The events from the week of January 4th, 2021, will significantly impact the political priorities for 2021. By winning two Senate runoffs in Georgia, Democrats are preparing to control a 50-50 Senate now that President Joe Biden has been sworn into office with Vice President Kamala Harris as the tie-breaking vote. The riot and invasion of the US Capitol on January 6th prompt members in both parties to determine what comes next in response to President Trump and his supporters; many will continue to serve in Congress, but any level of trust has been destroyed in the short-term.
Democrats are attempting to deal with each of these events as Joe Biden becomes President and governing with a united legislative and executive branch. It will not be easy – practically speaking, Kamala Harris will not spend ALL her time in the Senate chamber, but presiding over the most important business like COVID-19 relief and any narrow Cabinet appointment votes will be priorities. Within the first 100 days of any presidency, Biden and congressional Democrats have an ambitious plan to confront COVID-19, rebuild the economy, reopen schools, and pass infrastructure/climate legislation.
Additional COVID-19 Relief
Throughout his campaign, Joe Biden has made clear that eradicating COVID-19 will be his top priority. As states and healthcare providers manage the rollout of vaccines across the country, the Biden Administration will provide more direct federal support, guidance, and assistance to decision-makers in government and on-the-ground. Accelerating vaccinations is a crucial element to crushing the virus. The Biden Administration will also enhance research and development efforts to address any new COVID-19 variants and increase vaccine effectiveness.
We also expect a renewed focus on testing to expand testing capabilities and availability and contact tracing response to mitigate the spread. Earlier in the pandemic, lack of personal protection equipment (PPE) was a significant problem for businesses and individuals; ensuring a manageable and safe supply chain for these products will be key as we deal with any other impacts of the virus.
Government funding for many of these initiatives will be necessary; these are mainly bipartisan approaches, but the outcome could potentially mean a safer environment for the economy to reopen, while at a more consistent pace, to get the economy back on track.
The prevailing legislative vehicle to accomplish many of these COVID-19 and economic-focused goals appear to be a massive infrastructure investment effort. There are many political and practical reasons for this approach given the historically bipartisan nature of infrastructure; attracting Republican votes would help alleviate the pressure of the narrow vote margins mentioned above and send a strong message of unity to the country during these fragile times.
Infrastructure will be much broader than roads and bridges; it will encompass rail, aviation, water, clean/renewable energy, broadband, and climate issues. Congress and recent Administrations have focused on building consensus for this effort, but Biden and his team are betting that the COVID-19 pandemic, along with their majorities in Congress, can finally get this done. When Joe Biden was Vice President, he oversaw the American Recovery and Reinvestment Act (ARRA) implementation, the Obama Administration ‘stimulus,’ which shares these goals. The playbook will be similar, but there will be an extra aggressive push to get this victory sealed for President Biden.
The Tax Cuts and Jobs Act (TCJA), ‘Trump Tax Cuts,’ ignited a significant policy battle in the US around tax policy. The tax cuts ultimately contributed to a robust economy, which was halted by COVID-19 in March 2020. This legislation was passed with only Republican votes, and Democrats have vowed to overturn various parts of the law if they returned to the majority. One of the larger benefits to business was reducing the corporate tax rate from 35% to 21%. President Biden and other Democrat leaders pledged to raise the corporate tax rate to ‘pay for’ other domestic priorities like infrastructure, health care, education, etc.
Democrats will continue to look for ways to amend the TCJA, but given the slightest of majorities, it is unlikely they will be successful in raising the corporate rate. We would expect that other TCJA policies, such as the SALT limitation, a longtime target for Democrats, will be in greater danger of being reversed.
Procedural Advantage – Reconciliation
The Democratic congressional majorities allow them to use a ‘budget reconciliation’ tool, which affords them several advantages – mainly allowing for a simple majority vote (51 votes) in the Senate. It has been used recently to enact major parts of the Affordable Care Act by Democrats in 2010 and by Republicans in 2017 to enact the Tax Cuts and Jobs Act. There are several other rules associated with what policies are eligible for reconciliation, but the simple majority vote in the Senate makes it a very attractive tactic for Democrats looking to enact significant legislation in a short period of time.
President Biden is stepping into his position at an unprecedented time. He has a long history of working across the aisle in Washington and building relationships that allowed him to be an effective legislator throughout his career. Given the dynamics in DC and across the country, he will need to use all of those skills to confront and solve the significant challenges as he takes office.
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