- Control of the U.S. Senate hinges on a January runoff election, and Republicans could retain control of the chamber if they win at least one seat
- President-elect Joe Biden’s options would be limited under a divided Congress, but he could influence economic policy from the executive branch through regulations, personnel changes, and executive orders
- Connecting environmental initiatives to economic ones could foster progress on climate policy
When President-elect Joe Biden takes office on Jan. 20, the ambitiousness of his economic agenda could hinge on two runoff elections earlier in the month.
Since none of the candidates for U.S. Senate from Georgia earned a majority, new contests were scheduled. Twin Democratic victories would split the chamber evenly, although Vice President Kamala Harris would have the power to break ties. If either race goes to the Republicans, they’ll retain a slim majority in the Senate.
A split Congress and divided government is a pleasing prospect for Wall Street, whose investors see such an arrangement as limiting any major reforms or policy shifts. At the same time, the COVID-19 pandemic has weakened the labor market and shuttered thousands of businesses, and the same partisan divide has hindered efforts to pass a new round of economic stimulus.
While a Republican majority in the Senate could limit Biden’s economic actions, there are still several actions he could take without legislative approval. These include executive orders, regulations, and choosing the personnel who make various economic decisions.
Some avenues open to the President-elect include forgiving student loan debts up to a certain amount, raising the minimum wage for federal contractors, and overhauling the lending programs established by Federal Reserve to make them more attractive to businesses. He could also make decisions on certain tax regulations, trade policy, and leadership at regulatory agencies, allowing for stronger oversight as well as changes such as regulation of payday lending and consumer protections on debt collection.
Since a split Congress could also derail major action on environmental issues, Biden might yoke these policies to economic stimulus programs as well as COVID-19 legislation. For example, the White House could introduce programs and incentives aimed at supporting research and development on combatting climate change and accelerating the adoption of renewable energy. These could even prove to win broader support, as businesses have increasingly made commitments to reduce their impact on the environment and climate change.
Biden has pledged to rejoin the Paris Agreement, and could also take steps such as establishing regulations on greenhouse gas emissions and fuel efficiency standards. Other options include opening a climate office at the White House to coordinate environmental efforts and having financial regulators incorporate climate risks as part of their mandate to monitor and identify emerging threats to financial stability.
