Although the final numbers aren’t in yet, it looks like the 2020 election will deliver a divided Congress to whichever party claims the White House.
Democratic hopes for a “blue wave” fell by the wayside pretty quickly Tuesday night, and it now seems likely that Democrats will keep control of the House while Republicans will maintain their majority in Senate following big wins for a handful of GOP incumbents in some closely watched races, including Susan Collins in Maine, Thom Tillis in North Carolina and Lindsey Graham in South Carolina.
And while former vice president Joe Biden now appears to have an easier path to 270 Electoral College votes than President Donald Trump, without unified control of the government, either man will have a tough time advancing his agenda.
The most likely outcome in numerous important policy areas is a continuation of the status quo, with little room for major changes. “[F]or now, the main takeaway appears to be that whoever wins the presidency probably faces continued gridlock in Congress,” Jonas Goltermann of Capital Economics wrote Wednesday.
Here’s how a divided government could play out on some key issues.
Smaller coronavirus stimulus: Democrats have been seeking a coronavirus package worth at least $2 trillion, and a blue wave could have produced legislation totaling even more. But with the Senate in Republican hands, the stimulus will likely be much smaller.
Senate Majority Leader Mitch McConnell (R-KY) — who cruised to reelection and is expected to return as leader, assuming Republicans maintain control — said Wednesday that an aid package would be a top priority, even before the next administration is sworn in, and that he was open to including aid for state and local governments, a key point of disagreement in previous negotiations.
“We need another rescue package,” McConnell said. “The Senate goes back into session next Monday. Hopefully the partisan passions that prevented us from doing another rescue package will subside with the election. And I think we need to do it and I think we need to do it before the end of the year.”
Whether Trump would be interested in signing such a bill remains an open question, especially if he loses. But regardless of whether a stimulus package is sent to a Trump or Biden White House, it will almost certainly be smaller than it would have been had Democrats managed to pull off a clean sweep.
“With Republicans still in charge in the Senate, we’d be surprised to see a stimulus bill early next year much in excess of $500 billion, far less than the $2 trillion we expected if Democrats had won,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said Wednesday.
The markets sent signals Wednesday that traders were adjusting to the prospect of a smaller stimulus. “The yield of 10-year US Treasuries has fallen by about 10bp since the results started coming out overnight ... and the yields of other high-grade government bonds have fallen too,” Goltermann of Capital Economics said. “The expectations of a big post-election fiscal deal had been a key factor pushing US bond yields higher over the past few weeks.”
No big changes for tax policy: Joe Biden wants to increase taxes on businesses and the wealthy in order to pay for some of his ambitious agenda, which includes huge spending increases on health care, education and green energy. But a Senate controlled by McConnell is very unlikely to approve such changes, which include reversing some of the tax cuts Republicans passed in 2017.
Similarly, a Trump administration would have a difficult time passing more tax cuts with Nancy Pelosi (D-CA) in control of the House.
Smaller tweaks for health care: Biden has proposed expanding the Affordable Care Act, but a divided Congress probably eliminates that possibility.
“If Republicans keep their majority in the Senate, Biden's more expansive plans for addressing health care affordability by expanding ACA subsidies and adding a public option seem dead in the water,” Larry Levitt of the Kaiser Family Foundation said.
Biden could still make numerous tweaks to the health care system through executive actions, just as Trump has done. Levitt listed a few of those potential changes: “Put scientists front and center, Extend ACA open enrollment, Reinstate ACA outreach funding, Limit short-term plans that don’t cover pre-existing conditions, Undo family planning funding restrictions.”
Biden would not be able to eliminate the threat to the Affordable Care Act posed by a lawsuit seeking to invalidate the law.