It has certainly been a dramatic couple of days across our country. There has obviously been focus on the chaotic events that happened at the Capitol Wednesday afternoon and the certification of the electoral college votes early Thursday morning. And, on Thursday evening, President Trump pledged an orderly and seamless transition.
The other big story is the victories by both Democrats in the Tuesday Georgia Senate elections, which flipped control of the U.S. Senate. Below is an update on the potential impact of Democratic control of both chambers of Congress and the presidency. A key take away is that while Democrats are much better positioned to advance their agenda, the very close margins probably still require some bipartisanship, especially on consequential legislation.
Democrats Jon Ossoff and Rev. Raphael Warnock won the Georgia Senate elections on Tuesday. Mr. Ossoff has been elected to a full six-year term in defeating Senator David Perdue, while Rev. Warnock, who ran against Senator Kelly Loeffler, won a special election to serve out the remainder of former Sen. Johnny Isakson’s term through 2022. Sen. Perdue was not seated for the 117th Congress; Sen. Kelly Loeffler will continue to serve until the election is certified and Rev. Warnock can be sworn in, unless she decides to step down sooner.
Once Mr. Ossoff and Rev. Warnock have been seated, the Senate will stand at 50 Democrats and 50 Republicans, with ties broken by incoming Vice President Kamala Harris. Senate Democrats, in conjunction with Senate Republicans, will undertake the process of setting up committee ratios and budgets soon.
The last time there was a 50/50 split in the Senate in 2001, a “power sharing” agreement was negotiated in which Senate committees had a 50/50 membership split and equal staff budgets. As a result, committees were only able to move bipartisan legislation. Under this scenario, the Majority Leader could still add legislation to the Senate Calendar in order for it to be considered outside of the committee process, though there have been times during a 50-50 split where Democratic and Republican leaders have agreed to not use that mechanism and only process legislation through the committee process. It is unclear which approach incoming Senate Majority Leader Chuck Schumer (D-NY) will take, though there is likely to be pressure to retain some controls outside the committee process.
With respect to President-elect Biden, Democratic control of the Senate should create a smoother confirmation process for some of his more controversial nominees, such as Xavier Becerra for Secretary of Health and Human Services and Neera Tanden for Director of the Office of Management and Budget. It should also help expedite confirmation of nominees, like former Michigan Governor Jennifer Granholm for the Department of Energy, which are relatively noncontroversial. These leaders will play a key role in implementing President-elect Biden’s agenda.
As we look ahead to the next several weeks, Congress will require some time to organize committees and leadership roles. COVID-19 will also be a likely immediate focus. Democrats suggested yesterday that such a package could include $2,000 economic impact payments as well as increased funding for state and local governments. In addition, attention may turn to resources for vaccination deployment, the initial stages of which is resulting in significant questions and challenges.
On a call Thursday morning, House Speaker Nancy Pelosi (D-CA) said they hope to pass the John Lewis Voting Rights Act. We also anticipate a more immediate focus on key Democratic priorities such as climate change and social and racial injustice issues. The Democratic majorities also improve chances infrastructure and climate/clean energy legislation is considered.
Although Democrats will control Congress, it is important to note that they have very thin majorities. This is not only true in the Senate, but also in the House, in which a number of moderates will be defending purple seats in 2022. This is likely to create tension between progressive and moderate Democrats.
In the Senate, Democratic leadership will work to craft legislation that can garner enough support amongst Democrats and some Republicans to meet the 60-vote filibuster proof majority. Democrats are also likely to attempt to use the budget reconciliation process, which requires a simple majority of 51 votes in the Senate. Notably, only provisions that have a budgetary effect, do not affect Social Security, and do not add to the budget outside the 10 year budget window (per the Senate’s Byrd Rules), among other restrictions, can be included in such legislation. However, reconciliation has been used aggressively by majorities in the past decade to enact significant pieces of legislation, including tax and health care reforms. Congress can consider three reconciliation bills per year - tax, spending and debt - so Democrats will need to be strategic. Given the slim majorities, reconciliation packages are likely to be the product of careful negotiations to ensure party unity.
The Congressional Review Act (CRA) could also come into play. The Congressional Review Act (CRA) provides a fast track process for Congress to reject by a simple majority vote of both chambers any major rule finalized within 60 legislative days on which the previous Congress adjourned. The Parliamentarian will ultimately decide the lookback period but some have estimated that rules issued after mid-August would be within the timeframe. Similar to reconciliation, with the narrow majorities, CRA actions will require substantial Democratic support to be effective.
We do not believe the filibuster will be reconsidered in the immediate term as long as there are no action forcing events. Notably, Sen. Joe Manchin (D-WV) has said he would oppose such an effort.
Power of the Middle
Given the political dynamics and likely areas of policy focus, moderates on both sides of the aisle are likely to wield significant power for the next two years. This is true of moderate Democrats in the House – as discussed above – and the Senate; it is also true of Republicans in the Senate, as 21 seats currently held by Republicans, including some in increasingly purple states, are up for election in 2022. Consequently, moderate members will be critical in the negotiations of legislative packages on a range of issues, including COVID relief and stimulus, infrastructure, and climate/clean energy legislation.