Alert 10.21.20
Alert
11.09.20
While President Trump continues to push forward legal challenges and some states will have recounts of their votes, it has become increasingly clear that Joe Biden will be the 46th President of the Unites States.
Offering a stark contrast to President Trump throughout the campaign, the message from President-Elect Biden of unity and normalcy prevailed in a country fatigued by a pandemic, economic hardship and political divisiveness. Succeeding in uniting the Democratic party, the lifelong centrist adopted several key progressive positions while moderating them enough to carry moderate voters. With an electoral mandate supporting a return to “normalcy,” the incoming Biden Administration has promised compromise and reconciliation, though at the same time pushing forward with a reversal of many policies of the last four years. Significant changes are coming on issues from energy and climate policies to foreign trade and international relations to infrastructure and finance.
Many of the proposed policy changes and reversals from the Trump Administration may be limited by a divided Congress. While the House of Representatives will remain under Democratic control—though with a smaller majority to protect—the Senate may remain in Republican hands, or, at the very most be split 50-50. Final control of the Senate will be determined by two runoff Senate elections in the state of Georgia in early January.
Even if Democrats succeed in capturing both Georgia Senate seats to bring the Senate to a 50-50 tie (with Vice President-Elect Kamala Harris able to serve as a tiebreaker), the outlook for Democrats’ most ambitious legislative proposals will require negotiation with Republican senators, not to mention moderate Democratic senators.
The President-Elect is expected to use his executive powers to reverse Trump administration policy and reimpose regulatory regimes dismantled over the past four years; however, pushing through a legislative agenda of the sort laid out below through Congress will likely necessitate significant compromise. The parties might find a road toward bipartisan negotiations without President Trump’s grassroot support hanging over Republican lawmakers and necessary COVID-19 relief requiring drastic economic action. President-Elect Biden’s path to delivering on his promises has been made harder by the Congressional outcome, but his administration still maintains significant ability to accomplish major regulatory and legislative reforms.
Pillsbury has prepared assessments of some of the top issues that the new President and Congress will face, analyzing the potential impact on business interests. In the weeks ahead, the Pillsbury team will also publish guidance looking at the details of what different industries will be facing in the coming four years. These will be available on Pillsbury’s Election Implication Resource Center.
Below are brief summaries of the Democratic President-Elect’s key policy positions.
COVID-19 Recovery
With negotiations between House Democrats, Senate GOP leadership and President Trump having stalled repeatedly since the adoption of the CARES Act this Spring, the three major players have failed to reach an agreement for a comprehensive replacement. Even as the U.S. economy made a partial recovery, experts including Federal Reserve Chair Jerome Powell warned that failure to provide more support to Main Street businesses, states and local government, and the unemployed could stall progress on the road to recovery. President-Elect Biden signaled that his administration is prepared to consider all options to curb the spread of the virus, including federal testing programs and mask mandates. Public reporting indicates that two experienced professionals on pandemics and public health issues—former Obama administration Ebola coordinator Ron Klain and former Surgeon General Vivek Murthy—are likely to play a key role in formulating the new Administration’s response.
As President-Elect Biden prepares to enter the White House, he has been clear that he expects a stimulus bill on his desk soon after inauguration day, unless such a bill is passed during the lame-duck session of Congress this year, as Senate Majority Leader Mitch McConnell (R-KY) has discussed. Congressional Democrats would prefer that the $3.4 trillion HEROES Act passed by the House majority in May serve as the template for any comprehensive stimulus package, but it is highly likely that such a relief bill will need to be scaled back in price by at least half and paired with policy positions favored by Republicans to have any chance of enactment. Any such bill would likely include stimulus payments of $1,200 to most Americans, increased unemployment benefits, a renewal of the Paycheck Protection Program for small businesses, and funding for COVID-19 testing and tracing, though the devils will be in the details as to how each of those elements are formulated and negotiated.
Democrats would also like to see significant new aid to state and local governments (including direct funds to replace revenue lost as a result of the pandemic, which Republicans generally oppose as “bailouts”), boosting Social Security payments by $200, student debt forgiveness and other protections for both individuals and businesses. In turn, Republicans will be clamoring for legislative provisions that provide liability protection for businesses and building owners related to the pandemic. It is likely that any deal reached by Republicans and Democrats either before or at the start of the Biden Administration will necessitate tradeoffs between the issues discussed above.
The President-Elect has outlined several measures of his own to complement the HEROES Act that aim to support U.S. companies. His central plan calls for “at least” $370 billion in new funding and federal loans to be made available for small businesses, while potentially using the Defense Production Act to compel additional bank lending. The incoming administration also supports a larger role for federal government in spurring rehiring through a “restart package” that includes funds to help retain and rehire workers, as well as grants to help small businesses adapt pandemic conditions. To offset the cost of such relief measures, the Administration would seek reduction of tax exemptions in the CARES Act such as the "Excess Business Losses" provisions.
Energy & Climate Policy
President-Elect Biden has proposed a $2 trillion federal spending package to rapidly expand R&D and the deployment of renewable energy generation as well as boost energy-saving technologies. At the same time, the Biden Administration is planning to clamp down on polluting industries with expanded reporting requirements and more aggressive enforcement of environmental regulations. While Congressional support would be essential for this plan to be enacted, the goal is to create millions of jobs through the process of transitioning the U.S. energy system toward zero-emission technologies.
The spending package would, if passed by Congress, speed the adoption of low-emission technologies throughout the energy infrastructure. It includes federal investment to install significant solar and wind power capacity, increased energy efficiency in the existing real estate stock and in infrastructure facilitating the use of electric cars, to name a few. President-Elect Biden intends to place the U.S. on a path towards net-zero emissions by 2050, a net-zero standard for all new commercial buildings by 2030 and to de-carbonize the utilities sector by 2035. But without a significant Democratic majority in the Senate, the President-Elect will lack the means to enact climate change legislation as transformational as he proposed during the campaign. The President may be compelled to seek more piecemeal passage of energy and environmental legislation, such as bills focused on wind energy (which retains support from several Republican senators hailing from wind-producing states), battery technology, and energy efficiency.
Key regulatory priorities, likely achievable through executive action or agency rulemaking, may include the creation of a technology-neutral federal Energy Efficiency and Clean Electricity Standard (EECES), rolling back Trump Administration efforts to dilute NEPA and expanding environmental review for the BLM and FERC permitting processes along with a ban on new oil or gas exploration on federal land. The incoming administration will also rejoin the Paris Climate Accord and reorient U.S. foreign policy to spur international action on curbing global GHG emissions, pushing for stronger NDCs by signatory countries. Green energy sources, but also low-emission utilities stand to benefit. These are attainable even without support from Capitol Hill and may thus become the more prominent part of President-Elect Biden’s future plans.
Trade Policy
The last four years have been tumultuous for international trade, but it is an area where President-Elect Biden is likely to hold on to key parts of the Trump Administration’s policy. Buy American rules, reshoring and supply chain resilience will be a key focus for the next administration against the backdrop of COVID-19 recovery. Biden has promised extended federal procurement coupled with more stringent application of current Buy American legislation. Pressure on China through tariffs is also likely to continue until concessions are made. Skepticism of entering FTAs will persist, as the President-Elect has promised to abstain from doing so until his administration determines the U.S. economy to be sufficiently competitive.
Bridging ongoing trade conflicts with allies in Europe, North America, Japan and South Korea will be key to forming the coalition of countries the next administration envisions to bring together to take on China and reform international institutions such as the WTO. A central part will be to restrain the use of Section 232 tariffs, providing relief amongst Americas’ trade partners. This increased cooperation is another tool to use for pushing back on Chinese economic practices. Bipartisan action has been clear even when not naming China, for example through the Foreign Investment Risk Review Modernization Act (FIRRMA), which strengthened the CFIUS review process, and the Export Control Reform Act (ECRA), legislative trends likely to continue under the President-Elect. Whether President-Elect Biden will relieve or keep Section 301 tariffs currently imposed on $370 billion of Chinese goods is unknown.
The Biden plan on supply chain resilience calls for a 100-day review to start early in a new administration to inquire about what national security risks current dependencies represent. Aiming to build a broad resilience against the supply-chain disruptions across critical sectors outlines several tools to be used in pursuit of this goal, including directing federal agencies to purchase American products in the targeted industries, conditioning federal spending and investment, expanding federal stockpiles and using the Defense Production Act (DPA) more aggressively. Impetus for the President-Elect to do so has only increased with the disruptions experienced during the COVID-19 pandemic.
Banking & Financial Services
The likely first priority of the incoming administration will be to rein in the deregulation of the financial sector. For example, much of the Trump administration’s efforts to scale back to the Dodd-Frank Act may be reinstated by President-Elect Biden. However, it is likely that some of the changes, including easing of the Volcker Rule, will remain unchanged as it was passed with bipartisan support, benefited community banks, and is important to the larger Democratic priority of furthering equal access to capital and financial services.
Increased federal oversight and regulation of the financial sector is likely in a new Biden Administration, though it may be hamstrung if the President-Elect is unable to appoint progressive leaders to key regulatory agency positions in the event of continuing Republican control of the Senate. During the campaign, President-Elect Biden’s financial services proposals included establishing of a federal credit rating agency and creating a joint federal banking program, FedAccounts, run by the Federal Reserve and U.S. Postal Service. With a proposed federal real-time payment system slated for introduction during President-Elect Biden’s term, he will likely favor FedNow implementation as another initiative to support community banks.
Many impactful changes under a Democratic administration will depend on the appointments made to key agencies such as the OCC, CFPB and FDIC, as well as to the Federal Reserve Board. Each of these federal agencies has significant authority to impact federal policy, as demonstrated by the Trump Administration’s several appointees to serve as Comptroller of the Currency, each of whom initiated significant initiatives to support fintech during their short tenures. Appointees would hold large sway over key regulatory matters, and will likely support stronger consumer protection, fair lending practices and reinstating payday lending restrictions, impacting small-dollar lenders. However, the development of fintech has been supported by both parties and the financial industry is likely to be encouraged to continue to innovate, though perhaps with greater guardrails and oversight.
Foreign Policy
President-Elect Biden has rejected the Trump Administration’s philosophy for U.S. foreign policy. He has pledged to renew traditional alliances and take a harder stance on combatting climate change human rights abuses and democratic backsliding by invigorating international coalitions. By reentering treaties such as the Paris Climate Accord and JCPOA, the goal is to reassert America as a world leader. Biden shares the Trump administration’s principal goal to disengage militarily from “forever wars” in the Middle East, but will likely be less friendly with regional powers such as Saudi Arabia.
The former Vice President has promised to face up to international challenges or adversaries by creating coalitions and reforging alliances with the EU and NATO countries, emphasizing democratic values and expanding U.S. diplomatic efforts. While sharing similar concerns about the world and the place of the United States in it, their values, tools and potential partners are drastically different. Economic interests will most likely take somewhat of a back seat to furthering value-driven foreign policy goals. To that end, President-Elect Biden will increase budgets for the State Department and aid organizations.
In large part, the doctrine will be a return to the Obama Administration’s foreign policy, which President-Elect Biden was a principal part of forming and enacting. However, the current environment will likely force a more active and at times combative approach to international challenges. Relations with China, Russia and regimes such as the Kim dynasty in North Korea will be strained, and the President-Elect will likely be less prone to engage in negotiations without preconditions. The President-Elect has called for renewed engagement in South America, significantly increasing aid and investments, as well as returning to the path towards normalization with Cuba and Central American countries. For Venezuela, however, little change is likely to come in the near future.
Tax Reform
President-Elect Biden has matched his ambitious public spending proposals with an extensive plan for tax reform, focusing on raising taxes on corporations and high-income earners, punishing the offshoring of jobs, as well as supporting renewable energy investments. The headline proposal, an increase to the corporate tax rate from 21 percent to 28 percent, is identical to an Obama-era tax cut initiative that never came to be. Businesses abroad could see a doubling of the GILTI effective tax rate, from 10.5 to 21 percent. This would likely be accomplished by reducing the TCJA Section 250 deductions from 50 percent to 25 percent.
The President-Elect has promised tax reforms encouraging companies to return supply-chains state-side, using both carrots and sticks. American companies re-importing products will between a series of proposals pay up to 30.8 percent on profits, but create a 10 percent tax credit on investments revitalizing the U.S. manufacturing sector and similar incentives for supply chain relocation of critical products. A variety of new and existing tax incentives could also be introduced or expanded to incentivize reductions of carbon emissions, as well as increasing labor standards.
On individual taxes, President-Elect Biden has proposed tax reforms raising the tax burden on high-income earners and investors. On incomes and capital gains above $1 million, the Biden campaign proposed a 39.6 percent tax rate across both income types. It also calls for a return of the estate tax as it was in 2009. Beneficiaries of his plan would primarily be low-income households, which could see expanded tax credits for house purchases, living costs and ACA premiums.
Realistically, the broad strokes of the Biden tax policy agenda—particularly the proposed increase in the corporate tax rate and the increase in the top rate for individual earners—are “dead on arrival” in a Senate controlled by Republicans and perhaps even in one controlled by a bare majority of Democrats. Although President-Elect Biden will have to make concessions to win support for tax legislation, savvy businesses are preparing to mobilize efforts to play offense and defense on tax policy in the new political climate. In short, if businesses are not at the table for tax discussions, they may find themselves on the menu.
Infrastructure
After a campaign themed around the “Build Back Better” slogan, President-Elect Biden will most likely prioritize an infrastructure package as part of the envisioned $2 trillion spending plan on greening the U.S. economy. As much as $1.3 trillion could be dedicated to infrastructure-related programs over the next 10 years. Initial priorities would include $50 billion towards upgrading the existing road network and stabilizing the Highway Trust Fund. Changes to the permitting processes are to expect as well, with potential fast-tracking of critical projects but a higher emphasis on environmental considerations as the new administration gets to work on rolling back the regulatory easing of the Trump administration.
Federal contractors will also face stringent Buy American requirements and new labor rules to comply with, including Senator Merkley’s Good Jobs for 21st Century Energy Act, Project Labor and Community Workforce Agreements and a possible federal $15 minimum wage requirement. Companies looking at participating in the major projects likely to be pushed by the President-Elect should review their compliance with such potential regulation.
Apart from the ambitious spending on energy infrastructure and energy-saving initiatives, President-Elect Biden has declared it a priority to make federal funding available for expanding urban transit, rural waterways and railroad transportation networks, as well as doubling FAA funding for the Airport Improvement Program. Like most of the President-Elect’s spending plans, it is likely to face a partisan battle on Capitol Hill. But with federal spending likely to be more popular than usual during an economic recovery and made more affordable by low interest rates, at least parts of President-Elect Biden’s priorities could come to pass.
Ethics & Campaign Reform
The President-Elect has promised comprehensive ethics and campaign reform. Expanding ethics and divestment requirements for administration officials, strengthening whistle-blower protections, and enhancing the oversight power of federal inspectors general are likely to be the easiest to accomplish. He has also proposed a Commission on Federal Ethics to coordinate efforts to combat corruption and foreign influence among administration officials.
The President-Elect proposed plans to increase disclosure of lobbying and foreign influence including proposals to amend the Foreign Agent Registration Act (FARA) to completely ban lobbying on behalf of foreign governments, including a ban on lobbying by private entities with a connection to or funded by a foreign state entity.
The incoming administration has also proposed several campaign finance initiatives, including:
Continued political wrangling about foreign and domestic interests in U.S. politics are likely to be a key issue in Washington during the incoming administration. More generally, President-Elect Biden will likely face pressure from his left flank to implement his numerous campaign proposals on ethics, while also refraining from appointing individuals with ties to Wall Street or other “special interests” to key Cabinet and agency positions. This anti-Wall Street litmus test emanating from progressive stakeholders has received blowback from other quarters of the Democratic Party, who fear that it could deprive the new Administration of both expertise and, potentially, racial and ethnic diversity. It is likely to be a flashpoint of intraparty debate during President-Elect Biden’s transition and first 100 days.
Communications Policy & Regulations
The incoming administration will oversee significant developments to the U.S. digital infrastructure and a growing imperative to expand access to high-speed broadband, as well as 5G. Simultaneously, both parties share concerns over the integrity of next-generation communications systems, as well as the handling of personal information. President-Elect Biden has unveiled plans for investing in measures to bridge the “Digital Divide” but has made less detailed statements on data privacy issues.
Major initiatives from the Biden platform includes tripling the funding for Community Connect broadband grants and investing $20 billion in U.S. broadband infrastructure. Democrats have also committed to reforming legislation to increase internet access, such as expanding the FCC’s Lifeline program and supporting the adoption of the Digital Equity Act. Competition with China will persist, as will the barring of Chinese hardware from future telecommunications networks under President-Elect Biden. The $300 billion R&D spending included in the President-Elect’s infrastructure plan, scaling up the SBIR program and federal procurement promises are parts of his plan to increase U.S. competitiveness in critical technologies.
On data privacy, a move towards stronger enforcement of online privacy protections instead of continued reliance on guidelines is expected once President-Elect Biden enters the White House. The former Vice President has expressed support for establishing privacy protections and personal data standards not unlike those adopted by the EU through the GDPR framework. Such legislation is unlikely to find bipartisan support, seeing as this summer’s attempts on Capitol Hill to legislate on the treatment of digital information related to COVID-19 revealed two major sticking points: private right of action and the preemption of state law.
Gig-Economy & Social Media Platforms
Technology companies will likely face a more challenging regulatory environment under a Democratic Administration. Even as relations between the industry and the White House have been tense for years, President-Elect Biden will bring a renewed focus to strengthening labor rights in the gig economy.
The Biden platform has opened for a national equivalent of the California Assembly Bill 5, which establishes an “ABC” test for determining whether a gig worker is to be considered a full-time employee and not a contractor—essentially reclassifying drivers for ride-sharing companies or other workers in similar contractor-reliant companies as employees. For gig-workers, this would affirm the right to receiving health care benefits and paid leave. However, it is noteworthy that key provisions in AB 5 were overturned in a successful California ballot initiative that passed in November. The success of that ballot initiative could stunt momentum on similar efforts in other states and at the federal level.
President-Elect Biden has declared his intent to repeal Section 230 of the Communications Decency Act in another step toward forcing large social media companies to act against harmful content. The Democratic Nominee has yet to formulate what would replace Section 230. The incoming administration has placed self-policing front and center of its approach to social media policing, inviting large tech platforms to the table in international forums to agree on codes of conduct delivering a social media sphere more conducive to democratic values. This could mean increased transparency and oversight of content algorithms. as well as expanded content moderation to acquiesce federal regulators.
Antitrust & Tech Companies
Entering the White House in January, President-Elect Biden will inherit not only a major case against Google, the handling of which will signal his administration’s direction, but also a political turning point in the public understanding of relation between corporations and public institutions. His party, especially its progressive wing, will be keen to seize this moment.
On Capitol Hill, a series of hearings with tech CEOs have placed antitrust legislation targeting the tech sector as another partisan issue. The House antitrust subcommittee Democrats have proposed wide-ranging action against anti-competitive behaviors. Options presented included mandating structural separations, nondiscrimination rules for giving preference for their own services over others on online marketplaces and restricting what lines of business the large technology companies can operate in. These are likely non-starters for Republicans, who prefer instead to tweak existing law rather than introduce new, broad antitrust legislation. The President-Elect has not yet offered his views on these specific actions. Congress is more likely to take the lead on moving ahead with any new antitrust legislation.
Health Care
As Vice President in the Obama Administration, President-Elect Biden has a health care legacy on which to build in the Affordable Care Act. The Biden Administration will seek to build on and expand the ACA, granted the legislation survives a pending SCOTUS challenge.
First, the President-Elect will likely seek to add a public option to the insurance marketplace, ostensibly offering a baseline option. It would automatically cover low-income residents in states that have not expanded Medicaid but who would have been eligible if the state had. Second, the ACA tax credits would be expanded by removing the upper income cap and limiting spending on insurance to 8.5 percent of household income. Lastly, President-Elect Biden has outlined in his plan to expand Medicare coverage by lowering the eligibility age threshold from 65 years old to 60, aiming to expand overall coverage and lowering premium prices on the individual marketplace but with increased Medicare costs.
This will be a major challenge to push through Congress as Republicans have been vocal in their opposition, especially to the public option. But there are other areas of health care legislation which may be more conducive to bipartisan action. President-Elect Biden and President Trump both touted plans to lower prescription drug prices, which may convince some Republicans that supporting the proposal to repeal legislation barring Medicare from negotiating drug prices and indexing future cost increases to the inflation rate. Pharmaceutical companies will likely be in the crosshairs for increased government regulation, and President-Elect Biden has proposed using antitrust actions to curb market concentration in the medical industry. Stopping surprise medical billing could also be another area for bipartisan action.
Education
Education and tuition were key issues during the Democratic primary, but as the election cycle concluded this year the two presidential candidates have traded few substantial statements on education. Nevertheless, President-Elect Biden has promised comprehensive changes to tuition, federal funding and college debt. Initial focus will fall on providing funding for school districts to test and prepare schools nationwide for reopening. The President-Elect has promised to push for a combined $90 billion in funding to support this effort, another $200 billion in general support to K-12 schools, and to improve remote learning possibilities.
But the Former Vice President has laid out several plans impacting the education sector more structurally. While the President-Elect has refuted the ambitions for tuition-free college preferred by some of his Democratic colleagues, President-Elect Biden is advocating to make public colleges and universities tuition-free for students with household incomes under $125,000, including two years of community college for workers looking to reschool. The incoming administration will likely put emphasis on workforce education, including supporting private initiatives. To that end, it could seek to make community college and training programs tuition-free for two years of attendance, invest tens of billions in workforce training programs and in upgrades to community college facilities. According to President-Elect Biden’s platform, another $70 billion could be earmarked for HBCUs. In addition to expanding federal financing for colleges and universities, K-12 education is a key area of investment for the President-Elect’s $775 billion caregiving plan and tripling the Title I funding is a likely priority for responding to the racial educational disparities brought into the mainstream political debate during this summer’s protests. However, the future for charter and private schools is unsure as the President-Elect has largely refrained from addressing how his administration would reform public sector support for such institutions. The Biden-Sanders Task Force document does express opposition to public funding of for-profit educational entities. It is no hard guess that the next Education Secretary will show more willingness to put pressure on EMOs and tuition lenders.
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As one can see, there are a wide range of policy initiatives in the Biden platform, and U.S. and foreign businesses will want to consider the potential impact of these proposals. The proposed federal spending priorities, tax reform and regulatory realignment to combat climate change all present both distinct opportunities and challenges for industries. As these proposals develop, companies will need to consider these opportunities, as well as efforts to influence the policy development.
Pillsbury is carefully tracking the broad implications of the 2020 U.S. election, monitoring and analyzing the impact a new president, a changing Congress and forthcoming legislation will have on a wide range of industries. To read more of our policy insights, visit our Election Implications Resource Center.