The House was out of session, while the Senate failed to muster the 60 votes needed to begin debate on a $500 billion COVID-19 stimulus bill (see below). The full Senate also began a debate on the nomination of Judge Amy Coney Barrett to serve on the Supreme Court (see below).
The House is scheduled to be out of session. The Senate will vote on the nomination of Judge Barrett to serve on the Supreme Court.
Supreme Court Vacancy.
As expected, the Senate Judiciary Committee confirmed Judge Barrett’s nomination yesterday along party lines. The 12 Republicans on the committee voted yes, while the ten committee Democrats boycotted the vote. A debate on the nomination in the full Senate began today and will culminate in a final vote as early as Monday of next week, when it is very likely she will be confirmed. Regardless of whether President Trump wins re-election, his efforts to fill federal judicial vacancies, particularly three new justices on the Supreme Court, will be a cornerstone legacy of his administration.
No Rest for the Judge.
Judge Barrett can begin her work on the Supreme Court the day after her confirmation vote. There was a lot of focus in her confirmation hearings on her potential vote in a case on the constitutionality of the Affordable Care Act (Obamacare), but she will also participate in other important cases that will be subject to oral arguments in November and December. In November, the court will hear Fulton v. City of Philadelphia, a dispute concerning religious rights and nondiscrimination protections for LGBTQ individuals. In December, the court will hear cases that involve congressional access to grand jury testimony from special counsel Robert Mueller’s investigation of the Trump campaign and Russia, the structure of the Federal Housing Finance Agency and voting rights in Arizona. Later, the court will hear cases challenging President Trump’s asylum and border wall policies. Decisions on the last set of cases won’t be made until next summer.
COVID-19 Stimulus Bill.
More bipartisan negotiations were held this week but still no deal was made. We are tired of delivering that same update week after week for the past month. One thing is certain now – a comprehensive bill won’t be voted on in the Senate before election day. The Senate voted this week on a smaller $500 bill offered by Senate Republicans, but the measure was defeated by Senate Democrats. Even if House Speaker Nancy Pelosi (D-CA) and the White House come to agreement on a deal sometime soon, a Senate vote on it will have to wait until after the election. We believe there will be another stimulus bill at some point, but it’s unclear whether there will be an appetite for a bipartisan compromise after acrimonious elections. Such a bill may wait until early next year, at which point the economic and health needs may be different and a vaccine may have been approved.
It’s hard to say now where all of the bipartisan angst over big tech – whether it’s related to anti-trust concerns or over online content – is headed. There certainly will continue to be bipartisan scrutiny of the largest companies, but there is no consensus in Congress on what to do, including on key questions of whether to break the companies up or repeal or limit the industry’s infamous Section 230 liability shield. Many members of Congress can hardly turn their computers on, so we shouldn’t expect them to have positions on the more complicated issues the tech industry faces. However, two things are clear to us. One, any substantive action will more likely come from the executive branch than from Congress. The attorney general will be particularly important on anti-trust questions and may develop a roadmap on how the companies can structure their businesses to avoid anti-trust action. Second, nothing will happen quickly. There will be no easy fixes for an industry that is dominated by just a few companies that are popular with consumers for the wide array of services they offer (many of which are free). These debates will continue to generate a lot of noise and passion, but we don’t think we are close to any policy resolutions that will result in a major change in this space.
Wealthier taxpayers have been focused on former Vice President Joe Biden’s plans to increase the highest marginal tax rate (back up to 39.6%), the estate tax and its exemption level, and capital gains taxes. He also has proposed applying the 6.2% payroll tax that funds Social Security to individual income over $400,000. This proposal tracks a longstanding bill by Congressman John Larson (D-CT) that is supported by over 200 Democrats in the House. His plan would apply the payroll tax to wages above $400,000 as well, but it would also increase the payroll tax rate over time from the current rate of 6.2 percent to 7.4 percent. Both plans would increase benefits and change the inflation adjustment to be more generous in future years. Higher taxes on Social Security will certainly be in play next year if Biden wins and Democrats control the House and Senate. Democrats may try to add a Social Security tax increase to a broader tax bill or later down the road to legislation to reform Social Security. Wealthier individuals should add this proposal to the list of potential tax increases they could face even if key details such as the level of the specific tax rate and the use of the proceeds (whether they would go into general revenues or the Social Security trust fund) still need to be worked out.
Regulatory Finish Line.
The Trump administration has made the relaxation of regulatory requirements for business and other entities a key focus throughout its tenure. With the potential for November’s election results to usher in a change in power, federal departments and regulatory agencies are sprinting to complete unfinished regulatory business. In the next couple of months, the Trump administration is expected to issue final regulations to ease environmental requirements, streamline the process for businesses to classify workers as independent contractors instead of employees and tighten certain immigration requirements. The Department of Labor (DOL) and Department of Homeland Security also recently finalized regulations to tighten certain work visa requirements. In the financial services space, the DOL will soon issue final rules on the standard of care for brokers on retirement accounts and on the treatment of investments focused on environmental, social and governance factors. The banking regulators this week finalized a rule establishing a new liquidity requirement for large banks, though this rule was originally proposed under the Obama administration and developed in concert with global regulators. Many of the rules mentioned above will be targets of litigation and potential reversal if there is a changeover in the administration.
50 vs. 55.
In trying to project policy that could be enacted over the next two years, it’s important to pay attention to the roughly 15 competitive Senate seats up for election this year. Trump and Biden will very likely both need their own parties to control the Senate if they hope to pass legislation they favor next year. Moreover, the majorities need to be large enough to approach 60 – the current de facto threshold to pass most legislation in the Senate – to give bills a chance to pass. Republicans have 53 members now and will likely flip a seat in Alabama. Assuming Republicans flip no other seats, Democrats would need to pick up four seats (and the presidency) to retake the majority. They appear to be comfortably ahead in three states (Colorado, Maine and Arizona). Seats in close to ten other states are very close. However, to govern effectively and have a chance to advance much of their policy agenda, Democrats will need a much bigger majority than that. Pay attention to which party wins the Senate on election day, but also pay attention to whether the number of the winning party is closer to 50 or 55 since there is a big difference.
Over eight months ago, President Trump’s campaign made headlines by purchasing a pair of 30 second Super Bowl ads for $10 million. It was an impressive showcase of the Trump campaign’s resources and the reach his ads would have. It was also one day before Joe Biden would go on to finish fourth at the Iowa caucuses, a low point of his campaign. Since then, both candidates’ fortunes have reversed in some ways. After a slow start, the Biden campaign has now raised enough money to saturate the airwaves across any state it wishes, while the Trump campaign has had to make strategic decisions to reduce advertising in some states, including the key battlegrounds of Michigan and Wisconsin. From June 1 until election day, the Biden campaign has spent, or reserved, $178 million more in ad buys than the Trump campaign. While this disparity in the latter half of the year is stark, that is not unfamiliar territory for the Trump campaign. In 2016, Democratic nominee Hillary Clinton massively outspent the Trump campaign, but Trump was able to generate an enormous amount of free media though his social media usage, colorful comments and frequent use of rallies. The environment today is certainly different than it was four years ago, but Trump’s ability to earn free media has not changed. It was widely thought not long ago that the advertising and the media juggernaut the Trump campaign had built would be insurmountable, but the Biden campaign in recent months has managed to even the playing the field and surpass the Trump campaign’s spending for the final stretch.