As Senators-elect Reverend Raphael Warnock and Jon Ossoff are sworn-in after certification of the Georgia elections, Democrats are poised to assume the majority in the Senate, which, along with their control of the White House and the House of Representatives, significantly changes the policy-making landscape in Washington and the ability for President-elect Biden and Democrats in Congress to move their policy priorities forward over the next two years. This report will discuss potential impacts of this political shift on the federal policy agenda, updating the forecast on key policy issues contained in Akin Gump’s 2020 Post-Election Outlook published in November 2020.
In light of these events, we explore in more detail below: (1) nominations and key policy matters, such as COVID-19 relief, tax, climate change, health care, antitrust, immigration, trade, telecommunications, financial services, privacy and oversight; and (2) procedural matters, including reconciliation, the Congressional Review Act (CRA), filibuster reform and committee composition. With respect to anticipated efforts to utilize the reconciliation process to implement the Democratic policy agenda, we note the procedural complexity of this approach. For instance, successfully moving legislation through reconciliation requires that both the House and Senate pass budget resolutions containing specific budgetary instructions for authorizing committees and that the reconciliation legislation contain only revenue and spending measures. Thus, enacting policy changes in reconciliation will be challenging unless those changes specifically contemplate revenue and spending.
What remains to be seen is the political tone the two parties will attempt to strike in the wake of the closely-contested 2020 elections, impeachment proceedings, the presidential transition and in the lead up to the 2022 elections. That tone, and the resulting ability of the parties to reach any measure of bipartisan agreement, will have an enormous impact on whether and how policy priorities of either party are able to move forward to enactment over the next two years.
A Democrat-controlled Senate is likely to prioritize quickly confirming nominees to the Biden administration so the President has his chosen officials in place as soon as possible. Additionally, some nominees that would have faced opposition in a Republican controlled Senate may now have sufficient support to be confirmed absent any defections by members of the Democratic caucus.
While the anticipated focus on COVID-19 response and economic relief is not new, a Democrat-controlled Senate makes it more likely that Congress will consider additional funding beyond the “down payment” included in the package enacted in December.
This is likely to take the form of additional funding to provide resources to federal, state and local governments to respond to the virus and distribute vaccines, as well as a significant economic stimulus along the lines of the $2 trillion “Build Back Better” plan the Biden campaign proposed and the $1.5 trillion pared down version of the “Heroes Act” the House passed last fall.
With the barest majority including Vice President-elect Kamala Harris, filibuster changes are highly doubtful. Sen. Joe Manchin (D-WV) has publicly expressed outright opposition to a filibuster rules change, and several other Democratic senators have expressed reservations about such a change. As a result, any filibuster changes are currently short of support of a majority of senators given united Republican opposition. However, the mere threat of filibuster reform may persuade some moderate Republicans into negotiating and working with Democrats on bipartisan legislation without an official rule change. With the filibuster rule likely safe for now, legislation not considered through the reconciliation process will require sufficient bipartisan support in the Senate to reach the 60-vote threshold to conclude a filibuster. Absent that, and notwithstanding Democratic control of the House and Senate, Democrats will not have free reign to move their policy agenda forward.
Mirroring the 2020 election results, in 2001 the Senate stood at a 50-50 split with an incoming Republican administration. In a moment of unprecedented bipartisanship, congressional leaders negotiated a deal allowing both parties to hold an equal number of Senatorial committee seats and imposed mechanisms for allowing legislation and nominations gridlocked in committees to be discharged to the Senate floor. In today’s political climate, it is unclear if Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Mitch McConnell (R-KY) will follow that precedent and reach such an agreement. While some Democrats have signaled interest in a similar accord, others are calling for more seats on committees having won majority control of the chamber thanks to Vice President-elect Harris’s ability to break tied votes in favor of Democrats. How the party leaders address this issue is likely to influence the political tone, if not opportunities for bipartisanship, between the two parties as the 117th Congress gets underway.
Control of the Senate provides the opportunity for Democrats to use reconciliation to move their tax priorities (see reconciliation discussion below). Notably, reconciliation comes with its own limitations such as being limited to revenue and mandatory spending measures without additional rules changes, needing progressive and moderate wings of the Democratic caucus to unify around overall revenue targets, and keeping any policy changes revenue neutral beyond the 10-year budget window.
While razor thin margins in both the House and Senate likely will prevent President-elect Biden from moving on the more progressive aspects of his tax agenda, reconciliation could be used to move tax and spending elements of COVID-19 relief, infrastructure or health care proposals.
Democrats controlling the Senate will also mean that Sen. Ron Wyden (D-OR) will become the Chairman of the Senate Finance Committee, likely spotlighting priorities such as market-to-market taxation of certain financial products, tightening international tax rules, increasing the low-income housing tax credit and reforming current rules around the taxation of cannabis.
President-elect Biden campaigned on addressing climate change, and among his earliest nominations selected John Kerry to serve as climate czar for the incoming administration, underscoring how the president-elect has prioritized the issue. Moreover, in the last two years, Democrats in both the House and Senate led working groups to develop comprehensive climate legislative proposals that, among other elements, provide a framework for a 100 percent clean energy economy with net zero carbon emissions by 2050. A number of the provisions contained within the comprehensive proposals, including tax credits for various clean energy sources, could be candidates for consideration under the budget reconciliation process that requires a simple majority rather than 60 votes for adoption in the Senate. While these Democratic proposals stopped short of calling for a carbon tax, Democrats likely will seek to use their newly unified control of Congress to put a price on carbon, potentially through the reconciliation process. Separately, expect the economic stimulus package discussed above to allocate significant funding toward climate-related infrastructure and projects. In addition, expect other committees to address climate change in legislation they consider during the 117th Congress (see, e.g., financial services discussion below).
Democrats will have the option to use the reconciliation process to advance some of their health care priorities by a simple majority in the 117th Congress. We expect Democrats to work with the House and Senate parliamentarian to determine which of the following priorities could be considered in reconciliation legislation: drug pricing proposals (e.g., allowing Medicare to negotiate prescription drug prices); expansion of income eligibility for Affordable Care Act (ACA) premium tax credits; increasing the size of ACA premium tax credits; allowing Medicaid-eligible individuals in non-expansion states to receive premium tax credits; increasing the Medicaid Federal Medical Assistance Percentage (FMAP) rate; providing additional Medicaid resources to U.S. territories; increasing the Consolidated Omnibus Budget Reconciliation Act (COBRA) premium subsidies; creating a public option or Medicare early buy-in plan; and investing to strengthen health care system infrastructure and preparedness. Democrats may advocate including some of these policies, such as an FMAP rate increase and increased COBRA premium subsidies, in a COVID-19 relief package. Importantly, any attempts to move forward health care or other policy priorities via reconciliation must adhere to strict procedural requirements governing that process, particularly the condition that such proposals must deal directly with taxes and mandatory spending.
While Congress will continue to target perceived anticompetitive conduct and mergers by tech platforms, as well as competition issues in other spaces, expect greater scrutiny and legislative movement on antitrust with a Democratic majority in the Senate. Sen. Amy Klobuchar (D-MN), the incoming Chair of the Senate Judiciary Antitrust, Competition Policy and Consumer Rights Subcommittee, is likely to take a different approach than outgoing Chair Mike Lee (R-UT), who will remain as the subcommittee’s top Republican. Sen. Klobuchar has described the “outsized power” of Big Tech as one of her top priorities in the 117th Congress, including boosting the authority of antitrust agencies—an approach endorsed in a report by the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. Further, Sen. Maria Cantwell (D-WA), incoming Chair of the Senate Commerce, Science and Transportation Committee, has vowed to address unfair and abusive practices by tech platforms with respect to the local news industry.
advance. While President Biden intends to send comprehensive immigration reform legislation quickly to the Hill, congressional Democrats are expected to focus on moving piecemeal reform bills. Those with bipartisan support stand a chance of enactment if a compromise with Senate Republicans can be reached. Legislation addressing the “Dreamers” is a top legislative priority for Democrats and can likewise draw strong bipartisan support. Additional bipartisan initiatives may include providing green cards to essential health care workers, reforming the agricultural guest worker program, and removing the per country caps on employment-based visas. Congress also faces a deadline of June 30 to reauthorize and potentially reform the EB-5 investor visa program.
The change in the Senate will not dramatically change the trade policymaking landscape given the prominent role played by the Executive Branch/ the Office of the United States Trade Representative (USTR) and bipartisan support for key issues like toughness on China and efforts to enhance domestic production in strategic technologies and protect the associated supply chains. However, the change in Senate control will likely have consequences for some expired trade programs, including the Miscellaneous Tariff Bill (MTB) and Generalized System of Preferences (GSP) programs, both of which expired at the end of 2020. While there were bipartisan negotiations to try to extend these programs, the programs lapsed. Democrats are now in a stronger position to secure the changes they sought, like making GSP benefits for developing countries conditional on their adoption of policies to economically empower women, protect the rule of law, and prevent corruption. They also will play a more active role in pushing legislation to deny imports tied to forced labor in Xinjiang, China, which stalled at the end of last Congress. Prospects for President-elect Biden’s trade nominees are also improved, though were not considered as controversial as others.
Incoming Senate Commerce, Science, and Transportation Committee Chair Maria Cantwell (D-WA) is likely to take a different approach in some areas of telecom policy than outgoing Chair Roger Wicker (R-MS). Expect a shift away from the lighter touch approach on issues like net neutrality and broadband regulation that Sen. Wicker favored. Additionally, Sen. Cantwell has been a vocal critic of spectrum policies the current Federal Communications Commission (FCC) has adopted, which, in her view, have wrongly favored commercial wireless uses over the needs of the transportation industry and national security. However, bipartisan consensus is possible on issues related to closing the digital divide, connecting students during the pandemic, winning the race to 5G and revisiting Section 230. Lastly, it is likely Sen. Cantwell will prioritize confirming a third Democrat to the FCC, ending the current 2-2 deadlock. The new FCC majority is expected to revisit net neutrality, and reinstate Title II regulations for broadband service providers adopted under the Wheeler FCC and later repealed by the Pai FCC.
A Senate Banking, Housing, and Urban Affairs Committee chaired by progressive Sen. Sherrod Brown (D-OH) will have a different focus and tone than a committee run by conservative Sen. Pat Toomey (R-PA). With the gavel in hand, Sen. Brown will be able to make his mark on hearings and investigations that reflect his own, and the Biden administration’s, priorities. Among those key areas of focus likely will be affordable housing policy, re-invigorating Consumer Financial Protection Bureau (CFPB) and Department of Housing and Urban Development (HUD) enforcement of Fair Housing Act laws and regulations, review and oversight of Trump administration regulatory changes, climate change in the context of housing, transit and risk in the financial sector, and overall consumer protection. Serving as a backdrop for the entire agenda will be issues related to economic justice and civil rights. Yet the path from hearing, to markup, to the Senate floor will be complicated given the split on the Democratic side between more moderate members (Sens. Mark Warner (D-VA), Jon Tester (D-MT) and Kyrsten Sinema (D-AZ)) and more progressive members (Sens. Elizabeth Warren (D-MA), Brian Schatz (D-HI), and Chris Van Hollen (D-MD)). For instance, while Sen. Warren’s high profile bills—the Stop Wall Street Looting Act and the Accountable Capitalism Act—will more likely receive some attention, their ultimate prospects will be less certain given this philosophical divide. In this environment, and in a 50/50 Senate that generally does not allow for the use of reconciliation in the Banking Committee space, getting the more aggressive pieces of the President-elect’s agenda through the Senate will be a challenge. Nonetheless, the shift in majority control is likely to keep the financial services community on its toes.
Enacting a national privacy standard will continue to be a priority for the new Congress. Expect Democrats and Republicans to continue to build on the significant work accomplished in the last Congress. While the main areas of disagreement (e.g., allowing for a private right of action and state preemption) will remain, with an increasing number of different state privacy laws affecting interstate commerce, Members will continue to try to thread the needle on a federal privacy standard. The Federal Trade Commission (FTC) will continue to be key in this space as well. Sen. Cantwell becoming Chair of the Senate Commerce Committee will ensure President-elect Biden’s selection to run the agency will quickly advance out of the Committee and to the full Senate.
While the budget reconciliation process may be arcane, assuming that Congress can pass a Budget Resolution with “reconciliation instructions,” bills designed to address tax and mandatory spending can pass with 50 votes in the Senate. In other words, with Democrats’ Georgia Senate wins, President-elect Biden’s tax agenda is now a more viable possibility. So, too, the availability of reconciliation facilitates a substantial COVID-19 stimulus/recovery package that would have been more challenging with a deficit-minded Republican Senate majority. In the Senate, a reconciliation package is limited to 20 hours of debate, so Senators are unable to filibuster, and the legislation only requires a simple majority to pass. As with any legislation, should the House and Senate pass two different bills under reconciliation, they must conference and agree on one version of the text before sending the final bill to the President for signature.
Another thing to keep in mind: a reconciliation bill requires a reconciliation instruction; a reconciliation instruction requires a congressional budget resolution; a congressional budget resolution is available for each fiscal year; and Congress never passed a fiscal year (FY) 2021 budget. In other words, a Democratic Congress potentially has two bites at the apple this calendar year (2021) with opportunities to generate reconciliation bills associated with both a FY 2021 and an FY 2022 budget. This is the same pathway Republicans followed in 2017, when they used the FY 2017 budget resolution to attempt to repeal the Affordable Care Act and then later in the year used an FY 2018 budget resolution to pass the Tax Cuts and Jobs Act. While there is probably some reluctance early in the year with the economy still struggling to seek the tax increases proposed in President Biden’s tax agenda, Democrats may view things differently in the fall should the economy improve. Thus, a reconciliation bill early in the year could be used to provide stimulus, and should the economy improve, a second reconciliation bill can address some of the more substantial tax reforms sought by the President-elect and his congressional majorities.
The Congressional Review Act (CRA) is another tool likely to be used by the 117th Congress and the President-elect. Under the Administrative Procedure Act, making a formal regulatory change is difficult, as is unwinding one of those changes. The CRA provides a process for repeal of a final rule by a simple majority vote in Congress. In short, for those regulations issued in the waning days of the Trump administration (dating back to mid-late August), a resolution repealing the regulation can be introduced in Congress. If passed by the House and Senate and signed by the President, the regulation will be stricken from the books. This type of congressional veto, however, can be heavy handed because it prohibits any future administration from promulgating a substantially similar rule in the future. President-elect Biden may prefer to revise a rule through the more onerous rulemaking process rather than prevent his administration from promulgating different, but similar rules on a given issue.
Both parties attempted to use the CRA during the Trump administration. When President Trump took office in January 2017, he and the Republican-controlled Congress used the CRA repeatedly to repeal regulations promulgated at the end of the Obama administration, successfully reversing 17 rules enacted in the 114th Congress. Senate Minority Leader Chuck Schumer (D-NY) last fall likewise forced a CRA vote concerning Trump administration regulatory action affecting the Community Reinvestment Act. We should expect, when President-elect Biden is sworn in on January 20th, that he and Democrats in Congress already will have examined the laundry list of regulations issued at the end of the Trump administration that might be subject to the CRA, and seek to implement the procedure consistent with Democratic priorities.
The 116th Congress was already an active period for investigations of the private sector. Now, with both chambers of Congress under Democratic control and without the investigative foil of the Trump administration, we expect a further uptick in oversight of private companies and individuals as Democrats build the public case for their policy agenda. Companies in industries subject to Democratic policy reforms or that had significant interaction with the Trump administration on its key initiatives or programs are potential targets of inquiry from Congressional investigators.
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