The Presidential election is over, and we turn our attention to what impact it may have; it is important to keep in mind that we cannot fully understand the implication until we know who will control the Senate. Control of the Senate hangs in the balance with the outcome of the Senate races in Georgia. Control of the Senate even by the smallest margins matters. A simple one-vote Democratic majority defines and advances the Biden Administration’s agenda for the next two years. A Democratic majority in the Senate sets the legislative agenda, schedules debates and votes. This puts the Biden Administration in the driver’s seat. Much is written about the need for 60 votes to pass most legislation. However, Senate procedural rules are available to the majority (discussed below) to advance its legislative agenda without risking a Republican filibuster.

The Day One Agenda

The Biden Administration’s day one agenda starts on January 20, 2021, with the signing of an executive order freezing all pending regulations and executive orders across the federal government. The Trump controlled agencies are currently scrambling to finalize regulations before January 20, 2021 (inauguration day) to secure his policies. For example, the Department of Labor is rushing to finalize regulations affecting worker classifications (employee vs. contractors), and the Department of Homeland Security is racing to expand its authority and methods for collecting biometrics for various identification purposes.

Other Biden campaign promises in the “day one” category include introducing broad-based economic relief/stimulus legislation, rejoining the Paris Climate accord and the Iran nuclear agreement. The Administration’s intent to rejoin the climate accord and nuclear agreement can be initiated with executive orders. Formally rejoining these agreements will take months of behind the scene negotiations. Legislative action on a broad-based economic relief/stimulus will also require Republican support unless Democrats control the Senate. It is worth noting, every new administration has a reserve of political capital to spend with a new Congress. President-elect Biden signals he will use his political capital at the outset to push a stimulus/vaccine distribution bill.

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Regulatory Action
Looking ahead, the Biden administration will review the allocation of funds in the various COVID-19 related programs, including Operation Warp Speed, to prioritize funds for vaccine production, purchase, and distribution, and financial aid to the states that are stretched thin due to COVID-19. Also, the Biden Administration will review Federal and Treasury funding programs authorized by Congress via the three COVID-19 economic stimulus laws to identify programs with unspent funds. For example, billions remain in the Federal Reserve’s Main Street lending program and the paycheck protection program for small businesses. The Biden Administration will look at ways to restructure or repurpose unspent funds to provide broader economic relief to ailing businesses while Congress haggles over additional stimulus legislation.

Continuing with the regulatory theme, new agency heads will start a bottoms-up review of all Trump Administration regulations. Senate confirmation hearings on agency heads will begin in late January. Repeal or modifications of Trump regulations requires a formal public notice and comment process (much like writing new regulations) and will take months, even years to complete.

Regulatory areas that will receive early attention by the Biden Administration include:

• COVID-19 related legislation and vaccine funding and distribution,
• The Affordable Care Act,
• Energy and climate policies and emissions,
• Education and student loans,
• H-1B visa expansion,
• Worker classification and labor organizing regulations.

Legislative Action
Accomplishments on the legislative front will be challenging for the Biden Administration if Democrats do not gain control of the Senate. A simple Democrat majority in the Senate provides significant opportunities to advance the Biden Administration’s legislative agenda despite anticipated Republican opposition. 

With a simple majority, Senate Democrats can advance their tax and spending priorities using an arcane Senate rule called reconciliation. The reconciliation rules remove the requirement that 60 votes are needed in the Senate to end debate and move to a final vote. In other words, the artful use of the reconciliation rule blocks the minority party’s ability to filibuster legislation. Both political parties use the reconciliation process to pass partisan legislation. Most recently, the Republicans used reconciliation to pass the Tax Cuts and Jobs Act of 2017 with a simple majority vote.

However, the reconciliation rule has limitations. It is generally available to use once a year and requires a great deal of coordination and cooperation between House and Senate Democrats and the White House concerning priorities. Intraparty fights are quite common on legislative initiatives with broad national impact. Besides, the process is limited to legislation that directly impacts taxes and spending. For example, Democrats can use the process to advance Biden’s priorities like adding a public health care option to the Affordable Care Act, raising taxes on higher-income earners and corporations, economic stimulus, and moving a $1 trillion infrastructure bill fit. Biden Administration proposals that do not directly impact taxes and spending like emission standards, immigration, and trade may not fit into the reconciliation process, leaving Democrats to consider the “nuclear” option.

A simpler but more politically risky option under consideration by Democrats and the Biden Administration involves eliminating the long-standing Senate filibuster rule, which requires 60 votes in the Senate to move legislation to a vote--the “nuclear” option as it’s known in Washington. The rule has its genesis in 1806 and currently requires 60 votes to end Senate debate on legislation and move to a vote. The rule is designed to protect the rights of the minority party. The Senate eliminated the filibuster for cabinet-level confirmations and judicial appointments a few years ago. This maneuver opens the legislative flood gates for Democrats in the near term (assuming they win at least one of the Senate seats in Georgia) but poses risks to them when the political tables turn and Republicans gain control of Congress. President-Elect Biden supports repealing the filibuster rule if Republicans obstruct his agenda.

Without a Senate majority, Democrats will be challenged to move key pieces of their agenda without the support of a handful of moderate Republicans (about 10). Consensus will be difficult but not impossible on a handful of policies that can attract bipartisan support. With White House leadership, Democrats and Republicans may be able to find common ground on targeted economic stimulus/vaccine distribution, education funding, infrastructure improvements, and immigration reform. For example, an improving economy and jobs picture boost prospects for a bipartisan immigration deal involving a path to citizenship for migrants living in the US and children who are part of the Deferred Action for Childhood Arrivals program. A group of influential border and agricultural state Republicans is willing to explore a solution to these important issues. Most of these proposals will require months of difficult negotiations and require both parties to give and take a great deal. In comparison, President-Elect Biden’s proposals to raise individual and corporate taxes, add a public health option to the Affordable Care Act, and address climate change, are non-starters with Republicans.

At Boston Private, we continue to provide updates from the new Administration and Congress. Please contact your Boston Private representative with any questions.

Boston Private is pleased to announce a partnership with Doug Fisher, a Washington Policy expert, who will offer a series of insights into a number of reform proposals making their way through Congress.  Doug provides strategic insight into the political and policy developments in Washington which impact the wealth management business. Advising wealth management clients on business, tax, and retirement issues, he helps firms and their clients understand the legislative and regulatory landscape and how to maximize business opportunities.

Doug served as tax counsel to the U.S. Senate Finance Committee and led the development of the Roth IRA, Simple retirement plan, the health savings account, and the 529 college savings plan. He co-authored the Small Business Jobs Protection Act, the Balanced Budget Act of 1997 and the Health Insurance Portability and Accountability Act.

After serving on the Senate Finance Committee, Doug led Fidelity Investments’ federal government relations and public policy teams. During that time, he focused on financial services, tax, retirement, and health care policy impacting Fidelity and its clients.