A year ago, Republicans scored impressive victories for president, Senate, and House. President George W. Bush planned an ambitious second-term agenda based on Social Security reform, tax reform, and making permanent his first-term tax cuts.

Now much of the GOP political capital has been lost. With only a year before the 2006 midterm elections, Republicans are sweating their ability to hold the House and the Senate. Democrats have hit the trifecta through Iraq, gas prices, and Katrina (not to mention House Majority Leader Tom DeLay’s recent indictments).

In this report, I look at the current political scene to see how the tide has turned against the GOP and what this portends for the upcoming midterm elections. Based on these developments, Democrats have an opportunity for major gains in 2006.

In horse racing, a trifecta refers to a wager specifying the exact finishing order of the top three horses. These bets are extremely difficult to win, but yield a high rate of return when successful.

Events over the past year have put Democrats in a position where the stars are lined up for major political gains. Historically, the greatest losses for the party controlling the presidency have taken place at the six-year point. This second-term jinx has plagued presidents over the past 50 years and been a source of recovery for the opposition party. If Democrats play their hand effectively, the 2006 midterm elections may spell the beginning of the end of the Bush administration

The Iraq war continues to defy expectations of a smooth transition to domestic rule. Rather than calming local nerves, the formation of an Iraqi government has become an additional source of conflict among Iraqis. Fights over oil, religion, and political power have undermined the effectiveness of the new government. Sunni, Shiite, and Kurdish rivals are jockeying for control of oil and land, and each has different objectives concerning the role of religion in civic life.

Suicide bombs go off each day, and basic necessities such as food, water, and electrical power are unmet. In this situation, it is hard for new public authorities to claim credit for success and instill confidence in the Iraqi people. The cycle of violence continues, and it is not clear how political order can be restored.

The classic political solution in divided societies is federalism and decentralization. Local areas gain autonomy and each group is able to control its own destiny. However, in Iraq, a federal solution will involve delegating power to the Kurds in the North, Shiite Moslems in the South and East, and Sunnis (Saddam Hussein’s former power base) in the center of the country around Baghdad.

This solution is acceptable to the Bush Administration because it means a de facto Islamic Republican in the Southeast under the control of Shiites friendly with Iranian mullahs, and reconciliation in the greater Baghdad area with members of Saddan Hussein’s former political party.

In addition, this type of geographic solution is not ideal from the standpoint of many Iraqis because oil reserves lay primarily in areas controlled by the Shiites and the Kurds. The resulting inequity based on oil money will doom Sunnis to a future of poverty. Fear regarding this scenario emboldens many locals to keep fighting because the economic and social consequences are so draconian from the standpoint of particular groups.

Unless the administration can find a way to get local factions to share power and oil revenue, Iraq is facing a society that will never be able to work together and live in peace. The hostilities will continue, America will spend $80 billion a year, and our troops will face high levels of injury and death.

At the same time that Republicans are facing intractable foreign policy challenges, gas prices have spiked upwards. In some places, they have gone over $3 a gallon. With the typical love affair Americans have with their automobiles, trucks, and SUVs, this price increase has hampered commuting, weakened consumer confidence, and reduced money available for leisure activities.

This winter, Americans will face record home heating costs that will complicate making ends meet for many people. Poor people and senior citizens may run short of funds to pay heating costs, and this will lead to negative stories about the administration.

The risk for Republicans is that the twin problem of high gas prices and high heating costs will undermine public confidence in their ability to manage government. Historically, Republicans have been seen as more adept managers of government than Democrats. But national public opinion polls now place Democrats on a level footing with Republicans on this crucial competence measure. Unless Republicans can turn this around, Americans may cast a pocketbook vote against their party in 2006 that will cost them a number of seats in the House and Senate.

The poor governmental response at all levels (city, state, and national) in the aftermath of hurricane Katrina has led to widespread suffering on the part of many people in Southern states. Large parts of Louisiana and Mississippi have seen the loss of electricity, water, food, and homes. It will cost billions to repair the damage caused by this storm.

National public opinion polls show that Bush’s job approval rating has dropped below 40 percent and is at the low point of his presidency. The president who received widespread praise for his handling of the September 11, 2001 terrorist attacks has come across as insensitive and incompetent.

These perceptions are very damaging for the GOP because it undermines Republican claims of managerial excellence and caring about working people. During the 2004 presidential campaign, about as many people saw Bush as Democrat John Kerry caring about ordinary people. Today, however, many are questioning these views and wondering who the GOP represents: the little guy or wealthy companies and contributors. These impressions damage Republican prospects in the upcoming congressional elections.

The indictment of House Majority Leader Tom DeLay represents one more risk for the Republican party. For more than a decade, DeLay has been the money-man of the GOP. He is the one who enforced party discipline, chastised D.C. lobbyists for hiring defeated Democrats, raised corporate money, and attacked the opposition party.

His indictment on charges of money laundering and campaign finance violations removes a pillar of GOP clout and gives Democrats an opportunity to run against Republicans as the party of corruption and cronyism. Bush’s tendency to appoint loyalists to high Cabinet positions and to fill Supreme Court vacancies with old friends reinforces traditional impressions of the GOP dating back to Richard Nixon and Watergate.

Between the DeLay indictment, charges Senate Majority Leader Bill Frist profited from insider information in stock trading, the pending trial of Republican lobbyist Jack Abramoff, and lucrative government contracts for Halliburton, the GOP is vulnerable to Democratic attacks on their governing approach and personal integrity.

Democrats have their best shot in nearly a decade to reverse their declining political fortunes and regain clout in the House and Senate. Through the combination of Iraq, gas prices, Katrina, and the DeLay indictment, they have a number of issues that could work to their political advantage.

What Democrats need to do is focus public attention on poor Republican performance and explain how they would handle Iraq, gasoline, and disaster preparedness. It will not be enough to sit back and throw darts at Republicans. As Newt Gingrich demonstrated in 1994 with his Contract with America, the opposition party must explain what distinguishes them from Republicans and how they would handle the big issues of the day. They must seize the agenda, define problems in advantageous ways, and run grass-roots campaigns.

If they do this, they will be in a strong position to compete effectively in 2006. Their candidates will do well, and prospects to take control either of the Senate or House will rise dramatically. Historically, the Senate has switched party control more frequently than the House. So the logical strategy for Democrats is to focus on competitive Senate races, and hope through a combination of beating a few incumbents and winning some open-seat elections, that they can turn the GOP margin of 55 to 45 in their own favor.

Taking the House is more of a long-shot due to incumbent advantages and the tendency for voters to return known names back to office. In recent years, the House incumbent re-election rate has been around 95 percent (compared to 80 percent for Senate incumbents). Unless Democrats can sweep all the open-seat House races, it will be difficult for them to regain a majority in that chamber.

The most important thing for Republicans is to focus on performance. That is the bottom line for most voters. Hurricanes, war, and high gas prices cannot be spun. Performance will be measured by the extent to which Republicans deliver results. If in six months, they have shelter and electrical power, the administration can claim victory and say it effectively dealt with the country’s worst natural disaster. However, if people’s fortunes have not improved by summer, 2006, critics will condemn the ineffectiveness of the national government and its insensitivity to people’s suffering.

On Iraq and gas prices, Republicans face a similar challenge. It is not a question of Bush giving more speeches and trotting administration officials out to talk about how well things are going. There are objective indicators of how each front is going, and those measures will signal either success or failure.

In Iraq, for example, one clear indicator is number of soldiers killed or injured. Another is how much America is spending. Still another is how many Iraqis have stable and reliable electrical service (not to mention food and water).

Gas prices that remain at current high levels will be devastating for Republicans. If people can not afford to drive to work or heat their homes, GOP losses in 2006 will be sizable. In the end, performance will trump spin, and voters will judge the actual results that are delivered.