Elections Scenarios Analysis
Introduction
Here we are just one day before Election Day and, at this point, most major election forecasting organizations are predicting a Biden win and Democrat-controlled Senate. As of November 1, the 270 to Win consensus map shows Vice President Joe Biden winning 290 electoral votes compared to 163 for President Trump, with 85 electoral votes marked as toss-ups. Similarly, the Senate map forecasts 49 seats for Democrats, 46 seats for Republicans, and five toss-ups.
The House of Representatives is expected to remain in Democratic control, and by most projections, Democrats are expected to add between 5 and 15 seats to their majority. We believe House Speaker Nancy Pelosi (D-CA) will return to her current position in the new Congress.
While there are still potential pathways to Republican victories for the presidency and control of the Senate, and 2016 has taught us we can only place so much trust in polling, the reality remains that we are unlikely to know who won control of the White House and the Senate on Election Night. This is due, in part, to a significant increase in voting by mail, as well as the possibility of two runoff Senate races in Georgia, which would be held January 5.
As of November 2, more than 96 million Americans had already voted, representing nearly 70 percent of the total turnout in 2016. One poll suggests as many as 53 percent of Biden voters may cast their ballots by mail, compared to just 12 percent of Trump supporters. This aligns with the analysis of ballots that have already been cast, which finds that Democrats are turning out more low-frequency voters and newly registered voters than the GOP and also leading in battleground states. This could be a worrisome sign for Republicans. Conversely, Democrats could be concerned about reports that Republicans have done a better job this election cycle of registering voters, particularly in rural areas.
States that start processing ballots before Election Day, such as North Carolina, Florida, and Iowa, are likely to serve as bellwethers for how the election might end. However, in most states, mail-in ballots can be postmarked on Election Day and typically take longer to count. The lag between in-person voting Election Day results and slower results from mail-in voting could make it appear President Trump is leading by a landslide margin that disappears as mail ballots are counted.
Hawkfish, a Democratic data and analytics firm, modeled how the Electoral College would shift as mail-in votes are counted and is forecasting the results of the election could be unknown until up to four days later. Benjamin Ginsberg, a longtime Republican election lawyer, puts the odds of the 2020 presidential election ending up in an all-out legal brawl that lasts into January at less than one percent, with a high chance of the winner being called on Election Night or within the following three weeks. Potential delays, in addition to possible surprises, make it all the more important to begin planning for a range of scenarios.
Conventional wisdom and our expectation is that most voters will cast votes for the same party down-ballot, so it is more likely we will see a Biden win and a Democratic Senate or a Trump win and a Republican Senate than some other scenario. In fact, a Pew Research Center study released on October 21 found large shares of votes will vote a straight party ticket for candidates for the presidency, Senate, and House. In a year when control of the Senate is at stake, just four percent of registered voters in states with a Senate contest say they will support President Trump or Vice President Biden and a Senate candidate from the opposing party.
Ultimately, the 2021 legislative environment is likely to be shaped by what is and is not accomplished during the lame duck. While activity in the lame duck will be largely dependent upon the outcome of the election, COVID spread, and the stock market, we understand Speaker Pelosi is interested in “clearing the decks” in anticipation of an incoming Democratic administration and Congress. Another unknown is how willing President Trump might be to sign bills into law should he lose reelection.
The prospects for legislation moving in the lame duck could also be impacted by the swearing in of new senators even before the start of the 117th Congress. For example, if Democratic challenger Mark Kelly beats incumbent Sen. Martha McSally (R-AZ), he could be seated in the Senate as early as November 30 because Sen. McSally was appointed, not elected, to fill Sen. John McCain’s (R-AZ) seat in 2019. The same early seating principle could apply to the winner of Georgia’s special election to fill the seat vacated by Sen. Johnny Isakson (R-GA) earlier this year. While Democratic candidate Raphael Warnock is currently leading Republicans Sen. Kelly Loeffler (R-GA) and Rep. Doug Collins (R-GA) in the polls, he would need to win more than 50 percent of the vote to avoid a runoff, an unlikely scenario.
At the very least, we anticipate we will see action in the lame duck on the Fiscal Year 2021 (FY21) National Defense Authorization Act (NDAA), which could potentially become a vehicle for other “must pass” legislation, such as an FY21 omnibus appropriations bill or continuing resolution (CR).
This analysis seeks to explore the dynamics that might be at play under various post-elections scenarios that result in: (1) a Biden White House/Democrat-Controlled Senate; (2) a Trump White House/Republican-Controlled Senate; (3) a Biden White House/Republican-Controlled Senate; and (4) a Trump White House/Democrat-Controlled Senate. Additionally, we have done our best to project what each environment could mean for some policy issues priorities during the next administration and in the new Congress.
Scenario 1: Biden White House/Democrat-Controlled Senate
General Observations
While the Biden campaign remains very much focused on winning the election, the transition team is already working to fill positions. Given the number of vacancies in the Trump Administration, a Biden administration will be eager to quickly fill political positions that do not require Senate confirmation. Other political appointments may need to wait until candidates for more senior slots, such as cabinet secretaries, are confirmed and have an opportunity to weigh in on hiring decisions.
Generally, we expect that a Biden Administration will be focused on achieving diversity in its most senior ranks. This means we are likely to see women, minorities, and individuals of different sexual orientations appointed to cabinet-level positions. Additionally, we believe a Biden Administration will seek to incorporate geographic diversity and a vast range of experience into its hiring with the goal of building unity.
As several individuals who previously worked for Vice President Biden have been involved in the campaign, we anticipate the Biden transition team will look closely at a number of these institutionalists. It is also likely to face pressure to be inclusive of ideas and candidates from the more liberal wing of the Democratic party. The Biden campaign has precluded registered lobbyists from engaging directly with members of the campaign staff working on policy. While there may be some waivers granted, we anticipate a Biden Administration will develop a strong ethics policy that may prohibit registered lobbyists from working for the administration in order to mitigate conflicts of interest.
There are also several Members of Congress who may be considered for various positions in a Biden Administration. Aside from Members who may not return to Congress next year due to retirements or tight races, we are hesitant to think Democrats would give up any Senate seats. This is especially true for senators representing states where there is a Republican governor. We believe many senior Democratic Hill staffers might also be interested in serving in a Biden Administration.
It is our belief a Biden Administration would have a Day One agenda, a First 100 Days agenda, and an agenda for the rest of the term. The Day One agenda is likely to include priorities that can be achieved without Congressional action. We anticipate much of a Biden Administration’s first 100 days, if not its first year, will be focused on responding to the COVID-19 pandemic and stimulating economic recovery. While we anticipate this effort will largely have a healthcare focus at the onset, it is also likely to include other elements that align with Vice President Biden’s “Build Back Better” campaign slogan, such as infrastructure, economic stimulus, climate, and environmental justice. It is also likely a Democratic Congress would work with a Biden White House to use the Congressional Review Act (CRA) to overturn regulations promulgated by the Trump Administration within the 60 legislative days prior to adjournment of the 116th Congress.
Of course, whatever the Biden Administration includes in its first term agenda, there will need to be some consideration of the margins in the Senate. If Democrats only hold a one- or two-seat majority, there will still be moderates, such as Sen. Joe Manchin (D-WV) or Kyrsten Sinema (D-AZ) to temper the progressiveness of the caucus. This moderation effect will only be compounded if Democrats control the Senate with an even larger majority. For this to be the case, Democrats will need to have flipped seats in swing and red states, which means presumptive Majority Leader Chuck Schumer (D-NY) will be dealing with an overall more moderate caucus. Counterintuitive to the thinking that a Democratic sweep will lead to more liberal policies, a really good night for Democrats could actually mean they take a more moderate approach. There is a wariness about being perceived as overreaching, and some are worried about a repeat of the 2010 midterm elections following the first two years of the Obama Administration, in which Republicans seized control of the House and Senate.
Further, we are also hearing rumors that if the Senate flips to Democratic control, Sen. Lisa Murkowski (R-AK) could switch her party affiliation to Independent and caucus with the Democrats. The thinking is this might allow Sen. Murkowski to keep some of her positions, potentially including chairmanship of the Interior Appropriations Subcommittee. Of course, Sen. Murkowski recently voted with Senate Republicans to confirm Judge Amy Coney Barrett to the U.S. Supreme Court, but she did vote with Democrats on the procedural motion. In our eyes, this demonstrates she is a true Independent.
While all of the ballots have yet to be cast, we have recently been in touch with senior Congressional staffers who are already thinking about senators who will be in cycle in 2022. In the next election, 20 Republican-held seats will be up for grabs compared to just 12 for Democrats, with two additional seats in play following this cycle’s special elections in Arizona and Georgia. Notably, Leader Schumer will be in cycle in two years and could face a primary challenge, particularly if progressives believe a Democrat-controlled Senate has been too moderate. The dynamics of running in a midterm election are likely to impact how the Senate approaches a Biden Administration agenda. In all likelihood, many of the Democratic senators on the ballot in two years will need to perform a balancing act during the first session of the 117th Congress to ward off the prospect of primaries from more progressive candidates.
At the end of the day, what can be accomplished next year by a Democratic White House and a Democratic Congress will be impacted by whether or not Senate Democrats choose to eliminate or modify the filibuster rule. This is one issue where Vice President Biden has been noncommittal on the campaign trail even though there is no scenario where Democrats control the Senate with a 60-vote majority. Our hunch is that it will be very difficult for Democrats to rely exclusively on reconciliation to advance their policy priorities. That said, we predict there is a potential scenario where Democrats force a vote on a popular idea, such as economic stimulus or a living wage, and leverage any lack of cooperation from the GOP to do away with the filibuster. This could, however, be a risky move, as there is no guarantee Democrats will retain control of the Senate for more than just two years.
Again, under all circumstances, we anticipate the House will remain under Democratic control and the leadership of Speaker Pelosi. If President Trump loses the White House and the GOP suffers significant losses in the House, it is possible we could see contested House Republican leadership contests. In the 117th Congress, the Democratic Caucus will continue to include factions of progressive and moderate Members. With a moderate Democrat-controlled Senate and perhaps a larger Democratic majority in the House, it will be even more important for Speaker Pelosi to be attentive in managing her diverse caucus.
Budget, Appropriations, and the Debt Limit
Next year’s budget and appropriations process will be a departure from past fiscal years as the White House and Congressional appropriators will no longer have to account for budget caps or the looming threat of sequestration. With no limits on defense and non-defense discretionary spending in FY22, a unified Democratic government could potentially increase federal spending and rebalance spending priorities. In particular, we expect there to be a debate, primarily amongst Democrats, on decreasing defense spending. While Vice President Biden has said he is not planning for major cuts in the Pentagon’s budget, progressives are already advocating for slashing funding. One way Democrats might compromise is by eliminating the Overseas Contingency Operations (OCO) account to create a perceived drop in defense spending levels.
Assuming that Democrats will want to reserve the opportunity to use reconciliation to advance priorities without 60 votes in the Senate, we anticipate there will be a budget resolution under this scenario. While there are limitations on what Democrats might be able to achieve using the reconciliation process, a unified Democratic government could address issues such as climate change, healthcare, and education as part of a reconciliation bill on spending, revenues, or the debt limit. With Democrats in control of both the House and Senate, we imagine Democrats will attempt to include riders on the FY22 appropriations bills. If the filibuster rule holds, these riders may ultimately be blocked by Senate Republicans.
When Vice President Biden is inaugurated, he will inherit a growing national debt that has been exacerbated by the COVID-19 crisis and is projected to exceed the post-World War II record-high over the next four years. According to the Committee for a Responsible Federal Budget, Vice President Biden’s plan, which envisions investing in childcare and education, healthcare, retirement, disability benefits, infrastructure, research, and climate change while lowering prescription drug costs, ending wars, and increasing taxes on the wealthy and corporations, is expected to increase the debt by $5.6 trillion. Congress will once again be in a position to raise the debt limit by August 1. There has been some talk that a Democratic Congress might consider doing away with the debt limit altogether. This would almost certainly draw opposition from fiscal conservatives, who have been vocal in recent months about their concerns over increased deficit spending.
Defense, Foreign Policy, Immigration, and Intelligence
One of the biggest changes the U.S. can expect under a Biden Administration is the reversal of President Trump’s attitude towards foreign policy and diplomacy. Vice President Biden has pledged to immediately restore the U.S. presence in multilateral bodies by rejoining the Paris Climate Accord, the World Health Organization (WHO), and other United Nations (U.N.) organizations. During his first year in office, Biden plans to host a “Summit for Democracy” with all ideologically like-minded nations to reaffirm U.S. leadership, alliances, and commitments. This “resetting” of relationships with other countries and global organizations will prove crucial to Vice President Biden’s execution of foreign policy goals, which might include finalizing a new nuclear agreement with Russia and potentially reentering the Iran nuclear agreement. We imagine a Biden Administration would also seek to deploy soft power, including by returning to a more coordinated and pragmatic use of sanctions and prioritizing the U.S. provision of foreign assistance. These objectives would be executed with renewed focus on human rights, democracy, and rooting out corruption.
Further, we expect an undoing of President Trump’s immigration policies to top the agenda during the early days of the Biden Administration. In particular, we believe Vice President Biden will attempt to separate immigration from the perceived national security threats articulated by President Trump. For example, this might include lifting President Trump’s “Muslim ban” and reversing immigration policies to increase refugee admissions. In fact, one of Vice President Biden’s first actions as president might be issuing an executive order forming a task force to reunite immigrant children held in detention centers with their families.
Legislatively, much of the focus in the national security space will be on the FY22 NDAA. As a defense authorization bill has been signed into law every year since 1961, it is not a stretch to predict the NDAA will again be enacted next year. Under a unified Democratic government, we could potentially see a large defense bill that includes progressive provisions, similar to the personnel or environmental policies we have seen in the House NDAA during the 116th Congress. We would anticipate a Democratic Congress would also seek to put a pause on the Trump Administration’s nuclear ambitions, including its pursuit of a low-yield nuclear weapon. A Democratic sweep may even allow Congress to revisit the Authorization for the Use of Military Force (AUMF).
Finally, we suspect a Biden Administration will seek to restore the independence of and reliance on the intelligence community (IC). We believe President Biden and senior National Security Council (NSC) staff would have more frequent engagement with IC officials. We could also see improved relations between the IC and Congress.
Energy and Environment
There are a number of far-reaching actions on energy and environmental policy that a Biden Administration could take immediately upon taking office. As noted above, Vice President Biden has committed to rejoining the Paris Climate Agreement, which would create an obligation for the U.S. to submit targets for greenhouse gas emissions reduction. Vice President Biden could also reestablish the Climate Science Advisory Committee, change agencies’ regulatory agendas, and potentially create an environmental justice office within the White House or at various relevant agencies.
A Democratic Senate would be quite agreeable to working quickly to advance environmental goals, and passing an expanded version of the House-passed Moving Forward Act (H.R. 2) could have the effect of broadening the regulatory authority of agencies like the Department of Energy (DOE) and the Environmental Protection Agency (EPA). Vice President Biden and Democratic Congressional leaders have signaled they would prioritize aggressively curbing greenhouse gas emissions, and would likely reinstate some of the environmental impact requirements that have been altered during the Trump Administration. Because a Democratic majority in the Senate would likely have a small margin, and it is not certain Democrats would use their majority to eliminate the filibuster, budget reconciliation has been cited as a possible avenue to address climate-related issues. A price on carbon could be passed using this method.
Tax incentives, particularly as they relate to clean energy and other emission reduction avenues, would be viewed favorably by a Biden White House and Democratic Congress. With Democrats controlling both the Senate and presidency, the investment tax credit (ITC), production tax credit (PTC), and energy efficiency tax credits, such as 25C and 25D, are all likely to be extended.
Healthcare
Whoever is sworn in on Inauguration Day will immediately face mounting job losses due to the COVID-19 pandemic that have had a direct impact on health coverage. Under a Biden Administration, we could see the creation of a public insurance option similar to Medicare for customers on the individual market. It is also expected a Biden Administration would employ a series of moves to shore up the Affordable Care Act’s (ACA) insurance exchanges. A new Democratic administration could also pursue a change in eligibility for the subsidies to ensure more people qualify for income-based tax credits that lower the cost of premiums.
In light of the significant health disparities that have come to light during the COVID-19 pandemic, we expect a Biden Administration would place an emphasis on lowering racial disparities. From a budgetary perspective, this could materialize in the form of increased funding for community health centers. We expect various federal agencies will be focused on COVID response efforts as part of the First 100 Days of a Biden Administration, if not the entire first year of a Biden Presidency. However, once we begin to recover from the pandemic, we expect to see conventional health policy issues such as prescription drug costs, surprise medical bills, along with Medicare and Medicaid reforms, return to the forefront of the healthcare policy agenda.
Prescription drug costs have been an important talking point for both candidates. Both President Trump and Vice President Biden support the importation of drugs from other countries and encourage the development of more generic drugs. Additionally, both support capping out-of-pocket costs for Medicare beneficiaries and allowing Medicare to negotiate drug costs, though Vice President Biden’s platform proposes to allow Medicare to negotiate on behalf of private purchasers. On these issues, we could see a Biden Administration place limits on launch prices for drugs, efforts to cap price increases for brands and certain generic drugs, and end pharmaceutical corporations' tax breaks for advertisement spending.
Technology, Telecommunications, and Cybersecurity
Generally, we expect that a Biden Administration will seek to protect the U.S competitive edge on a number of technology fronts, including artificial intelligence (AI), quantum computing, and 5G, among others. Space is another area where we could see technology investments that overlap with other priorities in Vice President Biden’s agenda. More specifically, we anticipate a Biden Administration will continue several of President Trump’s space initiatives, including the Space Force, National Aeronautics and Space Administration (NASA) programs aimed at sending humans to the Moon and Mars, and efforts to revamp regulations for space companies. While Vice President Biden’s campaign has not outlined any specific space policy, expanding international cooperation on space exploration could be a top objective, in addition to combating climate change using NASA’s Earth science research.
A change in control of the White House could usher in major changes in telecommunications policy. If Vice President Biden wins, there could potentially be a scenario where he begins his term with a 2-1 Democratic majority at the Federal Communications Commission (FCC), allowing the independent agency to act more quickly and nimbly to execute on the new administration’s priorities. For example, Democratic leaders in Congress and at the Federal Communications Commission (FCC) have indicated one of their first acts under a unified Democratic government will be to restore Obama-era net neutrality regulations. Also topping the Democratic agenda will be an effort to close the “homework gap,” address the digital divide, and expand telehealth and rural broadband. We anticipate a Democratic Washington will continue its scrutiny of big tech, especially on issues related to consumer privacy and disinformation and antitrust enforcement.
While Vice President Biden has not said much about cybersecurity during the campaign, we believe a Biden Administration will attempt to make good on the Democratic party’s cyber platform in a Biden Administration. This includes enacting strong consumer privacy and security standards, an increasingly important issue as more sensitive data is entrusted to tech companies. In their platform, Democrats have also pledged to update the Obama Administration’s Consumer Privacy Bill of Rights proposal with strong nationwide standards in order to protect citizens from data breaches. We anticipate a Democratic Administration would be open to enacting recommendations put forward by the Cyberspace Solarium Commission, including the creation of a national cyber director position to coordinate cyber policy across the federal government. Additionally, a Biden State Department would likely bring back the role of the coordinator for cyber issues.
Trade
Trade is one of the few policy areas where President Trump and former Vice President Biden hold relatively similar positions, with a strong anti-China stance noticeable in both candidates’ platforms. We anticipate a Biden Administration taking more of a pragmatic approach to trade issues, with an emphasis on multilateralism, engaging with international institutions, and rebuilding relationships with allies in Europe and Asia.
A Biden Administration is also likely to favor a more standardized regulatory framework, as opposed to one that targets specific companies. Biden has not campaigned on actively seeking to negotiate new free trade agreements, instead indicating a focus on domestic priorities and a “Made in America” manufacturing approach, with a particular emphasis on re-shoring critical industries. Accordingly, trade policy would shift more towards the implementation side of recently finalized deals, like the U.S.-Mexico-Canada Agreement (USMCA).
Transportation and Infrastructure
Vice President Biden has touted his transportation and infrastructure priorities as being focused on modern and sustainable infrastructure, and is therefore expected to emphasize job creation, improving equity, and clean energy.
A Biden White House and Democratic Congress would be expected to take up a major infrastructure package in the first 100 days of the administration as a means of economic recovery. We believe the House-passed H.R. 2 would serve as the foundation for this effort. We believe any sort of infrastructure/economic stimulus package passed in the early days of the Biden Administration would include provisions seeking to modernize highways and roads, invest in rail networks, improve ports, expedite 5G technologies, and expand rural broadband.
The FAST Act (the surface transportation reauthorization or highway bill) is set to expire on October 1, 2021 and is expected to be included in this overarching infrastructure package. Nevertheless, the reauthorization will provide a natural focus for lawmakers to consider moving infrastructure legislation forward.
Scenario 2: Trump White House/Republican-Controlled Senate
General Observations
Potential pathways remain in which President Trump may be able to secure reelection by running up voter turnout in battleground states. If this turns out to be the case, the Trump campaign’s momentum is likely to spill over to toss-up Senate races to bring Republican incumbents enough victories to keep the Senate in GOP control. If Republicans hold the White House, Senate Republicans can afford to lose three seats to maintain their majority, as Vice President Pence would cast a tie-breaking vote in a 50-50 Senate.
In stark contrast to Vice President Biden, President Trump has struggled to articulate a vision for a second term. While President Trump’s rallies have been thematically consistent with his 2016 platform, the lack of detailed policy proposals makes it a bit more difficult to forecast the agenda for another four years of the Trump Presidency.
If President Trump is reelected and Republicans retain control of the Senate, our assumption is the policy environment will largely remain status quo and we will continue to see the president focused on his base rather than growing the Republican party’s tent. Even if the president and Senate Republicans secure narrow victories on Election Day, we believe they will proceed as if they have won a mandate to govern. Given the large class of Republican senators who will be in cycle during the 2022 midterm elections, we predict Republicans in Congress will be hesitant to buck President Trump’s leadership or venture too far from towing the party line.
During the lame duck and continuing into the early days of President Trump’s second term, we would expect to see significant personnel turnover across the executive branch. As you might recall, this summer the Trump Administration began subjecting political appointees to interviews to gauge their loyalty to the president. That said, we imagine a newly elected President Trump will have already identified cabinet officials who he might fire immediately after the election. There could be some cases where the president has already privately informed administration officials he may choose to go in a different direction. Others, who may allege they only committed to serving during a first term, could choose to resign on their own.
With several vacancies already observed across the Trump Administration, we speculate it could be difficult for a Trump White House to recruit candidates to fill open positions. In making any new hiring decisions, it is our belief a Trump Administration will continue to prioritize loyalty, perhaps at the cost of policy credentials, during the next four years. It is also possible we will continue to see unprecedented levels of executive branch vacancies, as well as officials who serve only in an acting capacity through the end of President Trump’s time in office.
In terms of how it might work with Congress, we anticipate any major deal-making during the next phase of the Trump presidency would continue to take place between President Trump’s designee and Speaker Pelosi. It remains to be seen, however, if Leader McConnell will work more closely with the White House during President Trump’s second term. This will likely be dependent upon Leader McConnell’s calculations in regard to how embracing a collaborative or combative relationship with the White House could help or hurt incumbent Republican senators who will be in cycle. As a cunning political strategist, Leader McConnell will be primarily motivated by the prospects of retaining a Republican-controlled senate and his majority leader post in 2022.
With a divided Congress and a lack of direction from the White House, we anticipate a sparse legislative agenda if we face this scenario next year. While we anticipate “must-pass” bills, such as appropriations and the annual NDAA, will still get done, many other expiring provisions could see extensions. Our instincts tell us there will be limited windows of opportunity and a short list of non-controversial issues ripe for bipartisan, bicameral activity. Instead, we assume the White House and Senate Republican leadership will continue to coordinate to build upon President Trump’s legacy of confirming more conservative judges to judicial appointments.
Budget, Appropriations, and the Debt Limit
If President Trump is reelected and Republicans control the Senate, our instincts say there could be long, drawn out negotiations over topline spending levels in the absence of budget caps. As evidenced by government shutdowns and fierce battles on appropriations measures during President Trump’s first term, we imagine Speaker Pelosi will continue to be a relentless negotiator for higher spending, particularly on domestic programs, to stimulate the recovering economy. While President Trump has recently signaled an openness to spending on pandemic response efforts, we would anticipate his FY22 budget request will continue to bolster defense spending and make cuts in international and development programs. Overall, we expect Senate Republicans will progress their efforts to reign in federal spending and decrease the debt and deficit.
In a divided Congress, it is unlikely there will be a budget resolution next year, especially as it is unnecessary with no party having the opportunity to pursue legislation by reconciliation. However, a lack of agreement on topline numbers will only increase the possibility the annual appropriations process comes unhinged and that more controversial agencies, if not the entire federal government, are funded on a CR. To the extent the House and Senate advance appropriations measures, we would expect the House to attach riders to their bills as a messaging tactic. Senate Republicans might do the same. Ultimately, this is likely to make conferencing appropriations bills more difficult and could result in relatively clean spending legislation making its way to President Trump’s desk.
President Trump’s campaign has not issued a formal policy agenda for a second term. However, based on the limited vision the president has articulated, including increasing infrastructure spending, reducing federal healthcare expenditures, and increasing resources for border security and immigration enforcement, the Committee for a Responsible Federal Budget estimates a second Trump term would add $4.95 trillion to the deficit. Similar to any other scenario, Congress will once again be in a position to raise the debt limit by August 1. While Congressional Republicans generally oppose the idea of eliminating the debt ceiling, the Trump Administration has previously expressed some interest in exploring reforms. This could include a return to the Gephardt rule, which would allow Congress to raise the debt limit indirectly through the budget process, or an alternative model that would permit the president to unilaterally raise the debt limit and allow Congress to pass a resolution of disapproval.
Defense, Foreign Policy, Immigration, and Intelligence
President Trump’s foreign policy is centered around an “America First” mindset. This led to Trump pulling the country out of the Trans-Pacific Partnership (TPP), as well as the U.N. Human Rights Council, while criticizing U.S. involvement in NATO and demanding that allies pay for U.S. troops stationed within their borders. In a second term, we anticipate the Trump Administration will continue on this course and that the transatlantic relationship will stay on this rocky path, although we do expect President Trump would use another four years to continue efforts to normalize relations between Israel and Gulf states. We also believe the Trump Administration will make renewed push for a nuclear agreement between Russia, China, and the U.S.
Relations with China will remain in the international spotlight, especially as the president continues to publicly blame China for the COVID-19 pandemic and urge other nations to block Huawei and ZTE from 5G network construction. In a similar vein, we anticipate a Trump Administration will increasingly scrutinize relationships between U.S. companies and Chinese state-owned entities and continue its push to re-shore critical supply chains. Aside from integrating lines of work aimed at protecting U.S. economic security from China into its foreign policy strategy, we anticipate a Trump Administration would use its second term to continue its military pivot to the Asia-Pacific.
We believe the “America First” theme in Trump foreign policy would also extend into the immigration space. While immigration advocates have widely criticized immigration policies enacted during President Trump’s first term as inhumane and counter to American values, we believe a second term Trump Administration would seek to identify additional ways to raise the standard for entry into the U.S. In particular, we believe the White House would prioritize limiting asylum grants, outlawing and punishing sanctuary cities, bolstering the travel ban with enhanced visa screening, and placing new limits on work visas.
While the annual NDAA is expected to pass regardless of who holds the majority in the Senate, a Republican Senate would most likely lead to a narrower authorization bill with fewer policy reforms. We believe topline defense spending would remain relatively flat. In a divided Congress, the NDAA cycle would likely become the vehicle for a number of fierce debates on President Trump’s defense and foreign policy agenda, for example, on issues such as winding down U.S. engagement in Iran and Afghanistan, moving U.S. troops out of Poland, transgender military service, and renaming military installations honoring confederate soldiers. It is also unclear how hard a Trump Administration might push for a 500-ship Navy, as recently proposed by Secretary of Defense Mark Esper, someone who is likely to depart ahead of a Trump second term.
During President Trump’s first term, the relationship between the White House and the intelligence community has oftentimes been tense. We would expect a number of key intelligence officials, such as Central Intelligence Agency (CIA) Director Gina Haspel and Federal Bureau of Investigation (FBI) Director Christopher Wrap to top the list of officials who might be asked to resign or leave the administration of their own volition. We anticipate President Trump would prioritize loyalty from anyone who he might appoint to fill such vacancies, which will likely make confirming new intelligence officials difficult, even in a Republican-controlled Senate.
Energy and Environment
During his first term, President Trump took an active deregulatory posture on energy and environmental issues. Actions such as rolling back the Obama-era rule on methane leaks, moving to repeal the Clean Power Act, and signing Executive Order 13807 to streamline environmental permitting processes are all notable examples of the administration’s stance. A second term, particularly with a Republican Senate, would almost certainly see a doubling down on this approach.
The general ethos of many Republicans policymakers when it comes to energy issues can be summarized as follows: “innovation rather than regulation.” In particular, nascent technologies, such as advanced nuclear and carbon capture and storage, have emerged as possible priority areas for Republican members.
Should President Trump win reelection, he would also continue his policy of “energy dominance,” with an emphasis on boosting domestic production of oil and natural gas. Executive Order 13807, which aims to expedite the permitting process for infrastructure projects, was designed in part to make environmental assessments of fossil fuel projects easier to conduct, and could be strengthened with formal legislation. Indeed, Sens. Mike Lee (R-UT), Kevin Cramer (R-ND), and Ted Cruz (R-TX) have already introduced a bill (S. 4862) to reform the National Environmental Policy Act (NEPA) with the purpose of simplifying permitting.
Broadly, a Trump Administration and Republican Senate would continue to prioritize efforts to deregulate what they view as an onerous, overly complicated regulatory regime. Legislation would focus more on job creation and energy production, with innovation and the transition from coal to natural gas serving as the primary driver of greenhouse gas emissions reduction.
Healthcare
In a second term, we expect President Trump to continue to emphasize the development of a COVID-19 vaccine and treatments as a primary method of containing and combating the virus. With regard to coverage, President Trump has supported lawsuits and legislation challenging key elements of the ACA during his first term and would be expected to continue on that path in a second term. The president has previously said he will release a comprehensive replacement plan, but has not offered any details to date.
Additionally, we foresee a reemergence of surprise medical bills in a second Trump Presidency, and unless the issue is handled by Congress during the lame duck period, we could see the Trump Administration try to address it through regulatory efforts. Neither President Trump nor Vice President Biden have taken a position on how the reimbursement rate should be determined.
Technology, Telecommunications, and Cybersecurity
Although tech policy may not be the top issue driving voters to the polls, a victorious President Trump could certainly leave his mark during a second term. His focus might be on issues such as deploying rural broadband, especially in red states; integrating tech issues into Trump foreign policy, for example as part of national security challenges with China; and continuing to beat the drum on anti-conservative political bias on social media platforms. During a continuing Trump Presidency, a second term tech agenda might include more deregulation, selective enforcement of antitrust laws, and limited labor protections for those employed by the gig economy. It also remains to be seen if a proposal to launch a nationalized 5G network will continue to receive attention or fade in the midst of growing bipartisan opposition.
During a second Trump term, there will be changes at the FCC. If the president is reelected and Republicans retain control of the Senate, it is likely Nathan Simington will be confirmed, either during the lame duck or early next year, to fill the open Republican commissioner slot that will be vacated by Commissioner Mike O’Rielly. We anticipate a Republican FCC will continue efforts already underway to improve broadband mapping and dole out subsidies to support telehealth during the ongoing pandemic. The FCC is also likely to proceed with its intent to issue a rulemaking on reforming Section 230 liability protections and to continue to explore avenues for increasing the amount of mid-band spectrum available for unlicensed operations and commercial 5G.
On Capitol Hill, we believe we will see the status quo in the 117th Congress. Without bicameral unity, we believe it will continue to be a challenge for Democrats and Republicans to compromise on some of the most controversial issues, such as privacy, antitrust, or Section 230 reforms, although we are likely to see a number of standalone bills introduced on these matters. We continue to think broadband will be a bipartisan issue and we are also likely to see ongoing bipartisan work on telecommunications infrastructure supply chain issues in the annual NDAA. Finally, since we are already seeing reports of alleged foreign interference and cyber threats around our elections, we believe cybersecurity is an area where Congress might seek to push the administration to implement a more coordinated strategy and hold bad actors accountable.
Trade
As was noted earlier, trade policy is an area where President Trump and Vice President Biden diverge more on the means than on the ends. Given a second term, President Trump would likely continue unilateral action through the imposition of tariffs and sanctions. This sort of mindset is exemplified with the administration’s approach to China. Although the first phase of a trade deal was negotiated between the two superpowers earlier in the year, China has been struggling to meet its purchasing goals. Should this continue, it is possible the administration would seek additional trade remedies by expanding the scope of goods to which tariffs apply. A second Trump term would also likely see continued engagement on and negotiation of free trade agreements with other nations. Finalizing a deal with the United Kingdom (U.K.) figures to be high on that list.
Finally, an area that could generate bipartisan consensus is the reshoring and shortening of supply lines. Already, President Trump has signed Executive Order 13944, which aims to increase domestic production and onshoring of pharmaceutical and medical supplies, and Senators from both parties, including Sens. Tom Cotton (R-AR) and Elizabeth Warren (D-MA), have introduced legislation addressing this issue. Given the growing animosity towards China and renewed calls to boost in-country manufacturing, this is a topic that is likely to generate significant attention.
Transportation and Infrastructure
In 2016, the Trump campaign promised a bold investment in infrastructure that could top a trillion dollars. However, the President has yet to advance infrastructure legislation through Congress after nearly four years in office. The Trump campaign has remained fairly quiet on what the president’s infrastructure agenda in his second term might look like.
Our instincts tell us that in a second Trump Administration and a Republican-controlled Senate, we could see the issue being brought to the forefront again as many lawmakers believe infrastructure is still an area where bipartisanship is possible. Not only that, but with the economy still recovering from the COVID-19 pandemic, there seems to be some consensus that an infrastructure package could generate much-needed economic stimulus. The sticking point still remains how Congress and the administration might pay for such large infrastructure investment, especially as President Trump has been ambivalent about relying heavily on leveraging additional private financing through public-private partnerships.
Scenario 3: Biden White House/Republican-Controlled Senate
General Observations
While it is unlikely there will be both a Biden White House and a Republican-controlled Senate, it is important to consider the implications of this scenario on the regulatory and policy environment. This scenario would be a departure from the pattern we have seen for deal making between the Trump White House and the divided 116th Congress.
For example, over the past four years we have seen most policy vehicles negotiated between the Trump Administration, and in particular, Treasury Secretary Steven Mnuchin, and Speaker Pelosi. Despite the Republican majority in the Senate, Majority Leader Mitch McConnell (R-KY) has largely been on the sidelines. While this may have been part of Leader McConnell’s strategy to allow vulnerable Republican incumbents who are in cycle to vote the way they need to, it means he has not been a party to negotiations on major legislation ranging from appropriations to COVID relief. If the White House flips and the Senate remains under Republican control, Leader McConnell will be forced back to the negotiating table. This is likely to drive policymaking to the middle, and materialize in bans on riders on appropriations bills or other controversial or non-germane amendments on other legislative vehicles.
If President Trump loses reelection, it is unknown whether or not Senate Republicans would continue their investigations into President Biden and members of the Biden family, such as Hunter Biden’s dealings in Ukraine. Our gut says this will be a strategic decision for Republicans. On one hand, Republicans might choose to continue these investigations with the objective of distracting the administration and putting the new president in a negative light. On the other hand, the 2022 Senate map could be enough to drive Senate Republicans to drop their investigations and instead focus their energy on proving the chamber can be productive under Republican control.
Under this scenario, we anticipate a Democratic House would continue to introduce legislation and hold votes on bills that would be “dead on arrival” in a Republican-controlled Senate. These efforts would be intended to send a strong message on Democratic priorities. A Biden White House could potentially amplify such activity in a Democrat-controlled House to apply pressure on Leader McConnell and a Republican-controlled Senate. Further, this tactic could be leveraged to support both House and Senate Democrats running for reelection in 2022 by painting the Republican-controlled Senate as obstructionist.
Impacts on Policymaking
Conventional wisdom is that divided government can lead to gridlock. Under this scenario, unique regulatory and legislative strategies may be needed to address various policy priorities. This means it will be difficult to move many bills as standalone measures. As a result, we could see most policymaking taking place on “must-pass” bills, such as a COVID relief measure, infrastructure package, appropriations bill, or the NDAA.
Scenario 4: Trump White House/Democrat-Controlled Senate
General Observations
Of all of the potential elections outcomes scenarios, a Trump White House and a Democrat-controlled Senate is unquestionably the most unlikely. President Trump’s first term has admittedly been chaotic, and under the scenario, we anticipate another four years would be much the same.
It is unknown how President Trump may change his style of governing since he will be term limited from appearing at the top of the Republican ticket in 2024. While we do not necessarily think President Trump has been guided by popularity ratings or polling during his first four years in office, we wonder if he could be even more emboldened to act on his gut instincts knowing he does not have to run for reelection. It is our suspicion that President Trump will care little about positioning the Republican party to win the presidency in 2024. However, we question if, during a second term, President Trump might seek to create opportunities for other members of the Trump family who serve in the administration to build foundations for future presidential aspirations.
If this scenario comes to fruition, a Trump Administration would likely have a difficult time confirming any cabinet-level or judicial nominees in a Senate where Democrats are in the majority. This could exacerbate a growing wave of vacancies at various federal government agencies and potentially slow regulatory or deregulatory activity. It would also bring President Trump’s efforts to shape a more conservative judiciary to an abrupt halt.
With Republicans in control of the executive branch and Democrats in control of the legislative branch, almost any legislation that reaches the president’s desk would likely have to be carefully negotiated by Democratic Congressional leaders and representatives of the Trump Administration. However, as the Trump White House has trended less conservative than the Republican-controlled Senate in the 116th Congress, this scenario could actually present opportunities for bipartisanship, potentially on issues such as COVID relief and infrastructure.
The ability for a Republican Administration to work with a Democratic Congress could depend on how aggressively Congressional Democrats choose to use their majorities in both chambers to exercise oversight and investigate President Trump and others serving in the administration. We believe, to a certain extent, Democrats will choose to continue these efforts to mitigate the risks of primaries from the left. However, with 2022 in mind, Democrats will also be forced to undertake efforts to prove to voters that they can govern in the majority. Similar to what many House Democrats said at the start of the 116th Congress, their party will have to “both walk and chew gum at the same time.”
Impacts on Policy Making
History has taught us that we should not expect significant compromise under the rule of a divided government. While we anticipate a Trump White House and a Democratic Congress would be able to identify mutual priorities that result in moving legislation, these vehicles may be few and far between. Under these circumstances, if Democrats and Republicans cannot determine ways to work together, it is likely that many major policy decisions could be made in the courts.