Can it garner support from both parties?
New market analysis from Fitch Ratings indicates less ambitious legislative initiatives, with an eye toward bi-partisan cooperation. Visit here for details.
Fitch Ratings-New York-11 January 2021: President-Elect Joseph Biden will take office with a smaller Democratic majority in the House of Representatives than before the election and tiebreaker-control over the incoming Senate, which will be split 50-50 between Republicans and the Democratic Caucus following last week’s run-off elections in the two Georgia Senate races.
The Biden Administration’s immediate policy priority will be bolstering the federal government’s response to the pandemic and its economic consequences. Longer term, Fitch Ratings expects the administration to seek objectives that can garner support from both parties.
Additional Stimulus
Democratic control of both houses of Congress should help accelerate Cabinet confirmations and leadership appointments to key federal agencies. Fitch also expects the incoming administration to follow through on stated plans to seek an additional stimulus beyond the package passed in late December, likely in the range of $700-800 billion. This would include funding for additional cash payments to individuals, a further extension to unemployment benefits, and housing security measures.
Beyond these immediate steps, President-elect Biden’s stated objective to work across the aisle means that the White House will likely seek legislation that can attract some level of bipartisan support, such as infrastructure spending or measures aimed at job creation. Once the new Congress passes its annual budget resolution, taxes, allocation of spending, and the debt ceiling can be addressed via budget reconciliation in a once-per-year, simple-majority vote. During this process, Democrats could, at the margin, pass tax credits or new spending in connection with existing mandates, but could not introduce new programs that would require discretionary spending. Given the filibuster option, this will constrain their ability to undertake more ambitious legislation that lacks support from Republicans.
Tough On China
Fitch sees other opportunities for bipartisan policy cooperation, most notably: extending a tougher stance on the nation’s commercial and trade relationship with China, particularly in connection with intellectual property; more stringent regulation on the largest technology firms; buildout of 5G networks; expanded housing programs; and reduced healthcare costs. We expect the Affordable Care Act to remain in place, barring an adverse decision by the Supreme Court, but efforts to introduce universal healthcare are unlikely to gain meaningful traction.
A simple majority in the Senate also will afford President Biden the ability to advance nominations to the federal judiciary, which he will likely prioritize as openings arise. Leadership appointments to federal agencies that require Senate confirmation will be similarly straightforward. As Fitch noted prior to the election, once President Biden’s appointees are in place, they will be in a position to return focus to enforcement of regulations in key sectors of the economy, tightening controls over areas including energy extraction, environmental standards, housing access, private equity and consumer financial protections. In foreign policy, Fitch expects the Biden Administration to prioritize rebuilding traditional alliances and de-emphasizing protectionist trade measures outside of the China context. On the domestic front, President Biden may rely on executive orders to reverse Trump-era policies in areas central to his agenda, such as immigration reform and environmental protections.
