Washington Weekly: Trump-Biden Transition

U.S. Office of Public Policy, 13 November 2020

This Week

The House was out of session. The Senate confirmed a district court nomination and held several committee hearings ranging from bank regulation to the FBI’s investigation of the Trump presidential campaign in 2016 for alleged ties to Russia.

Next Week

Both the House and Senate will be in session and will resume negotiations over a COVID-19 stimulus bill as well as legislation to extend government funding beyond December 11, when it is scheduled to expire.

The Leads

COVID-19 Stimulus Bill. 

It seems like it has been months, rather than just two weeks, since disagreements on the composition and cost of another stimulus bill caused bipartisan negotiations to stall. Divisions remain as Congress returns to session, and there is a strong possibility that Congress will be divided next year (see below “All Eyes on Georgia”). This means that the current stalemate over funding will continue until one or both sides budge. Two new dynamics will affect the outcome for this bill, however. First, Senate Majority Leader Mitch McConnell (R-KY) will assume the role of lead negotiator for Republicans, replacing Treasury Secretary Steve Mnuchin. Second, positive news on the development of a vaccine shifts at least some of the stimulus focus to the need to distribute the vaccine when it is approved. This development could generate more public interest in the stimulus debate and greater urgency to these efforts. We would not be surprised if the renewed urgency to act on a long-awaited stimulus bill leads to a deal in the next few weeks that coincides with more positive news on vaccine testing and possible approval.

Trump-Biden Transition. 

The next nine weeks will be awkward in Washington as the presidential transition process tries to move forward under a cloud of legal challenges by the Trump campaign in various states. In the meantime, President Trump is likely to issue pardons, fire a few federal officials and make final decisions on various executive branch issues that are close to resolution, including new or revised regulations. At least some of these decisions will be reversed by a Biden administration. President-elect Biden accelerated his expected transition to office by naming a chief of staff (Ron Klain), while key cabinet officials (including the Secretaries of the Treasury and State) are expected to be announced in the next two weeks. While this transition may be complicated by the legal challenges, it will still move forward. There are legitimate systems in place for considering the legal challenges and for advancing any transition, and we are confident they will proceed in due time. The media is paying a lot of attention to transition complications and not very much to the process to consider legal challenges to elections and to ensure a productive transition. In the long run, the latter is more important than the former.

Other Issues

Narrowing Window on Tax Changes. 

If Republicans win one of the two Georgia Senate seats in January, it will be the final nail in the coffin for President-elect Biden’s tax policy proposals. Even if Democrats win both seats, they would only narrowly control the Senate with a 50-50 majority (Vice President-elect Kamala Harris would be the tie-breaker). Given the effective 60-vote requirement for most bills, Democrats still would have challenges passing major legislative priorities. If they are in the majority, Democrats could use a special process called “budget reconciliation,” which allows tax changes to pass with only a majority (instead of the more generally applicable 60 votes). But even this process would be difficult. Democrats would need unanimous support among their members, which would give individual senators significant leverage during negotiations. Take the example of potential changes to the estate tax. Senators Kyrsten Sinema (D-AZ) and Joe Manchin (D-WV) are both on record in favor of a repeal of the estate tax and would be able to block estate tax increases supported by other Democrats. This shows how powerful every single senator can be next year and how limited Democrats may be in what tax changes they could achieve even if they win both seats in Georgia.

Retirement Policy. 

A bipartisan retirement policy package was released two weeks ago by House Ways and Means Committee Chairman Richard Neal (D-MA) and the panel’s top Republican, Congressman Kevin Brady (R-TX). Key provisions include an increase in the required minimum distribution (RMD) age to 75, an increase in the qualified charitable distribution from $100,000 to $130,000 and incentives for employers to help younger Americans save for retirement (e.g. through a retirement match to student loan payments). There are similar proposals pending in the Senate as well. While it is possible this legislation is approved before the end of the year, we don’t think it is ripe yet. Rather, we think it is more likely to advance next year when there will be a premium on bipartisan achievements in what likely will be a continued period of divided government.

Fed Emergency Facilities. 

In response to the pandemic and the associated fallout in the economy and markets, the Federal Reserve set up over $2 trillion of new emergency backstop liquidity and lending programs. These included new programs (in particular, ones to support state and local governments and mid-sized businesses) that were capitalized by funds provided to the Treasury from the more than $2 trillion CARES Act package that Congress passed this spring. The emergency programs currently are set to expire at the end of the year and would need the Fed and the Treasury to extend them. Republicans, including Senator Pat Toomey (R-PA), who is poised to be Chairman of the Banking Committee if Republicans retain control over the Senate, have argued that markets have normalized and that these programs should be ended. Democrats, meanwhile, would like to have the programs extended, particularly those for municipalities and mid-sized businesses. Many existing facilities likely will be extended, though unused CARES Act funds (only $195 billion of $454 billion funds have been committed to specific emergency programs) are scheduled to sunset. Democrats have expressed concerns that restrictive eligibility criteria and unfavorable terms have limited take-up of the municipal and business lending programs, and a Biden administration likely will try to expand these programs.


All Eyes on Georgia. 

No candidate from either of the two Georgia Senate races was able to win 50% of the vote, so run-off elections are scheduled on January 5 for the top two candidates in each race. With a current Republican advantage of 50-48 in the Senate, Democrats will need to win both contests to have a majority in the Senate, while Republicans will need to win just one. We have sympathy for Georgia voters since they will be bombarded with political advertisements, VIP visits touting one or more of the candidates, and non-stop politicking until January 5. The races will feature contests between Republican Senator David Perdue and Democratic challenger Jon Ossoff and, secondly, Republican Senator Kelly Loeffler and Democratic challenger Dr. Raphael Warnock. However, the two elections will really be more about whether President-elect Biden should have a Democratic Senate to help him pass his policy agenda or a Republican Senate to serve as a check to that agenda. Run-off elections are notoriously difficult to predict since so much depends on which voters care enough to turn out to vote for only two races that might not seem that important to them. Add to that the fluid nature of Georgia’s changing politics, and both races seem to be legitimate toss-ups at this time.

Off the Radar Screen. 

With most of the current campaign coverage on the presidential and congressional races, scant attention has been paid to the elections of governors and state legislatures. Perhaps that is due to a lack of turnover in most of those races. In the 11 gubernatorial races around the country, only one flipped – in Montana – from Democratic to Republican control. The GOP now controls governorships by a 27-23 margin. Republicans also had better results than expected at the state level by flipping the New Hampshire House and Senate from Democratic to Republican control. No other state legislature had a change in party control. Republicans now have full control over 29 state legislatures, while Democrats have 19. Minnesota is the only split legislature in the country, while Nebraska has a unicameral nonpartisan legislature. It is clear from these races and those at the federal level that many voters split their ticket – they supported Biden for president and Republicans for other offices.

On to the 2022 Mid-Terms. 

Given that the Senate will be closely divided regardless of the Georgia results, both parties will have opportunities to gain seats (and possibly flip the majority) in the 2022 mid-term elections. On paper, Democrats have an advantage since 22 of the 34 seats up for election are currently held by Republicans (Democrats have fewer seats to lose). Moreover, Republicans have to defend seats in blue-leaning Wisconsin and Pennsylvania and the toss-up states of Georgia (if incumbent Senator Kelly Loeffler wins on January 5), Florida and North Carolina. Republicans don’t have nearly as many realistic chances for flipping states but will eye possible upsets in blue-leaning New Hampshire, Colorado and Nevada. If Republicans have the Senate majority in 2021-2022, it is plausible they could lose the majority after the 2022 mid-term elections. Much will depend on the politics and mood of the country in 2022, but if Democrats are able to win a majority in the Senate and hold on to a majority in the House, a Biden policy agenda would have a better chance of passing late in his term than earlier.