2010 Midterm Elections: GOP Takes Hold of the House

2010 midterm elections article updated with latest results, potential impacts on the economy and details from President Obama's speech.

NEW YORK (TheStreet) -- Republicans took control of the House of Representatives in Tuesday's midterm elections, removing Nancy Pelosi as Speaker of the House in the process -- a sign that some Americans are losing patience with President Barack Obama as the economy continues to flag. The upstart Tea Party faction of the GOP played a key role in the change, enjoying the first victory for one of its candidates to a Senate seat in the process with Rand Paul's victory in Kentucky.

Republicans picked up 60 House seats, the largest House sweep since 1948, wiping out the Democratic majority. The GOP needed to pick up 39 seats to secure a majority.

Republicans now hold 239 seats in the House to 185 for the Democrats, with 13 seats still undecided.

In a speech Wednesday afternoon, Obama said he had a good conversation with John Boehner of Ohio Tuesday night, who will replace California's Nancy Pelosi as Speaker of the House.

Obama said he did "a lot of listening," and heard confirmation of what he'd already heard from people across America -- that Americans are frustrated with the pace of economic recovery, want their paychecks to go further, want jobs to be created faster, want to know their tax dollars are spent wisely and that their voices are not being "drowned out" by partisanship.

Tuesday's election results also led Obama to conclude that common ground must be found in order to make progress on the "uncommonly difficult challenges" that face the U.S. today, and that the government must focus on jobs, security, the future of America, reducing the deficit, clean energy, education, and investment in technologies to ensure America maintains a global competitive edge.

The most important contest is between America and its economic competitors around the world, Obama said, and the nation needs to be strong and united to meet the competition. "No political party has a monopoly on wisdom," the president said, reiterating his sentiment that he is "eager to hear good ideas wherever they come from."

Though no surprise, the reality of the Republican victory in the House has to be jarring for Democrats, who came out of the 2008 elections with a clear mandate for change but have seen a polarizing impact from legislative efforts to fix the health care system and institute Wall Street reforms as the economy's recovery continues to stumble forward. John Boehner of Ohio will replace California's Nancy Pelosi as Speaker of the House.

"We hope President Obama will now respect the will of the people, change course, and to commit to making changes they are demanding," Boehner said Tuesday evening.

The congressman took a congratulatory phonecall from the president after midnight in which Boehner told Obama his top priorities would be to create jobs and cut spending.

The Republican agenda will no doubt include extending Bush-era tax cuts, addressing long-term fiscal and economic issues facing the U.S., and possible changes to Social Security and Medicare.

Boehner said Wednesday morning at a news conference that the GOP would soon lay the groundwork for those spending cuts and for repealing controversial healthcare legislation.

"The American people have concerns about government takeover of health care," he said. "I think it's important for us to lay the groundwork before we begin to repeal this monstrosity."

Obama will spend the balance of this presidential term with a divided Congress; bipartisanship has been dubious, at best, so far in his term.

On the plus side for the Democrats, despite losing some ground in the Senate, the party kept its majority there with a key race in West Virginia going to the Democrats. Democratic Gov. Joe Manchin defeated his Republican counterpart John Raese. Also, in another high-profile race for the Democrats, Barney Frank easily won a return to the House for Massachusetts' 4th district, defeating Sean Bielat, a Marine Corps reservist.

The Republicans did make it interesting in the Senate, though. Russ Feingold, a three-term Senator in Wisconsin, lost his race against Republican Ron Johnson. And Blanche Lincoln, who played a big part in the structure of the historic financial reform legislation passed by Congress this summer, won't be back on Capitol Hill to participate in its implementation.

Lincoln, a Democrat, was ousted from her Senate seat by Republican John Boozman, formerly a member of the House. Lincoln introduced measures to address derivatives trading to the Dodd-Frank Wall Street Reform and Protection Act, but apparently lost favor in her home state for her support of health care legislation.

In the Pennsylvania Senate race, Republican Pat Toomey defeated Democratic Rep. Joe Sestak.

Democrats held onto 51 of the 100 seats in the Senate, with Republicans holding 46 seats; 3 Senate seats remain outstanding.

The Tea Party's influence was felt early and often on Tuesday. The night started on a high note for the upstart faction of the GOP with Paul's victory in Kentucky, and Marco Rubio taking a three-way Senate race in Florida.

Paul, the son of Rep. Ron Paul of Texas, looks to have won out over Democratic candidate Jack Conway, the state's attorney general. Paul is a Republican affiliated with the Tea Party and also known as a proponent of the gold standard.

Tea Party-backed Rubio defeated Gov. Charlie Crist, once a rising star in the GOP who ran as an independent after skipping the primary, as well as Democrat Kendrick Meek.

Other Senate races that went the GOP's way early on included Robert Portman prevailing in Ohio, and Dan Coats winning in Indiana in a race that took away a seat previously held by the Democrats.

The Tea Party did stumble in places, most notably Delaware, where the Senate seat previously held by Vice President Joe Biden was won by Democrat Christopher Coons over Christine O'Donnell, a Tea Party-backed candidate whose fitness for the job (or lack thereof) sparked considerable debate on the national scene.

Another bright spot for the Democrats was a Senate victory in Connecticut with Richard Blumenthal, the state's attorney general, defeating Linda McMahon, the Republican candidate and a political newcomer. The pair battled to assume the Senate seat being vacated by Democrat Christopher Dodd, one of the main architects of the Wall Street reform legislation.

In Washington, Democratic Sen. Patty Murray held a narrow lead on Republican rival Dino Rossi. There's a chance a winner won't be declared until Wednesday afternoon, the Wall Street Journal reported, as a large number of ballots were still to be counted from populous King County, which wasn't scheduled to report results until later in the day.

Senate races in Alaska and Colorado remain too close to call as ballot counting continues.

President Obama's former Illinois Senate seat was won by Republican Mark Kirk who defeated Democrat Alexi Giannoulias.

Other Senate races that were not so hotly contested included victories for Republican Senators Jim DeMint of South Carolina and Richard Shelby of Alabama, and for Democratic Senators Patrick Leahy of Vermont and Barbara Mikulski of Maryland.

The main question as the polls closed across the country Tuesday night continued to be how big a victory the Republicans would be able to pull off. The polls and pundits had been predicting for weeks that the House, which had all 435 seats up for grabs, would go to the Republicans. But the Senate was another story from the start.

Only 37 of the Senate's 100 seats were in play Tuesday. The Democrats hold a 57-seat majority with 41 Republicans and two independents rounding things out. While the GOP picking up the 10 seats needed to take control of the Senate wasn't out of the realm of possibility, it did present a daunting task given the breakdown of the individual races.

Even without getting the majority though, the Republicans made a big splash in the Senate, and they have the Tea Party to thank for it, in part. But Senate Majority Leader Harry Reid (D., Nev.), who Republicans were hoping to oust, won re-election over Sharron Angle.

Another race where the Tea Party was a factor is Alaska's Senate battle between Tea Party-affiliated Republican Joe Miller, write-in candidate Lisa Murkowski and Democratic candidate Scott McAdams.

In addition to the congressional midterm elections, 37 gubernatorial posts were being contested. In New York, the current State Attorney General Andrew Cuomo, a Democrat, defeated his Republican counterpart Carl Palladino.

In California, Democrat Jerry Brown was again elected governor, defeating ex eBay ( EBAY) CEO Meg Whitman.

Also in California, Democrat Barbara Boxer won her fourth term in the U.S. Senate, defeating Carly Fiorina, the former CEO of Hewlett-Packard ( HPQ).

Just two years after Obama won the presidency and the Democrats swept to power, the national mood has soured with unemployment still lingering around 10%. The gap between Wall Street and Main Street remains stark and has fueled much of public's discontent with the federal government, even though the Dow Jones Industrial Average is up more than 7% year to date. For instance, the big banks are for the most part back on their feet, yet many individuals are still struggling with jobless benefits running out and foreclosures continuing to mount up at a healthy clip.

Cramer's Take: Political Gridlock Is Bliss

The Republicans taking the House is generally viewed as favorable for Wall Street, as gridlock would likely ensue. But much has been made lately of how far the market has already come from its lows of the financial crisis, raising the question of how much higher equities can run without the economy showing real signs of recovery. The Federal Reserve is expected to unveil details of its next round of quantitative easing Wednesday, but it's running out of ammunition, so gridlock may not be such a boon this time around.

Entering Election Day, the Democrats had a 255-158 majority in the House with two seats vacant, and a 57-41 majority in the Senate with two independents rounding out the total.

-- Written by Michael Baron and Miriam Marcus Reimer in New York.

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