7 things that will change when Democrats control the Senate
Democrats have pulled off an apparent sweep in the 2020 elections, after all.
Incoming President Joe Biden and his fellow Democrats underperformed in the November elections, winning fewer Senate seats than polls predicted and losing seats in the House. Biden himself won several key swing states by a vote margin of less than 1%.
But the surprise wins by two Democratic challengers in the Georgia Senate runoff races on Jan. 5 will give Democrats the narrowest possible majority in the Senate, and total control of government for at least the next two years. That will produce a different set of legislative outcomes than if Republicans had held the Senate and exercised a kind of veto power over Democratic priorities. Here’s what’s likely to change:
Cabinet nominees. Biden is now likely to get most or all of his Cabinet nominees confirmed, instead of battling with Republicans who may have torpedoed nominees they felt were too liberal or otherwise objectionable. That’s good news for Neera Tanden, Biden’s controversial nominee to be budget director, who has clashed with many Republicans and was a possible shoot-down. She’s more likely to make it now. It also allows Biden to tap Judge Merrick Garland as attorney general, as reported, because a Democratic Senate will likely confirm a like-minded judge on the appeals court where Garland now serves. Biden will have a much easier time getting judicial nominees confirmed, as well.
More stimulus money. Biden said on Jan. 4 that if Democrats take the Senate, “those $2,000 checks will go out the door.” He was referring to a proposal to send $2,000 stimulus checks to most Americans that the Senate shot down in late December. Congress did approve $600 checks at the end of last year, so Democrats might settle for $1,400 checks, to make up the difference. That’s not necessarily the best use of stimulus money. Targeting aid at the unemployed would probably be more effective. But having made this promise, Democrats probably need to follow through. It will add to the annual deficit but help the economy in the short run.
More aid for cities and state. Senate Republicans shot this down in the last stimulus bill because Democrats wouldn’t agree to their demand for a coronavirus liability wavier for businesses. Democrats won’t have to negotiate on that now, and will probably approve at least $160 billion in state and local aid. The next stimulus package, likely around March, will probably include another extension of supplemental unemployment insurance for those out of work, as well. The current benefit, $300 per week, will expire in March. Some Democrats want to raise this to $600, but that might be too costly if coupled with another round of stimulus checks. All told, new stimulus spending in 2021 could total $1 trillion, double or triple what a Republican Senate might have approved.
Higher taxes. Businesses and investors worry most about Biden’s plan to raise taxes, but Biden’s plans are not likely to become reality any time soon. Biden wants to raise the corporate rate from 21% to 28%, and raise income tax raise on workers earning more than $400,000. He’d also raise the capital gains tax for people earning more than $1 million. There are a couple problems with this agenda. First, raising anybody’s taxes during an economic downturn such as we’re in now can harm a recovery. So Biden might have to wait. Second, there are three or four conservative Democrats in the Senate who are unlikely to vote for major tax hikes, and might support a deeply discounted version of Biden’s plan, at best. Goldman Sachs predicts Democrats will only pass “incremental increases in taxes,” and not until late in 2021.
Repeal of the limit on SALT deductions. The Republican tax law of 2017 capped the amount of deductions for state and local taxes at $10,000. That affected high-income Democratic states such as New York and California more than Republican states, and Democrats have sought to reverse the change ever since. That could be part of tax legislation in 2021, but the problem for Dems is that repealing the SALT deduction mainly benefits wealthy taxpayers. To divert attention from that, Dems would have to raise other taxes on the wealthy and maybe include a modest tax cut for middle-income workers.
Infrastructure spending. Biden wants a big infrastructure bill, and some Republicans might go along with it. The catch is that this would require funding, which gets back to those tax increases. So even if Democrats can agree among themselves on a spending bill, they might not agree on where to get the money.
Obamacare. The Affordable Care Act will survive, despite court challenges that are still trying to kill it. Democrats can now pass simple changes to the law that would invalidate the recent suit against the law the Supreme Court heard in November. More than a decade after Congress passed the ACA, legal challenges might finally end. Democrats could also vote to make modest improvements, such as raising the income cutoff for people to qualify for insurance subsidies. Republicans are already plotting how to take back control from the Democrats in the 2022 midterms, but they’re probably done promising to “repeal and replace” the ACA.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Click here to get Rick’s stories by email.
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