not looking good for Democrats.

Here are a few reasons why Democrats should be worried:

• History is not on the Democrats’ side. Since World War II, the president’s party loses 26 House seats on average in midterm elections. The Democratic majority in the House is only 4 seats (222 total), which does not leave Democrats a lot of room for error. Even if Republicans significantly underperform the historical average, it should be more than enough to shift the majority to Republicans.
• Biden is a drag on the party. His job approval rating is sitting at 41.3%. The only presidents who had lower approval ratings heading into their first midterm elections were Harry Truman in 1946 (33%) and Donald Trump in 2018 (41%), and their parties both got slaughtered in the midterms. Republicans won 55 House seats in 1946 and Democrats gained a net total of 41 House seats in 2018.
• Even Democrats see the writing on the wall. According to my most recent arithmetic, 31 House Democrats (that is a staggering one out of seven) have announced that they will not run for reelection. This is going to create more competitive open seats where neither candidate has the benefit of incumbency. Why is this critical? Because it’s generally easier to win an open seat than to defeat an incumbent.
• Inflation is at a forty-year high, and interest rates are rising. The Personal Consumption Expenditures price index increased by 6.6% for the year ending in March. At the same time, the Federal Reserve continues to consider interest rate hikes to combat inflation. Americans are feeling their buying power being greatly diminished, and they are likely going to place the blame on Biden and the Democrats.
• The country is drifting to the right: Gallup’s quarterly party identification poll shows a significant drift to the GOP since Biden’s election. In January 2021, 49% of respondents identified or leaned Democrat. By the end of the year, that number dropped to 42%. Meanwhile, respondents who identified as Republican jumped from 40% to 47% over the same time period. We’re already starting to see this shift in off-year elections in places like Virginia, where Republican Glenn Youngkin won the governor’s race.

However, here are a few reasons why Republicans should not be rejoicing just yet:

• It’s only May. A lot can happen between now and November, especially with a volatile economy, the war in Ukraine, and abortion being thrust into the national conversation again as a result of the Supreme Court opinion leak this week.
• Redistricting helped Democrats for once. I was shocked that Republicans did not gain more seats in the most recent redistricting process. Despite Republicans controlling 62 of 99 statehouse chambers, and traditional Democratic strongholds like California, New York, and Illinois losing congressional seats as a result of the 2020 Census, there is expected to be a net increase of 11 Democratic-leaning seats compared to the old Congressional maps, according to FiveThirtyEight. This can largely be attributed to more states adopting non-partisan redistricting commissions that are making races more competitive, but it is also the result of several GOP-leaning legislatures getting a little too greedy with their gerrymandered maps. State courts in swing states like North Carolina, Pennsylvania, and Ohio threw out or curtailed redistricting plans that would have disproportionately benefited Republicans. On the flip side, Democratic legislatures passed equally gerrymandered maps in states like New York. Some of these Democratic gains may be clawed back as courts throw out these maps as well, but it will likely not be enough to shift the landscape in Republicans’ favor.
• There are not that many competitive House seats for Democrats to lose. Despite winning the presidency in 2020, House Democrats surprisingly lost thirteen House seats that year. That means there are only a few vulnerable Democratic seats left for Republicans to pick off this year. Republicans will have to play defense in more House races.
• Democrats may still keep the Senate. They only have to defend 14 (mostly safe) Senate seats. Arizona, Georgia, and Nevada seem to be the most likely states where Republicans will pick up a seat, but Democratic incumbents are running in all three. Meanwhile, Republicans are defending 21 seats. The races to replace retiring Republican senators in Ohio (Rob Portman) and Pennsylvania (Pat Toomey) will likely determine the Senate majority, so keep a close eye on those elections in November.

What does this mean for startups?

• Now is the time to start making some new friends. House Energy and Commerce Committee Ranking Member Rep. Cathy McMorris Rodgers (R-WA) and House Science, Space and Technology Committee Ranking Member Frank Lucas (R-OK) are about to become far more popular in San Francisco and with the startup community. As the expected chairs (or even more influential roles in party leadership) of these important committees that oversee a number of issues relevant to startups in our ecosystem, McMorris Rogers and Lucas are set to be in the middle of important debates around semiconductor manufacturing, electric vehicle regulations, the future of spaceflight, and more. Startup founders should start making inroads with ranking members like McMorris Rodgers and minority staffers on committees of jurisdiction.
• Companies should reevaluate their cadre of lobbyists. For the last two years, most companies have relied on lobbying firms with deep ties to Biden, Senate Majority Leader Chuck Schumer, and House Speaker Nancy Pelosi. Former staffers of these DC stalwarts benefited greatly from their previous bosses’ return to power. Moving forward, companies should reevaluate their roster of firms and lobbyists to see if they have ties to Senate Minority Leader Mitch McConnell, House Minority Leader Kevin McCarthy, and committee ranking members like McMorris Rodgers.
• Don’t plan on the US government solving any big problems for two years. A Republican majority in one or both houses of Congress along with Biden as a lame duck in the White House means nothing is going to get done until 2025.

As mentioned, a lot can change between now and November, but it is a good time for startups to do a gut check and start to build out their resources and capacity to influence a Republican Congress in 2023. You don’t want to be caught out in the cold on November 9th. It could be a very long two years for your company if you don’t take steps now to prepare for a Republican majority.

Gavin Mathis is the Communications and Government Relations Partner for venture capital firm Prime Movers Lab, which invests in breakthrough science startups that are transforming billions of lives.

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation, and agriculture.

Sign up here to subscribe to our blog