“In the wake of last week’s elections, one thing both Republicans and Democrats now agree on is the new buzzword in DC is ‘affordability.” — Howard Schweitzer, CEO, Cozen O’Connor Public Strategies
The Cozen Lens
- Despite the Democrats’ convincing performance in last week’s elections, the clear takeaway for next year’s midterms is that the victor will likely be whoever sells a more convincing narrative on addressing widespread discontent, particularly around affordability.
- Secretary of Defense Pete Hegseth discussed a new effort to reform the Pentagon’s procurement process in a speech on Friday.
- Even as congressional leadership’s attention has been consumed by negotiations over the government shutdown, efforts to advance a series of key legislative priorities unrelated to government funding are continuing apace among rank-and-file lawmakers.
Post-Election Takeaways for 2026 (and Beyond)
Country Ravaged by Blue Wave. Nationwide, Democrats romped in the 2025 elections.
- Regardless of what office was on the ballot, candidate, or location, Democrats had a banner night. In Virginia, Abigail Spanberger won the governor’s race by the largest margin for a Democrat since 1961. In the state’s House of Delegates, Democrats won the largest majority they’ve had since the 1980s and ousted the body’s longest-serving delegate. Jay Jones, the subject of a nasty texting scandal and running against an incumbent, still managed to win the attorney general’s race and even outperformed Kamala Harris’ performance in the state last year.
- New York and New Jersey, respectively, were home to the first- and second-largest swings to the right from the 2020 to the 2024 presidential election of any state. Polling showed a tight race for the latter’s gubernatorial race this year. Nevertheless, Democrat Mikie Sherrill prevailed easily by margins reminiscent of the anti-Trump backlash in 2017 and the party picked up a supermajority in the state’s legislature. In the Big Apple, democratic socialist Zohran Mamdani came out of nowhere and rose to defeat former governor Andrew Cuomo in both the primary and general elections, winning the latter this month with an absolute majority of votes cast.
- The Democrats’ edge extended to non-traditional contests on the ballot as well. Proposition 50 in California, which would permit the state to gerrymander their congressional districts in response to Texas, passed easily. Three liberal members of the Pennsylvania State Supreme Court were retained easily, locking in a left-leaning majority in one of the most important swing states until 2029 at the earliest. Democrats even picked up two seats on the Georgia Public Service Commission, a first since 2000. In Maine, a ballot measure constraining absentee voting was shot down and a red flag gun law so extensive it even divided Democrats passed.
2025 Takeaways for Democrats. A series of data points teaches valuable lessons about how the party should fight going forward — in short, it remains the economy, stupid.
- In New York, democratic socialist upstart Mamdani ran a campaign focused on a single word — “affordability” — and the challenges brought by the rise in the cost-of-living in America’s largest city. To the south, moderate and former veteran Sherrill ran on a similar message and promised to declare an emergency to contain spiking electricity costs on day one. Around the country, Democrats from different political persuasions promising different policies all honed in and stayed devotedly focused on a single topic: kitchen-table issues. This both reflects the ongoing strength of the still-continuing inflation backlash and indicates that the party should stay focused on economic issues over others.
- Specifically, energy costs rose to the fore in a way that suggests risk to the GOP’s AI-first and fossil fuel-heavy agenda. Besides the aforementioned Sherrill’s energy emergency, Spanberger also decried how new facilities in “Data Center Valley” in Virginia meant that tech companies were offloading higher prices onto households. In a race seemingly designed to be as uninteresting as possible, two Democrats won seats to the Georgia Public Service Commission and energized people to care by calling out high utility rate increases.
2025 Takeaways for Republicans. The results may have been disappointing for the GOP but they can take heart in the fact that the Democratic Party is still unpopular and off-year cycles are increasingly meaningless in predicting presidential years.
- When’s something too good to be true, it usually is. 128 of Virginia’s 133 counties shifted left this month. The primary reason for the party’s dominating success is not because the 2024 electorate is necessarily having regrets — it’s because a different electorate showed up. As the new party of the white, college-educated crowd, Democrats now have a structural advantage in low turnout elections. The voters making up the Democratic base are more likely to consistently show up. Although off-year elections share a similar dynamic as midterms, meaning that this evidence suggests Democrats may have a good 2026, it doesn’t necessarily say much about what’s coming in 2028.
- The simultaneous wins of Mamdani and moderates could indicate the presence of a healthy, big-tent coalition. Less generously, it could also indicate the lack of a coherent policy vision and consensus about the direction of the path going forward. The party has no clear leader. Even if Trump’s numbers are looking bad, the Democratic Party’s are arguably looking worse: overwhelmingly described as “weak, woke and out-of-touch.” After all, Democrats’ primary strategy over the past decade has been to declare that they are not Donald Trump and they now possess a losing record. That said, Republicans cannot become complacent. Trump will be off the ballot in 2028 and the GOP needs to find a way to convert a multi-racial, low-turnout coalition into Republican faithful going forward. More immediately, culture war-heavy attacks alone cannot deter voter frustration about the economy and country as a whole.
Defense Acquisition Reimagined
Major Changes. In his remarks to an audience of defense industry executives last Friday, Secretary of Defense Pete Hegseth announced a new vision for procurement at the Pentagon.
- The Department of Defense (DOD), also now known as the Department of War, is replacing its Defense Acquisition System with a new Warfighting Acquisition System. Hegseth emphasized the speed of delivery as a priority and said that the new processes would cut timelines that had lasted three to eight years down to one year. “No more endless delays or bureaucratic gridlock,” Hegseth promised. “Speed and volume will rule.”
- He warned that defense contractors that fail to meet new expectations may “fade away” but also struck a positive tone. “I’m not here to punish. I’m here to liberate,” Hegseth said. “I’m not here to reform, but to transform and empower. We need to save the bureaucracy from itself.”
- While Hegseth may be the face of procurement reform, Deputy Secretary of Defense Stephen Feinberg is a key figure. Feinberg “is driving the whole ship” and “all roads lead to the deputy secretary,” an anonymous source told
Key Reforms. A memo and Acquisition Transformation Strategy released by the Pentagon provide details of the DOD’s new approach.
- The memo replaces the Pentagon’s system of program executive offices that manage acquisition with new portfolio acquisition executives (PAEs) who would have authority over decisions such as making tradeoffs between cost, schedule, and performance. The new system includes fixed terms for the PAEs, performance-based compensation, and scorecards to track PAE performance from need to delivery of a new capability.
- The memo also describes a new Economic Defense Unit that will be responsible for the creation of a “playbook of modern commercial contract and agreement structures.” In his speech, Hegseth said that the defense sector would have new incentives to meet production goals and invest in capacity.
What’s Next. The Pentagon has set a rapid timeline for implementing acquisition reform.
- The memo directs the under secretary of Defense for acquisition and sustainment to issue guidance within 30 days and the military departments to provide implementation plans within 60 days after that point. It also mandates new contracting guidelines within 180 days.
- Congress is also considering changes to Pentagon procurement. Both the House and Senate versions of the National Defense Authorization Act (NDAA) include provisions on this topic. Hegseth’s new policies may inform the final NDAA. Senate Armed Services Committee Chair Roger Wicker (R-MS) has applauded the move. In a statement, he described the reforms as a “game changer” and noted that “we look forward to implementing these priorities in the next National Defense Authorization Act.”
Legislating During the Shutdown
What Must Pass. Shutdown or no shutdown, Congress still needs to clear a handful of so-called “must-pass” bills before the year is up, and key lawmakers have continued to make progress toward that end despite the funding standoff over the past month.
- A top priority for lawmakers (outside of government funding) is passage of the annual defense policy bill otherwise known as the National Defense Authorization Act (NDAA). The House narrowly advanced its version of the bill back in September, but action on the Senate’s version was delayed into October. Even so, senators were able to pass the bill by a wide bipartisan margin amidst the chaos of the shutdown last month and bipartisan negotiations in both the Senate and the House over a compromise product are ongoing.
- Helping make all of this possible is that, notwithstanding the House’s extended shutdown recess, many members remain in town, paving the way for key negotiations both between members, as well as with stakeholders, throughout the shutdown. House Armed Services Committee Chair Adam Smith (D-WA) said last week that he believes the two chambers could reach a compromise agreement on the NDAA by the end of the month, teeing up a vote on the final product before Christmas. The biggest issue negotiators will need to resolve is the topline spending level; the Senate pinned its NDAA topline at $913.9 billion, roughly $31 billion above the House’s ask. A number of House-passed amendments to the bill pertaining to healthcare and other non-defense priorities will also need to be addressed in negotiations.
- In addition to the NDAA, the other must-pass issue for Congress to address is FY26 government funding, something that’s been inherently tangled up in the politics of the shutdown. The new stopgap measure that will fund the government through January 31st also includes a three-bill package that would include the full-year FY26 Agriculture, Legislative Branch, and Military Construction-VA appropriations bills. Senate leadership hopes that by including this package in the deal to reopen the government, it will pave the way for negotiations over the remaining nine full-year appropriations bills. Senators are eyeing the Defense, Labor-HHS-Education, and Commerce-Justice-Science appropriations bills as a potential post-shutdown package, although there’s significant uncertainty as to the feasibility of such an effort.
Congress’ Wishlist. While a number of non-must-pass legislative efforts have been derailed by the shutdown, others have been given room to breathe, giving lawmakers a chance to make progress on a handful of longtime priorities.
- The Senate’s progress on a crypto market structure bill is a testament to lawmakers’ continued interest in advancing wishlist items during the shutdown. Late last month, discussions over the Senate Banking Committee’s portion of the market structure bill were revived less than two weeks after a rift erupted between the two parties over the regulation of the decentralized finance industry. A series of meetings between key industry players and Banking Committee members helped restart the talks. A separate set of negotiations in the Senate Agriculture Committee over the commodity-related portion of the bill have continued throughout the shutdown. Leaders on both committees are optimistic that they can mark up their respective sections of the bill before the year is up.
- Over in the House, a bipartisan hearing and related negotiations over housing legislation were postponed last month due to the government shutdown. Even so, progress on a housing bill isn’t dead. Following the Senate’s passage of the ROAD for Housing Act, a comprehensive bill that would streamline certain federal regulatory barriers around housing, particularly manufactured homes, attempt to expand financing for affordable housing, and incentivize local zoning reform, House lawmakers are searching for a compromise product. Punchbowl News reports that staff on the House Financial Services Committee plan to negotiate the scope of the bill with the Senate as part of the ongoing talks over the NDAA, the vehicle the Senate used to pass the housing bill. Should those talks fail, members remain optimistic that they can still eventually move a housing bill as a stand-alone measure.
- A handful of other longer time horizon efforts in the House have been slowed by the shutdown but won’t be left for dead. In a conversation last week with Punchbowl News, House Transportation and Infrastructure Committee Chair Sam Graves (R-MO) outlined his plans for the committee to advance a surface transportation reauthorization bill as soon as this spring. According to Graves, the committee is continuing to work on the bill throughout the shutdown although a markup is expected to wait until early 2026. The committee also continues to work through legislation that would overhaul the Federal Emergency Management Agency.
