With Senate control in doubt and the Trump administration continuing to file lawsuits over election results, Democrats' more ambitious economic policy priorities remain on hold, forcing the transition team for President-elect Joe Biden to focus the next 11 weeks on negotiating the next round of economic relief and crafting a plan to address skyrocketing U.S. coronavirus cases.
The team announced four priorities to address during the transition: COVID-19, economic recovery, racial equity and climate change. But this work has begun while the Trump administration has refused to concede the presidential election and has given no indication it plans to work with Biden's team on the transition, so market analysts see a narrower set of winnable goals for the transition.
"This is probably a minor hindrance and a bit of an annoyance, but it's probably not a huge deal," said Ian Katz, director and financial policy analyst at Capital Alpha Partners. "They still can address policies they want to address. They can still evaluate the people they are thinking of putting in positions. I think it's more of a logistical issue."
Democrats still have an outside shot at taking control of the U.S. Senate, depending on the outcome of two Georgia races set for runoff elections Jan. 5, but the failure of a "blue wave" to materialize in the election lessens the likelihood of a hefty legislative push early in the Biden administration, Katz said. The Democrats would need to win both runoffs to reach 50 Senate seats, creating a tie that would be broken by Vice President-elect Kamala Harris.
Many of the items on a Democratic wish list, such as a major tax reform package, financial transaction tax, private equity restrictions and a push to break up big banks, would be non-starters in a Republican-controlled Senate.
"None of that is going to happen, so in a way, it simplifies the approach," Katz said. "They'll focus on stimulus. They'll focus on how they'll address COVID."
In a Nov. 9 note, Brian Gardner, chief Washington policy strategist with Stifel, said he expects negotiations on a stimulus package will range from $1 trillion to $2 trillion. Still, he said the news Nov. 9 of a potential breakthrough by Pfizer Inc. on a COVID-19 vaccine might lessen the urge for Republicans to agree to a large stimulus.
"Republicans might dig in against a bill that approaches $2 trillion, so the lower end of the range seems more likely," Gardner said.
The stimulus negotiations will be paramount as Biden is set to inherit a pandemic-rattled economy that has yet to recover about 10.1 million of the 22 million jobs lost since March.
"While we're in a better place than many economists said we'd be this summer, we still have a long way to go," Neil Bradley, executive vice president and chief policy officer with the U.S. Chamber of Commerce, said in a Nov. 9 call with reporters.
Bradley said the Chamber will likely push the administration on numerous fronts, including a shift in trade policy away from punitive tariffs, a reversal of Trump’s executive actions on immigration, and a broad infrastructure program, but the priority will be the next stimulus package.
"We feel the incoming administration is well positioned to hit the ground running from day one," Bradley said.