13 Areas Impacted by the 2020 Election and What You Need to Know

Countless high-profile issues will be impacted by the 2020 election. In this alert, our team analyzes key topics with broad influence and offers insights related to policy outcomes by party.

The United States is no stranger to divisive and spirited presidential and congressional campaigns. This year's fast-approaching elections, however, appear to reflect deeper political chasms between candidates and parties than we have experienced in at least a generation. The resulting incivility is further exacerbated by voters' profound uncertainty and anxiety driven by the COVID-19 pandemic, the ensuing economic carnage, deepening social strife, and increasing apprehension about the electoral system's ability to accurately collect and count ballots in a timely manner.

While all elections have consequences, the results of this year's elections across the board may be more significant than most on a number of levels, but especially in terms of policy pursuits. Moreover, if the Democrats win both the White House and the Senate—while holding the House—the Senate legislative filibuster may be eliminated, removing a major procedural obstacle to legislation enacted by a simple majority.

Below, we examine how the results of this election may impact policy issues in 13 areas, noting party differences, key players, and trends to watch.

Appropriations
+

The Issues at Stake

Given that this is an election year and partisan gridlock has reached historic levels, it is anticipated that Congress will again fail to pass all of the individual appropriations bills for the next fiscal year. The typical issues that create roadblocks to passage of individual appropriations bills such as abortion funding and defense spending remain; new barriers include border wall funding and the renaming of military bases.

Congress is expected to pass a continuing resolution running through mid-December, which would force Congress to return after the election to further fund the government beyond that date. Action on an additional COVID-19 response package is unlikely before the election, possible during a lame duck session of Congress, but most likely in the new Congress.

 

The Positions

In the event that President Trump is reelected and Democrats hold control of one or both chambers of Congress, then the status quo of modest increases in federal spending is likely to continue.

In a Biden administration it should be expected that Republicans in Congress – whether in the majority or minority – will return to their fiscal conservative roots and oppose new spending, in the context of both regular federal appropriations and their COVID-19 response.

Defense
+

The Issues at Stake

While defense policy will not be a top priority for either a Biden or a Trump administration, it will still be an issue that consumes considerable debate regarding funding priorities. Should Democrats control the White House and both chambers of Congress, there will likely be a push to increase funding for domestic programs, with spending offsets coming from cuts to defense programs. Should Republicans maintain control of the Senate or President Trump be reelected, moderate increases in defense spending are likely.

 

The Positions

Defense Funding


Democratic: Vice President Biden has outlined the need to make investments in newer defense programs and emerging technologies instead of continuing to fund legacy programs that are too focused on traditional warfare. Biden has specifically cited the need for investments in cybersecurity and space.

Republican: Trump has touted his efforts to rebuild the military and has emphasized increasing the number of military planes and ships during his administration. He created the Space Force and has stated his desire to continue to build America's space program. Trump elevated the U.S. Cyber Command to a major warfighting command focused on both defensive and offensive capabilities.

Diplomacy


Democratic: Biden has emphasized the need to work with U.S. allies on shared goals. He has outlined a platform that calls for restoring U.S. partnerships and reimagining them for the future. Biden has called for reengaging and strengthening diplomatic alliances around the globe. He also looks to renew the U.S.'s commitment to arms control and would reenter the Iran nuclear deal if Iran returns to compliance with the deal.

Republican: Trump uses a maximum-pressure strategy to confront Iran, Venezuela, Cuba, and other adversaries. However, he has also been open to talks with leaders of traditional U.S. foes, such as North Korea's leader Kim Jong Un and Russian President Vladimir Putin. His administration signed a peace deal with the Taliban earlier this year. Trump has been a strong proponent of arms sales to allies, including controversial sales to Middle East countries such as Saudi Arabia and the United Arab Emirates (UAE). With the recent agreement on diplomatic relations between Israel and the UAE, Trump has indicated he would be open to selling the UAE advanced weaponry, including the F-35.

Regional Conflicts


Democratic: Biden is opposed to "forever wars" in the Middle East and Afghanistan and has pledged to bring home the majority of troops from those regions during his first term. However, he supports maintaining a small number of intelligence and special operation forces in those regions to work with local partners to engage in counterterrorism and deter aggression. He supports a narrow use of force when there is an identified need to defend U.S. vital interests and there is a clear and achievable goal.

Republican:  Trump has campaigned on bringing the troops home from wars that do not serve American interests. During his first term, he has drawn down troop levels in Afghanistan and Syria. He has just recently announced a plan to draw down troops currently serving in Iraq by up to a third.

 

The Key Players

If Democrats take control of the Senate, Patrick Leahy (D-VT) would be the expected chairman of the Senate Appropriations Committee. Should the Senate remain in Republican hands, current Chairman Richard Shelby (R-AL) would likely remain chair of the committee.

It is the same situation on the Senate Armed Services Committee; Jack Reed (D-RI) would chair the committee if Democrats take control of the Senate while James Inhofe (R-OK) would remain chairman if the Senate remains in Republican hands.

The House is expected to remain in Democratic control, meaning Adam Smith (D-WA) would remain at the top of the House Armed Services Committee. With the pending retirement of Ranking Member Mac Thornberry (R-TX), Republicans will be selecting a new ranking member of the committee in the next Congress.

Both House Appropriations Committee Chair Nita Lowey (D-NY) and Defense Appropriations Subcommittee Chair Pete Visclosky (D-IN) are retiring after this Congress. That leaves several Democrats jockeying for the top positions for the full committee and the Defense Subcommittee for the 117th Congress. Current committee Ranking Member Kay Granger (R-TX) and Defense Subcommittee Ranking Member Ken Calvert (R-CA) are expected to remain the top Republicans of the full committee and subcommittee.

Key players in the Biden campaign and likely front-runners for roles in a Biden administration would include the following:

Secretary of Defense

Michèle Flournoy is currently considered the front-runner for the secretary of defense role. When she was confirmed by the Senate in 2009, she was the highest-ranking female at that time in the Pentagon's history. Flournoy served as under secretary of defense for policy in the Obama administration from 2009 to 2012. She also served in the Clinton administration as a deputy assistant secretary of defense for strategy and threat reduction and deputy assistant secretary of defense for strategy. Flournoy is currently the co-founder and managing partner of WestExec Advisors, which is a geopolitical advisory firm specializing in defense, foreign policy, and cybersecurity.

Tammy Duckworth (D-IL) is currently a senator and was on Joe Biden's short list for vice president. She is a retired army national guard lieutenant colonel who lost both of her legs when her Black Hawk helicopter was shot down in Iraq in 2004. Her seat would remain in Democratic hands, as Illinois' Democratic governor, J.B. Pritzker, would appoint her replacement. Duckworth has been a U.S. senator since 2017 and was a member of the House of Representatives from 2013 to 2017. Before being elected to the House of Representatives, Duckworth served as assistant secretary for public and intergovernmental affairs at the U.S. Department of Veterans Affairs. She is also considered a top contender for the secretary of the Department of Veterans Affairs in a Biden administration.

Jack Reed (D-RI) has been a senator since 1997. He has had a long tenure as the top Democrat on the Senate Armed Services Committee. As a graduate of West Point, he served in active duty in the army from 1971 to 1979 and then the army reserves from 1979 to 1991. Reed is well respected in the Senate by both Democrats and Republicans. Reed would likely not be interested in the secretary position, as he has turned down previous offers for the secretary of defense role under President Obama.

Secretary of State

Susan Rice has been active in the Biden campaign and was seriously considered for vice president on the Biden ticket. Rice served as the U.S. ambassador to the United Nations from 2009 to 2013 and as national security advisor from 2013 to 2017. She worked closely with Vice President Biden on national security for eight years during the Obama administration and remains a close confidante of Biden. Rice was in consideration to replace Secretary of State Hillary Clinton but withdrew from consideration because of controversy regarding the Benghazi attack. Rice also served on the National Security Council in several roles during the Clinton administration. She is a distinguished visiting research fellow at American University's School of International Service and a nonresident senior fellow at Harvard's John F. Kennedy School of Government's Belfer Center for Science and International Affairs. Rice currently serves on the board of Netflix and is a member of the Aspen Strategy Group, American Academy of Diplomacy, and Council on Foreign Relations.

Tony Blinken serves as the senior policy advisor for the Biden campaign. In his role, he has actively directed the campaign's positions on foreign policy and national security and has been very active in fundraising. Blinken served as deputy secretary of state and deputy national security advisor in the Obama administration. Previously, Blinken served as national security advisor to Vice President Biden. He knows how to navigate Capitol Hill, as he served as the Democratic staff director on the Senate Foreign Relations Committee from 2002 to 2008. Blinken is a partner of the private equity firm Pine Island Capital Partners but recused himself from the firm to work on the Biden campaign.

Chris Coons (D-DE) won the Senate seat Biden vacated to become vice president in the Obama administration. He is a member of the Senate Foreign Relations Committee and has been a prolific fundraiser for the Biden campaign, headlining several foreign policy events. Coons has a close relationship with the Bidens, including Joe Biden's late son, Beau. He has a good relationship with his colleagues in the Senate and would easily win confirmation for a position in a Biden administration. Senator Roy Blunt (R-MO) even said of Coons, "I prefer to think of him as a potential secretary of state." If Coons vacates his seat, Democratic governor John Carney would appoint his replacement until a special election takes place.

Karen Bass (D-CA 37th) was also mentioned as a possible running mate for Joe Biden. She serves on the House Foreign Affairs Committee and chairs the Subcommittee on Africa, Global Health, and Human Rights. Bass was first elected to Congress in 2010. Previously she served as speaker of the California Assembly. She may have a tough confirmation fight in a closely divided Senate because of comments she made in 2016, calling Fidel Castro's death a "great loss" for Cuba. Bass is also considered a top contender for an appointment by California Governor Gavin Newsom to fill Senator Kamala Harris's seat if Joe Biden is elected president.

National Security Advisor

Tony Blinken and Susan Rice may also be considered for this role. Jake Sullivan serves as a senior policy advisor to the Biden campaign. He held the same role during Hillary Clinton's 2016 presidential run and was regarded as the front-runner for the national security advisor role in a Clinton administration. Sullivan served in the Obama administration as under secretary of state for political affairs. He also served as national security advisor to Vice President Biden during the Obama administration. Sullivan is a Montgomery Fellow at Dartmouth College and a senior fellow and master's in public policy faculty member at the Carsey School of Public Policy.

Education
+

The Issues at Stake

Back-to-school season is drawing intense interest as students, teachers, staff, and administrators begin the school year against the backdrop of an unprecedented global pandemic. Policies and funding—from early childhood education (ECE) to higher education—are being hotly debated from the halls of Congress and the executive branch to communities across the country. Families around the U.S. are navigating a variety of delivery models as localities balance academics with new public health and safety concerns.

 

The Positions

Democratic: Should Vice President Joe Biden win the presidency, many of Secretary of Education Betsy DeVos's policies are expected to be reversed or replaced, such as the new Title IX regulations. Congressional Democrats will focus on higher education, put pressure on for-profit schools, elevate funding and policy for public education over private education, and increase support for childcare and ECE.

More specifically, we could see another attempt at Higher Education Act (HEA) reauthorization, which could include federal-state partnerships, an increase in Pell Grants and federal undergraduate student loan limits, income-based repayment (IBR), loan forgiveness, and free tuition for students in need. We expect action on the first five years as well. Senate Health, Education, Labor, and Pensions (HELP) Committee and Labor, Health and Human Services, Education, and Related Agencies (LHHS) Appropriations Subcommittee Ranking Member Patty Murray (D-WA) is a long-standing advocate of ECE, including increasing funding for programs like the Child Care and Development Block Grant (CCDBG) and Head Start. In the 115th Congress, she put forward the Child Care for Working Families Act (CCWFA) with House Education and Labor Committee Chairman Bobby Scott (D-VA). In the House, it is instructive that one of Representative Scott's first big bills of the 116th Congress was the Rebuild America's Schools Act, which focused on repairing and modernizing school facilities. Given the considerable costs schools are facing during the pandemic, this bill remains as relevant as ever. Representative Scott also put forward a higher education bill, the College Affordability Act, which will inform how a Democratic House will approach HEA in the new Congress.

Republican: The Republican policy priorities of the Senate HELP Committee will depend largely on who ends up in the top spot (discussed below). For example, Richard Burr (R-NC) was a significant driver of the last CCDBG reauthorization in 2014 and has an interest in improving health and safety in ECE. Rand Paul (R-KY) recently introduced the Support Children Having Open Opportunities for Learning (SCHOOL) Act which would allow federal funds for K-12 education to "follow the student." Susan Collins (R-ME) continues to advocate for rural education in bills such as the Success for Rural Students and Communities Act, while at the same time playing a role in a wide range of educational issues before HELP. Bill Cassidy's (R-LA) primary focus would be on healthcare, but he is dedicated to school choice in K-12 and, in the realm of higher education, has promoted several initiatives, including the College Transparency Act to improve student outcomes using data at the Department of Education. Senate LHHS Chairman Roy Blunt (R-MO) shares Senator Murray's support for public four-year colleges and universities, and through his role on the Appropriations Committee can be expected to continue to advocate for them, especially with state budgets busted. On the House side, Education and Labor Ranking Member Virginia Foxx (R-NC) has one more Congress as the top Republican on the committee, and higher education remains a top priority for her. Representative Foxx will continue to push for increased transparency in higher education, streamlining student aid programs and loan repayment options, and refocusing accreditation policies.

 

The Key Players

If Democrats take control of the Senate, current Ranking Member Murray is expected to chair the HELP Committee. Under this scenario, Senator Murray would also resume her chairwomanship of the LHHS Appropriations Subcommittee, with Senator Blunt as her counterpart. Whichever party controls the chamber next Congress, the retirement of current HELP Chairman Lamar Alexander (R-TN) means the committee will have a new top Republican. Senator Burr has seniority, followed by Senators Paul, Collins, and Cassidy. Additional clarity on this point hinges on the resolution of Senator Burr's insider trading investigation as well as the November elections.

The leadership of the House Education and Labor Committee is anticipated to remain the same, with Representatives Scott and Foxx as chairman and ranking member, respectively. Current House LHHS Subcommittee chair Rosa DeLauro (D-CT) could become full Appropriations Committee chairwoman next Congress, and her counterpart, Representative Tom Cole (R-OK), is likely to remain LHHS ranking member.

Should Vice President Biden win the presidency, we believe it's likely he will choose a secretary of education with direct public school experience, such as a current or former superintendent or other administrator. We think it's also possible that Elizabeth Warren (D-MA) could have a role in shaping education policy, given her focus on the issue during the campaign season.

Energy and Environment
+

The Issues at Stake

Energy and the environment are issues where President Donald Trump's administration has made significant strides in rolling back or slowing down regulations and initiatives implemented during President Barack Obama's administration. Whether the election results in a second Trump term or a first term for Vice President Joe Biden, aggressive executive and regulatory activities on these issues are likely to continue. The party that controls the Senate will be a factor in the possibility of congressional action, but even a Democratic Senate majority would include enough moderate members from energy-producing states to make ambitious proposals that are supported by the progressive wing of the party unlikely to pass.

 

The Positions

Democrat: Biden has proposed a $2 trillion climate plan focused on the use of clean energy in the transportation, building, and power sectors. Many of these provisions could be included in an infrastructure or jobs package if Congress takes one up. Biden has also announced his intention to rejoin the Paris Climate Agreement, from which Trump withdrew the United States in 2017, and push for stronger international agreements. He is likely to ban new oil and gas permits on federal lands, including within the Arctic National Wildlife Refuge (ANWR), and impose aggressive methane pollution limits on oil and natural gas. Although energy and environment policies are areas where Biden has moved further to the left over the course of his campaign in an effort to compromise with the more progressive wing of the Democratic Party, he still opposes a ban on fracking and has made clear that job creation and union support are key components of his energy and environment policies. Should Democrats take over all the levers of power in Washington, they may utilize the Congressional Review Act (CRA) to rescind so-called midnight regs left in the final months of the Trump administration, particularly those coming out of the Environmental Protection Agency (EPA). Biden's financial services plan also includes proposals for increased disclosure on climate-related issues, including bank exam requirements regarding climate change's effect on bank safety and soundness.

House Democrats put forward the Growing Renewable Energy and Efficiency Now (GREEN) Act in June, with tax incentives promoting the deployment of green energy technologies and reduction of greenhouse gas emissions. Senate Democrats also addressed these issues through Finance Committee Ranking Member Ron Wyden's (D-OR) amendment to American Energy Innovation Act (AEIA), which is almost identical to the GREEN Act in scope, and in the Clean Energy for America Act. The Clean Energy for America Act, introduced by Senator Wyden last Congress, effectively represents the Senate Democratic position. It is backed by Senate Minority Leader Chuck Schumer (D-NY) and cosponsored by over half the caucus.

Republican: If the status quo is maintained, the Republican agenda would be more of the same: continuing the Trump administration's agenda of deregulation designed to unleash production and buttress what they have termed "American energy dominance." A second Trump administration is expected to continue to oppose efforts that require climate change disclosures in financial services sectors, which the Securities and Exchange Commission (SEC) continues to maintain are immaterial to investors. Regulators will also push the notion that climate expertise is out of their purview, and regulatory requirements on the issue will create more problems than fixes. From a legislative standpoint, a strong candidate for action could be the aforementioned AEIA, a broad package of bipartisan energy and lands bills that have previously been reported by the Senate Energy and Natural Resources (ENR) committee. While the bill stalled out earlier this year amid parochial disagreements, and was put on hold during a COVID-19-oriented spring and summer, it would be near the top of the agenda for a Republican-controlled Senate in the 117th Congress, particularly with outgoing ENR Chairwoman Lisa Murkowski (R-AK) facing reelection. The Energy Savings and Industrial Competitiveness Act (ESIC), a bipartisan energy efficiency bill long championed by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH), is another measure that could once again see floor time.

 

The Key Players 

ENR Committee Chairwoman Murkowski will be termed out as both the chairwoman and ranking member of that committee. Therefore, regardless of which party has control of the chamber, John Barrasso (R-WY) is expected to replace her as the top Republican on the committee. As a result, he will vacate the top Republican slot at the Senate Environment and Public Works (EPW) Committee, leaving Shelley Moore Capito (R-WV) to replace him there. Joe Manchin (D-WV) and Tom Carper (D-DE) are expected to retain their roles as the top Democrats at ENR and EPW, respectively. If Democrats take control of Congress and the White House, Wyden would be expected to chair the Senate Finance Committee (and will be the top Democrat on the Senate Finance Committee if the GOP retains control of the Senate). Six GOP Finance Committee members are either retiring or up for reelection in 2020, and Chuck Grassley's (R-IA) tenure as chairman of the Finance Committee ends this year. Thus, if the GOP maintains its Senate majority heading into 2021, the committee will be led by a new chairman, and its membership could look different.

The story is similar in the House, where Energy and Commerce Committee Chairman Frank Pallone (D-NJ) and Natural Resources Committee Chairman Raul Grijalva (D-AZ) are expected to return to those positions. However, the Republican ranking members of both committees are retiring. On the Republican side, Cathy McMorris Rodgers (R-WA), Bob Latta (R-OH), and Michael Burgess (R-TX) are all vying to become the next top Republicans on Energy and Commerce after Greg Walden (R-OR). And with Rob Bishop (R-UT) vacating the ranking member position on the Natural Resources Committee (NRC), Bruce Westerman (R-AR), Doug Lamborn (R-CO), Tom McClintock (R-CA), and Paul Gosar (R-AZ) have voiced interest in succeeding him. Having survived a stiff primary challenge, Ways and Means Committee Chairman Richard Neal (D-MA) will remain the House's chief tax writer, with Ranking Member Kevin Brady (R-TX) staying in the top slot on the GOP side.

If Vice President Biden wins the presidency, Secretary John Kerry could be in line for an overarching White House position focused on climate issues. We also believe Collin O'Mara, former Delaware regulator and now CEO of the National Wildlife Federation (NWF), may be nominated for Environmental Protection Agency (EPA) administrator. Christy Goldfuss has been discussed for chair of the Council on Environmental Quality (CEQ), a division of the Executive Office of the President that coordinates federal environmental efforts. She previously served as managing director of CEQ at the end of the Obama administration. Finally, Tom Udall (D-NM) could be the nominee for secretary of interior after he retires from the U.S. Senate at the end of the 116th Congress.

Filibuster
+

The Issues at Stake

The filibuster remains a tool employed by members of the Senate to disrupt legislative business, but in recent years it has been a target of scrutiny by both Democrats and Republicans. The Senate has the right to eliminate the filibuster through a change to the Senate rules, which may be done in one of three ways: by a 2/3 vote of the Senate at any time, which requires 67 votes and is therefore the least likely to be successful; the "nuclear option," where the Senate's presiding officer interprets a rule to his or her liking, which will stand as precedent unless overruled by a majority of the senators present; or using a simple majority to adopt the rules for a Congress at the beginning of each new Congress.

The question remains whether the Senate will change its rules regarding the legislative filibuster next session.

 

The Positions

Democratic: In the last year, both former President Obama and former Democratic Leader Harry Reid called for the end of the legislative filibuster. Senate Democratic Leader Chuck Schumer has declared that eliminating the filibuster is "not off the table." Vice President Biden has addressed abolishing the filibuster as a last resort. The 2020 Democratic platform remains silent on this issue.

Republican: President Trump has repeatedly called for ending the Senate filibuster on legislation. Senate Republican Leader Mitch McConnell is warning Senate Democrats to not make the mistake of killing the filibuster.

 

The Key Players

The most important players here will be the president and the Senate's majority leader, and the legislative filibuster's future will depend on who holds those titles in 2021 – Trump or Biden and McConnell or Schumer. Regardless of which party controls the Senate, it is very likely that there will not be unanimity among the majority party members on whether to end the legislative filibuster, and they will need near unanimity to accomplish it. Therefore, it is likely that the fate of the filibuster will rest with a small handful of Senators who are reluctant to immediately end a Senate tradition, but if the majority's legislative priorities are consistently blocked by a belligerent minority, then pressure will build in the majority party to reform or eliminate the legislative filibuster sometime during this new Congress. If President Trump gets a second term, he will likely agitate for ending the filibuster if his agenda is bogged down, but since Joe Biden is a long-time Senate veteran, he will likely only do so as a last resort.

Financial Services
+

The Issues at Stake

This election will determine the direction of every area of financial regulation. The starkest contrast between the parties will be in the area of consumer enforcement, mainly through the Consumer Financial Protection Bureau (CFPB). A Biden administration will likely put in place new protections and enforcement actions around small-dollar and "payday" lending, collections, arbitration, and practices with disparate impact. Another stark divide will be in how each party approaches the regulation of systemic risk, including through capital rules, activities-based supervision, and Volcker Rule implementation. The nature of banking and bank charters itself is at stake, with a Republican Office of the Comptroller of the Currency (OCC) pushing for new national bank charters for fintech and payments firms that do not take deposits, and Democrats looking to make banking services more utility-like through proposals such as postal banking and publicly run consumer credit agencies.

 

The Positions

Climate Change and ESG


There is a growing consensus that the financial services industry will be indirectly impacted by the effects of climate change and is seen by some as a policy lever to reduce the economy's carbon footprint. Some banks and private equity funds have already begun shifting investments to less carbon-intensive companies, and financial firms of all types are grappling to price in climate risk to their offering.

Democratic: Biden's plan includes requiring public companies to disclose climate-related risks and issues, and it is likely a Biden administration would seek to include the effects of climate change as a factor in bank safety and soundness examinations and in stress tests. Biden's overall climate-change policy would likely hasten the flow of capital to green projects, opening opportunities for financial firms while simultaneously requiring them to reevaluate their existing investments.

Republican: Trump's administration is expected to continue opposing efforts that require climate-change disclosures, which the Securities and Exchange Commission (SEC) maintains are immaterial to investors. Regulators will also push the notion that climate expertise is out of their purview, and regulatory requirements on the issue will create more problems than fixes.

Community Reinvestment Act Reform


Both parties acknowledge that reforms are needed for the Community Reinvestment Act (CRA) to be effective, as both banking practices and technology have changed. These changes include broader use of internet-banking services, which has reduced the need for brick and mortar branches and thereby makes current CRA metrics and assessment areas somewhat obsolete. In May 2020, the OCC issued a final rule amending its CRA regulations to, among other things, broaden the definition for eligible investments, provide new metrics, and institute new assessment area (AA) standards. Although the OCC, Federal Deposit Insurance Corporation (FDIC), and Federal Reserve (Fed) had for decades maintained identical joint CRA regulations, the OCC under the Trump administration acted alone. The Fed is working on a proposed rulemaking to amend its own CRA regulations, which is expected to differ significantly from the OCC's rule. Unless the OCC switches course or is overruled by Congress, the CRA framework is likely to differ across jurisdictional boundaries.

Democratic: A Biden administration could target portions of the new OCC regulations that Democrats across the board oppose, including the expansion of CRA-eligible activities to explicitly include certain commercial investments like community facilities and essential infrastructure. Further, Democrats will look to roll back contentious AA provisions such as the 5% deposit taking threshold and the ability to measure AA using the largest geographical area available. Under new leadership, the OCC would likely amend the Trump-era rule in coordination with the Fed and FDIC. Federal Reserve Board Governor Lael Brainard, a Democratic appointee, has led the Fed's efforts to reform its CRA rules, with the support of Chairman Jerome Powell, and has advocated for a more limited approach than that taken by the OCC.

Republican: The Trump administration, with Republican support in Congress, will continue to push for modernization of the CRA, but the outcomes remain up in the air, as even banks that would supposedly benefit from the OCC's efforts have expressed concerns with the agency's approach. Nonetheless, a Republican administration would be unlikely to amend the OCC rule before its 2023 and 2024 effective dates. The Federal Reserve will almost certainly still issue its own CRA rulemaking, forcing the FDIC to pick an approach, likely in line with the Fed.

Consumer Protections and Lending


The CFPB has been less active in recent years in bringing enforcement actions, resulting in several states proposing their own consumer protection agencies for financial products and services. These so-called mini-CFPBs do not yet have a record of enforcement, but it is likely that financial firms will face an even more difficult regulatory landscape with conflicting or overlapping regulatory expectations among the states. Either way, we believe the CFPB—regardless of its director in 2021—can be expected to thoroughly review the treatment of consumers during the course of the ongoing COVID-19 pandemic.

Democratic: A Biden administration would likely move quickly to appoint a new CFPB director (pursuant to the Seila Law decision striking down the "for cause" requirement for removal). Upon confirmation, the CFPB is expected to escalate enforcement actions and strengthen consumer protections as it targets interest rate caps, credit reporting, debt collection, and fair lending requirements, among other issues.

A Democratic Congress and administration could seek to test the limits of the "substantially similar" definition of the Congressional Review Act and seek to redo overturned rules on arbitration.

Biden's plan for community investment calls for the creation of a public credit reporting agency. Viewed as part of an overall effort to increase access to credit and capital for underserved communities and individuals, the Democrats could also move to establish universal access to bank accounts through either the Federal Reserve or postal banking.

Republican: President Trump will likely continue to be selective in how his administration approaches what it views as onerous regulations on businesses in an attempt to free up access to capital while maintaining consumer protections through enforcement penalties.

Republicans would strongly oppose the creation of new government sponsored banking services like postal banking.

Diversity and Inclusion


Democratic: Biden would build upon Democrat-led efforts in the House of Representatives to push more policies to promote diversity and inclusion within the federal government and in the private sector. This is likely to include—but is not limited to—mandates for reporting on pay equity, vendor spending, training, and performance measures.

Republican: Republicans support efforts to increase diversity and inclusion in federal agencies and the private sector but are not likely to push for reporting mandates. They will also oppose efforts that place increased governance requirements on company boards.

Bank Partnerships and Fintech


The OCC and FDIC continue to encourage appropriate partnerships between banks and payments and fintech companies. In 2019, the FDIC issued a proposed rule to modernize the brokered deposit rule which aims to improve the ability of banks to accept deposits originating from a payments or fintech program. Earlier this year, the OCC and FDIC issued rules clarifying that nonbanks that purchase or take assignment of loans originated by banks are permitted to charge the same interest rate as the banks that made the loan (the "valid when made" doctrine). In addition, the OCC has proposed a rule to address the related "true lender" issue, which creates a framework to determine the circumstances under which an entity is considered to be the actual lender behind a loan. However, some states see these efforts as intruding on their regulation of nonbank lenders, and several have filed suit to block the OCC's rulemaking.

Finally, Acting Comptroller of Currency Brian Brooks continues to push ahead with a proposed payments charter, which would provide payments companies the benefits of federal preemption of state laws governing money transmission without the need to establish a full-service national bank. States, however, have pushed back against the proposed payments charter, and will surely challenge the OCC's authority to establish such a charter in court.

Democratic: Some of the reforms, especially Valid When Made and True Lender, will continue to be scrutinized by Democrats, as evidenced by a recent letter sent by Senate Democrats to the OCC on the True Lender proposed rule. However, that does not necessarily mean a Biden administration would significantly change the OCC's approach to fintech and payment charters. The OCC's effort to establish a regulatory regime for fintechs started under former Comptroller Thomas Curry, an Obama appointee. It is possible that a Biden-appointed comptroller would seek a negotiated resolution with the states rather than a protracted court battle. The OCC and FDIC could continue making it easier for banks to partner with fintech and payments companies, but under a Biden administration the framework would likely incorporate greater regulatory requirements for nonbanks.

Republican: The federal banking regulators under President Trump would continue advancing rulemakings that make it easier for fintech and payment companies to partner with banks, become banks themselves, or otherwise access the payments system. The OCC likely would vigorously defend against the state challenges in court. The FDIC will likely finalize the brokered deposit rule with little modification and may look to approve applications from payments and fintech companies to obtain industrial loan charters.

Faster Payments


The promise of "faster payments" is becoming a reality, with the launch of various services, including the Clearing House's Real-Time Payments Network (RTP Network), "push to card" services, Nacha's same-day settlement, and the Federal Reserve's in-development FedNow service. At this time, however, only banks have direct access to these networks, and fintech companies are seeking to capitalize on these payments systems.

Democratic: Biden's Unity Plan includes a proposal to ramp up the Federal Reserve's FedNow service to facilitate greater access to real-time payments and allow consumers to have more immediate access to their funds. Under a Biden administration, the Federal Reserve would likely focus on deploying FedNow to rival the private RTP Network, which Democrats say will be costly and non-accessible to Americans who don't have bank accounts. The Biden administration would likely treat access to faster payments as part of a larger effort to the underbanked.

Republican: Under a second Trump term, the Federal Reserve may focus less energy on FedNow, instead allowing the RTP Network to take the lead on developing the real-time payments infrastructure. The Federal Reserve and OCC would likely continue to push for bank partnerships as the means to more widely disseminate access to financial services and payment systems, with less emphasis on the government's role in ensuring equity in financial services.

Prudential Regulation


The OCC, FDIC, and Fed have been actively updating, amending, and, in some cases, rolling back financial regulations under the Trump administration. In the two-year period from January 2017 through December 2018, the agencies issued a combined 81 final rules. Since January 2019, however, they have issued a dizzying 130 final rules, and will likely issue at least 10 more before the end of Trump's current term. The regulatory reforms have covered everything from capital rules to counterparty credit limits, and the liquidity coverage ratio to narrowing the Volcker Rule. Because of the Administrative Procedure Act, these types of formal rulemakings are difficult to unwind, assuming the agencies are even inclined to make such changes.

Further, the leadership structures of the federal banking agencies create policies that are sticky across administrations, particularly the Fed with its seven staggered 14-year governorships. Even if a Biden administration immediately filled the two empty Federal Reserve Board seats, it is unlikely the Fed would radically shift its supervisory focus. Meanwhile, the acting comptroller would likely be replaced in a Biden administration, but Jelena McWilliams, the FDIC chair, would still have two years remaining in her term.

A new administration could, however, push the regulators to change the effectiveness of rules through examinations and enforcement actions. In addition, the relationship between federal and state regulators will be significantly different, depending on the administration. Several states, all with Democratic governors, are currently suing the OCC over its various rulemakings and, under a Trump administration, the agency would likely aggressively defend its position.

Democratic: A Biden administration may look to reverse the deregulatory policies of the Trump administration but that would require longer-term rulemaking. The agencies' significant efforts at increasing transparency for both the enforcement of regulations and the deliberative processes of the agencies themselves are unlikely to change. Instead, a Biden administration would more likely focus on systemic issues. Although Biden's official plans do not address the issue, the Biden-Sanders Unity Task Force and influential supporters, such as Elizabeth Warren (D-MA), assert that the largest financial institutions still pose unacceptable risk to the financial system. We expect a revived Financial Stability Oversight Council (FSOC) under a Democratic secretary of the treasury and a revamped Office of Financial Research (OFR), which will increasingly look at specific activities that could cause systemic risk. A Biden administration will also focus on how financial institutions participated in COVID-19 recovery efforts and will scrutinize whether the ongoing economic fallout is impacting bank safety and soundness.

Republican: The federal banking agencies will continue their rulemaking efforts, though the pace may slow. The OCC will continue its push to revolutionize the national bank charter to include fintech and payments companies and will aggressively defend against the state-level challenges to its authority. The FDIC and the Fed will likely follow the OCC's lead in modernizing its regulations to account for bank partnerships and changes in technology. Depending on the duration of the COVID-19-induced economic shock, a Trump administration FSOC will likely continue to be less active as concerns about systemic issues fade. With a likely divided Congress and administrative processes ticking along, Trump could even seek to advance his priorities by reevaluating the regulators' relationships with international financial supervisory regimes, such as the Bank of International Settlements. Current Federal Reserve Board Vice Chairman for Supervision Randal Quarles is also the chair of the Financial Stability Board. In the year he would have left on his term, Quarles could continue efforts to build an international supervisory framework that gives greater leeway for individual countries to tailor their prudential regulations.

Other Issues to Watch (less dependent on the outcome of the election):


  • Cannabis Banking: Bipartisan support in the House and Senate, resolution between Republican and Democratic leaders in the Senate necessary. Democratic control may push that issue to a resolution.
  • BSA/AML: Like cannabis banking, there is broad support in the House and Senate for reform. Republicans are looking to resolve issues and concerns around its effect on small businesses.

 

The Key Players

Those to watch in a possible Biden administration include Jared Bernstein, former economic policy advisor to Biden and key campaign advisor, and Ben Harris, who has taken a lead on financial services policy for the campaign. Lael Brainard, Federal Reserve board governor, has helped lead a progressive agenda at the Federal Reserve, including the Fed's Community Reinvestment Act reform efforts. Others to watch include key players from the Obama administration, including current FDIC board member and former chair Marty Gruenberg, former CFTC chair Gary Gensler, and key former Treasury senior staff, including Amias Gerety, Jonah Crane, and Katheryn Rosen. Look for former Warren allies FTC Commissioner Rohit Chopra and current member of the Congressional Oversight Commission Bharat Ramamurti to play continuing roles in the consumer protection space.

Biden will have an opportunity to reshape the bureaucracy fairly quickly. Jelena McWilliams has two more years in her term as FDIC chair, and Vice Chair Randal Quarles' term (as vice chair only) expires in October of 2021. OCC head Brian Brooks is currently in an acting position. Mike Crapo (R-ID) could continue to lead the Republicans as chair or ranking member of the Senate Banking Committee, and Pat Toomey (R-PA) is a potential chair of the Senate Banking Committee.

Sherrod Brown (D-OH) could become chairman of the Senate Banking Committee if Democrats take control of the Senate; Elizabeth Warren (D-MA) will not only play a role as a key advisor to Biden, being a major voice for progressives in the financial services space, but she could be on the short list for a cabinet-level position. Maxine Waters (D-CA) is likely to continue as chairwoman of the House Financial Services Committee and as a leading voice for increased consumer protections and diversity and inclusion requirements. Patrick McHenry (R-NC) is likely to continue as ranking member of the House Financial Services Committee.

Healthcare
+

The Issues at Stake

Healthcare remains a top issue of concern for voters, and an issue on which the presidential candidates and the political parties are diametrically opposed. With limited exceptionssuch as on Medicare prescription drug price negotiationthere is little to no bipartisan support for major healthcare initiatives, and that is unlikely to change regardless of the outcome of the election.

 

The Positions

Health Insurance


Democratic: Vice President Joe Biden advocates for protecting and building on the Affordable Care Act (ACA) by creating a "public option" health insurance plan. Biden's healthcare plan would also reinstate the individual mandate; lower drug prices by allowing Medicare to negotiate prices; and allow undocumented immigrants to buy into the public option plan. In 2009, the House of Representatives passed the public option as part of the ACA, but the Senate rejected it. Although Biden opposes the specific Medicare-for-All proposal, the "public option" plan could serve as transitional legislation and as a glide path to a Medicare-for-All single-payer system. If Democrats have a majority in both the House and Senate, some healthcare policies, particularly related to Medicare and Medicaid, could be enacted through the budget reconciliation process, which requires only a 51-vote majority, as opposed to the usual 60 votes for other legislation. A Supreme Court decision striking down the ACA could also incentivize Senate Democrats to eliminate or reform the legislative filibuster in order to enact healthcare policies.

Republican: President Trump has not formally proposed his internally developed healthcare plan, though he has spoken of it publicly. The White House website has the only definitive statement on healthcare attributed to the president: "Replacing Obamacare will force insurance companies to compete for their customers with lower costs and higher-quality service. In the meantime, the President is using his executive authority to reduce barriers to more affordable options for Americans and U.S. businesses." The administration backs an effort by 18 Republican state attorneys general to strike down the Affordable Care Act in its entirety, which the U.S. Supreme Court is expected to rule on next spring.

Pharmaceuticals


There is bipartisan support for legislation to allow the federal government to negotiate prescription drug prices through the Medicare Part D program. The obstacles to a deal are more about intra-party disagreements in the Senate Republican Conference and the House Democratic Caucus than a disagreement between the two parties. For example, in 2019 progressives pushed for HR 3 (Lower Drug Costs Now Act) to go further, and Mike Crapo (R-ID) introduced the Lower Costs, More Cures Act as an alternative to Chuck Grassley's (R-IA) approach. Legislative action on this issue is likely regardless of the outcome of the election. If Biden wins the presidency and Democrats gain control of the Senate, Congress is more likely to pass a progressive drug price plan. Should Trump win a second term, we could still see a bill, albeit a more moderate one due to a divided government. The coronavirus pandemic could cause Congress to move legislation to increase government-funded incentives to promote research and domestic drug production and streamline drug approval processes.

 

The Key Players

The key player for Republican healthcare efforts would be a reelected President Trump. With Democrats expected to retain control of the House, even with a Republican Senate majority, it is unlikely major healthcare legislation would reach his desk. Therefore, administrative actions would likely be the focus in a second Trump term.

The Biden campaign has relied heavily on advice from former Obama administration healthcare officials in relation to COVID-19 and healthcare policy generally. Former Office of Management and Budget (OMB) healthcare advisor Ezekiel Emanuel and former Centers for Medicare and Medicaid Services (CMS) administrator Andy Slavitt are among those influencing Biden's healthcare policies.

Retirement and Republican term limits for committee leaders will result in a change in the top Republicans at both the Senate Finance and Senate Health, Education, Labor, and Pensions (HELP) Committees. Mike Crapo (R-ID) is likely to become the top Republican on the Senate Finance Committee. Richard Burr (R-NC) is next in terms of seniority at HELP, followed by Rand Paul (R-KY), Susan Collins (R-ME), and Bill Cassidy (R-LA). Democratic Senators Ron Wyden (D-OR) and Patty Murray (D-WA) are expected to remain the top Democrats on the Finance and HELP Committees, respectively.

Any effort to implement Biden's legislative proposals on healthcare, which focus on a public option health insurance plan, would likely be led by House Democrats. With Democrats expected to retain control of the House, Energy and Commerce Committee Chairman Frank Pallone (D-NJ) and Health Subcommittee Chairwoman Anna Eshoo (D-CA) will remain key players on healthcare issues, as will former Clinton administration Secretary of Health and Human Services and now Congresswoman Donna Shalala (D-FL). The committee's ranking member, Greg Walden (R-OR), is retiring. Cathy McMorris Rodgers (R-WA), Bob Latta (R-OH), and Michael Burgess (R-TX) are all vying to become the next top Republicans on Energy and Commerce. Leadership changes are not expected at the House Ways and Means Committee, where Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) will return in those roles.

Post Office
+

The Issues at Stake

The U.S. Postal Service (USPS) is undergoing operational changes, resulting in increased scrutiny of its overall efficiency and ability to handle the flow of mail-in ballots ahead of the November election. Media coverage of the USPS, especially in relation to mail-in ballots, is likely to continue through the election and beyond. The results of the election itself, and whether operational changes implemented by the USPS are perceived to have resulted in problems with voting by mail, will likely have an impact on postal oversight and policy going forward.

 

The Positions

Democratic: Vice President Biden has been endorsed by the 300,000-member National Association of Letter Carriers (NALC) union and is expected to be more receptive to legislative efforts to put the agency on better financial footing. Three vacancies remain on the board of the governors, which would allow Biden the opportunity to appoint three Democrats to the board. A Democratically controlled Senate would likely confirm them; it is unclear whether a Republican Senate would do so. Biden would be expected to support any of the postal legislation that has the support of postal worker unions.

Republican: If the president is reelected, efforts to implement operational and service changes at the Postal Service are expected to continue. Greater involvement by the White House and Treasury Department at the agency are likely as well. Republicans would continue to enjoy a 4-2 majority on the USPS board of governors. With Democrats expected to retain control of the House, aggressive congressional oversight should be expected to continue. Regardless of which party controls the Senate, there is bipartisan support for postal legislation that would impact USPS finances; however, it is not clear if Trump would be willing to sign any of it.

 

The Key Players

With Democrats expected to retain control of the House, Oversight and Reform Committee Chairwoman Carolyn Maloney (D-NY) and Government Operations Subcommittee Chairman Gerry Connolly (D-VA) will remain key players on postal legislation and oversight. The subcommittee's September 14, 2020 hearing on postal operations may serve as a preview of the intense USPS scrutiny that is expected to continue.

An expected leadership change at the Senate Homeland Security and Governmental Affairs Committee could result in a friendlier environment for consideration of postal legislation, which despite some bipartisan support in the chamber has not been taken up by current Chairman Ron Johnson (R-WI). If Republicans retain control of the Senate, Rob Portman (R-OH) is expected to replace Johnson, since Johnson will have served the maximum six years as chairman allowed by Senate Republican rules. If Democrats take control of the Senate, Gary Peters (D-MI), the committee's current ranking member, is expected to become chairman.

Privacy Policy
+

The Issues at Stake

Following the election, federal privacy and data protection policy is expected to be shaped by Congress, the Federal Trade Commission (FTC), and other regulators, as well as externalities such as those in the states and marketplace. In the wake of aggressive action by state legislatures and active citizens, and increased offerings during the COVID-19 pandemic that rely on the use of data to provide valuable experiences that benefit consumers and businesses, the 117th Congress will no doubt consider a range of privacy proposals, many of which will likely reflect bills that were discussed and debated in 2020. The last major privacy law enacted by Congress was Title V of the Gramm-Leach-Bliley Act (GLBA) in 2000. Since then, the European General Data Protection Regulation (GDPR) and the California Consumer Privacy Act of 2018 (CCPA), combined with a California ballot initiative designed to expand the CCPA in an evolving marketplace, have brought the issues of privacy and data protection to the forefront. Privacy will inevitably be the focus of both federal and state legislative and regulatory action for years to come.

 

The Positions

Enforcement


Democratic: Many Democratic members of Congress have espoused the authorization of broad enforcement powers at both the federal and state levels, and have expressed support for expansive private rights of action.

Republican: Congressional Republicans have generally expressed support for a predictable and unambiguous compliance environment that facilitates the adoption of practices that conform with regulatory and consumer expectations.

Preemption of State Law


State preemption of federal law presents a significant challenge for businesses. National regulatory consistency is viewed by many businesses as critical to facilitating a legal compliance environment; a patchwork of state laws—that can potentially change with each state legislative session or citizen ballot initiatives—can result in selective enforcement and inconsistent compliance enforcement. Without federal preemption in place, federal action becomes little more than the creation of an additional compliance jurisdiction that differs from the states.

Democratic: At both the federal and state levels, many Democrats have expressed opposition to federal preemption, advocating for the states to take the enforcement lead. Democratic members of the California congressional delegation, for example, have characterized the CCPA as strong consumer protection, and have expressed wariness of federal legislation that they say would establish lower standards for data privacy.

Republican: Many Republicans have voiced support for the creation of a single national standard that preempts state law, due, in part, to their stated position that online data transmission constitutes interstate commerce.

 

The Key Players

The leading Democrats engaged with privacy policy proposals include Maria Cantwell (D-WA), the senior Democrat on the Senate Commerce Committee and likely chairwoman of the committee should the Senate change hands in the 117th Congress. She introduced the Consumer Online Privacy Rights Act (COPRA) in 2019 and has consistently supported broad enforcement. Sherrod Brown (D-OH), the senior Democrat on the Senate Banking Committee and, like Senator Cantwell, in line to become chairman in a Democratic Senate, has introduced a bill, the Data Accountability and Transparency Act, that would, among other provisions, create a new, separate enforcement agency that would augment existing federal functional enforcement. Also, like proposals by Senator Cantwell and Democrats in the House, Senator Brown's bill does not include federal preemption.

In the House, Speaker Nancy Pelosi (D-CA) has expressed opposition to federal preemption, and Congresswomen Anna Eshoo (D-CA) and Zoe Lofgren (D-CA) have introduced the Online Privacy Act, which, like that by Senator Brown, both eschews preemption and creates a new federal enforcement agency. On the Republican side, Senate Commerce Committee Chairman Roger Wicker (R-MS), joined by John Thune (R-SD), Deb Fisher (R-NE), and Marsha Blackburn (R-TN), recently introduced the Setting an American Framework to Ensure Data Access, Transparency, and Accountability (SAFE DATA) Act. The Safe Data Act seeks to create a single national compliance standard. House Consumer Protection and Commerce Subcommittee Ranking Member Cathy McMorris Rogers (R-WA) has urged action in a House Energy and Commerce Committee discussion draft that leaves issues like preemption and private rights of action open for later discussion and resolution. Representative McMorris Rodgers is also vying for the top Republican slot on Energy and Commerce, along with Michael Burgess (R-TX) and possibly Bob Latta (R-OH), in the wake of current Ranking Member Greg Walden's (R-OR) impending retirement.

Tax Policy
+

The Issues at Stake

The 2020 election is renewing interest in the tax system as a source of both revenue and relief, and Democrats and Republicans are taking tax policy positions that reflect their larger platforms. If either party gains control of both Congress and the White House, the reconciliation process will enable them to enact new tax policies with a simple majority in the Senate. If the 2020 election yields a divided government, any dramatic changes in tax policy will be minimal, with more focus on less controversial proposals.

 

The Positions

Business Taxes


Democratic: Democrats would repeal many of the business tax benefits provided in the 2017 Tax Cuts and Jobs Act (TCJA). Vice President Biden's most prominent proposal seeks to increase the corporate tax rate from 21% to 28%. Another key proposal is a new 15% minimum tax on book income for companies with profits greater than $100 million. The former vice president proposes doubling the global intangible low-tax income (GILTI) rate from 10.5% to 21% and tightening the rules for how the tax is calculated. Biden recently released an offshoring tax plan that includes a 10% offshoring penalty surtax on U.S. companies' overseas profits from U.S. sales and a 10% Made in America tax credit to encourage U.S. jobs and economic growth. Biden and Senate Democrats will also pursue Obama-era legislation to eliminate the tax benefits of corporate inversions. Higher business tax receipts will help offset Democrats' tax incentives focused on increasing business investment in low-income communities and reducing carbon emissions.

Republican: President Trump and Republican policymakers are expected to pursue policies that increase investment and shift supply chains to the United States from abroad. Trump may seek to lower the corporate tax rate to 20% (and possibly lower). GOP policymakers will attempt to expand and make permanent immediate expensing ("bonus depreciation") and accelerated amortization of research and development expenses; both policies are slated to begin to phase out in 2022 under TCJA. Trump has also proposed introducing Made in America tax credits and other tax incentives to recapture jobs from China.

Capital Gains and Estate Tax Policy


Democratic: Democrats will make a strong effort to reform the ways in which capital gains are taxed. Biden proposed eliminating the step-up in basis of assets at death and taxing capital gains at the newly increased 39.6% individual rate for taxpayers with incomes in excess of $1 million. Senate Finance Ranking Member Ron Wyden (D-OR) has been a long-time proponent of a "mark-to-market" system for capital gains taxation, which would impose an annual tax on unrealized capital gains if a taxpayer meets certain income or asset thresholds. Democrats would repeal the changes made to the estate tax under the TCJA by reducing the unified exemption amount (perhaps to as low as $3.5 million) and increase estate tax rates to "historical norms" (historical rates have been as high as 77%).

Republican: GOP proposals on capital gains and estate tax differ significantly from Democratic proposals. Trump has said he would lower the long-term capital gains tax rate to 15% if reelected. He also supports indexing capital gains for inflation. Congressional members would also push for a permanent extension of the increased estate tax exemption amount under TCJA ($11.58 million for individuals indexed to inflation), which expires in 2025.

Individual Taxes


Democratic: Biden has stated that his tax increases for individuals would not raise taxes for anyone making less than $400,000 per year. He proposes reinstating the 39.6% rate as the highest income tax bracket, phasing out the 199A pass-through deduction for taxpayers with income in excess of $400,000, and applying the 12.4% payroll tax on wages above $400,000. Biden also plans to limit the use of deductions for high-income taxpayers by restoring the Pease limitation for incomes greater than $400,000 and capping itemized deductions at 28% of their value. These revenues will help expand the earned income and child tax credits and create new credits to assist low-income renters, homebuyers, and caretakers. These revenues also are budgeted to expand green energy credits to more Americans (e.g., electric vehicle and charging station credits).

Republican: Trump has stated his desire to reduce tax rates for the bottom three tax brackets (22% and below). The president would also like to permanently "terminate" the payroll tax, although this has been contradicted by various administration officials. This termination would lack support in Congress, as it would undermine the solvency of the Social Security Trust Fund. The GOP will focus on making certain individual tax changes in the TCJA permanent. Some of the more prominent individual provisions set to expire in 2025 include the increased standard deduction and child tax credit, lower individual rates, and the AMT exemption amount for individuals.

 

The Key Players

If Democrats take control of Congress and the White House, Senator Wyden would be expected to chair the Senate Finance Committee. Six GOP Finance Committee members are either retiring or up for reelection in 2020, and Chuck Grassley's (R-IA) tenure as chairman of the Finance Committee ends this year. Thus, even if the GOP maintains its Senate majority heading into 2021, the committee will be led by a new chairman, and its membership could look different.

Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) could have a prominent voice in a Biden administration, pushing for more progressive tax proposals, such as a wealth tax. While the progressive wing of the Democratic party would likely have a larger influence in a Democratic sweep, a narrow Senate majority for Democrats (50 or 51 seats) would empower more moderate Senators or newly elected swing-state members to shape tax policy. Jared Bernstein, Larry Summers, and Jeffrey Zients are potential candidates for leadership positions within Biden's economic team and are expected to have a strong influence over the administration's tax policy proposals.

Business Tax Proposals

 

Policy
Republican / Trump Proposals
Democratic / Biden Proposals

Corporate Tax Rate

  • Lower rate from 21% to 20% (and possibly lower)
  • Increase rate to 28%
  • 15% AMT on book income if net income above $100 million (greater of)

International Tax

  • GILTI rate unchanged until increase in 2026
  • Tax on multinational's income earned in China (Fair Trade with China Enforcement Act)
  • Double GILTI rate from 10.5% to 21% (and apply on a jurisdictional instead of aggregate basis)
  • 10% offshore penalty surtax on foreign profits from U.S. sales (effective rate of 30.8%)
  • More stringent corporate inversion legislation (Stop Corporate Inversions Act)

Tax Credits / Incentives

  • Made in America Tax Credits
  • Credits for bringing Chinese jobs back to U.S.
  • Immediate amortization of R&D expenses
  • Expanded / permanent full expensing (bonus depreciation)
  • 10% Made in America Tax Credit
  • Credits for small businesses to sponsor retirement plans
  • Expand New Markets Credit
  • Establish Manufacturing Communities Credit
  • Expand and make permanent renewable energy credits to encourage carbon-free manufacturing and carbon capture

CARES Act Tax Provisions

  • No changes
  • Repeal (or cut back) NOL and loss limitation provisions

Other

  • Temporary COVID relief incentives: expanded employee retention credit, business meal deductibility, workplace safety credits
  • Remove tax subsidies for fossil fuel industry
  • Repeal real estate "loopholes" (1031 exchanges, depreciation rules)
  • Fee on liabilities of large financial firms (>$50 billion in assets)
  • Congressional Dems could push for carbon tax

 

Individual Tax Proposals

 

Policy
Republican / Trump Proposals
Democratic / Biden Proposals

Individual Tax Rates

  • Reduce rates in bottom three brackets (below 22%)
  • Make TCJA rate changes permanent (set to expire in 2025)
  • Restore 39.6% top rate
  • Phase out 199A deduction for income over $400,000
  • Cap itemized deductions at 28% of value
  • Restore Pease limitation for incomes over $400,000

Tax Credits / Incentives

  • Make permanent TCJA provisions set to expire (e.g. increased child tax credit and standard deduction, AMT exemption)
  • Repeal SALT cap
  • Credits for low-income renters and first-time homebuyers
  • Expanded credits for child/elder care
  • Expand earned income tax credit to childless individuals (LIFT Act)
  • Restore credit for EV and charging stations

Payroll taxes

  • Potentially terminate payroll tax
  • Apply 12.4% payroll tax on wages above $400,000

Opportunity zones

  • Relax certain program limitations
  • Push deadlines to allow more time for investments
  • Introduce program reporting requirements
  • Require review of benefits by Treasury

Capital Gains Tax

  • Lower long-term capital gains rate to 15% from 20%
  • Index capital gains for inflation
  • Increase CG rate to 39.6% for incomes > $1 million (Biden)
  • Mark to market system for taxpayers with income > $1 million or assets > $10 million (Wyden)

Estate Tax

  • Make increased exemption amount permanent (expires in 2025)
  • TCJA amount is $11.58 million
  • Reduce exemption amount to as low as $3.5 million
  • Increase rate to "historical norms" (as high as 77%)
  • Eliminate step-up in basis
  • Reform trust rules (GRATs and valuation discounts)
Retirement
  • SECURE Act 2.0
  • Replace deduction for DC plan contributions with 25% refundable credit
  • Auto-IRAs

Telecommunications
+

The Issues at Stake

As both parties seek to bridge the digital divide and develop next-generation wireless capabilities, telecommunications policy will be a focus over the next four years under either administration. If the 2020 election yields a divided government, most activity will likely be at the Federal Communications Commission (FCC) rather than in Congress.

 

The Positions

5G


Democratic: Biden has proposed a $300 billion research and development investment in breakthrough technologies, such as 5G and artificial intelligence, and similar proposals have Democratic support in both the House and Senate. Activity at the FCC related to 5G—such as making more spectrum available—would likely continue, although it would likely be less of a priority under a Democratic commission.

Republican: Should Trump win re-election, a focus on ensuring that auctions remain on track will be a top priority. These auctions include c-band and mid-band that are pivotal to clearing spectrum to be repurposed by wireless carriers for 5G.

Broadband and the Digital Divide


Democratic: The COVID-19 pandemic has raised greater awareness about the challenge of ensuring broadband connectivity for all Americans. As part of their infrastructure bill and again as part of the annual appropriations process, House Democrats have voted to provide $60 billion to the FCC for broadband buildout subsidies and grants. While Republicans also support broadband buildout efforts conceptually, the $60 billion price tag is likely too high for most of the caucus. There remains an opportunity for bipartisan agreement on a compromise dollar figure, though. A Democratic FCC would look to bolster the Universal Service Fund's (USF) Lifeline program, which provides telephone and broadband subsidies for low-income Americans. A more robust subsidy and expanded eligibility, such as covering at least some devices and not just services, would be priorities.

Republican: President Trump and Republican congressional members have also supported broadband buildout, just at lower amounts than Democrats. In a second Trump administration, broadband buildout would remain a priority, through either an infrastructure package or a direct Department of Commerce authorization. Republican policymakers have also supported the FCC in clearing additional spectrum to move next-generation wireless services to 5G.

Net Neutrality


Democratic: A Democratic FCC would almost certainly and quickly take steps to reinstate Obama-era net neutrality rules. Vice President Biden has repeatedly indicated his support for such action and is expected to nominate an FCC chair who would move quickly to reclassify broadband as a Title II service under the Communications Act. If Democrats take over both chambers of Congress, eliminate the legislative filibuster in the Senate, and control the White House, there may be quick action on legislation to codify such a policy in order to prevent a future Republican FCC from reversing it without congressional action.

Republican: In the next Congress, there will be no support among Republicans to reinstate net neutrality rules or to legislatively classify the Internet as a Title II service under the Communications Act. Should the Democrats end up controlling both chambers of Congress and eliminating the legislative filibuster in the Senate, and controlling the White House, we anticipate Republicans will go to great lengths to thwart legislation to go past net neutrality legislation, and/or any other attempt to regulate the Internet as a utility.

 

The Key Players 

With Democrats expected to retain control of the House, Energy and Commerce Committee Chairman Frank Pallone (D-NJ) and Communications and Technology Subcommittee Chairman Mike Doyle (D-PA) will remain key players on telecom issues. The committee's ranking member, Greg Walden (R-OR), is retiring. Cathy McMorris Rodgers (R-WA), Bob Latta (R-OH), and Michael Burgess (R-TX) are all vying to become the next leader of the Republicans on Energy and Commerce. After the election and before the start of the next Congress, the Republican steering committee will meet to make a selection. All three are actively campaigning for the position, and the decision will come into greater focus after November.

Senators Roger Wicker (R-MS) and Maria Cantwell (D-WA) are expected to remain their respective parties' top members at the Senate Committee on Commerce, Science, and Transportation. Which of them will be chair and which will be ranking member will depend on control of the Senate. Both of the current Democratic FCC commissioners, Jessica Rosenworcel and Geoffrey Starks, as well as former Commissioner Mignon Clyburn, are among the possibilities for FCC chairman in a Biden administration.

Trade
+

The Issues at Stake

The executive branch traditionally has held considerable sway in matters of trade, and this makes the 2020 presidential race a must-watch for global commerce concerns. During the last four years, the question of China has dominated trade policy discussions, and China will remain a critical issue for this election and beyond. With the U.S.'s "Phase One" deal with China approaching its one-year anniversary this winter, the future of the deal—and of trade relations between the world's two largest economies—is still very much up in the air. Trade deals will also be another important issue in the lead-up to November. The United States-Mexico-Canada Agreement (USMCA) is finalized and has been in force since mid-year. While significant enforcement questions linger, the forward-looking question is where the U.S. will turn its attention next. Will the upcoming administration continue to focus on the UK or set its sights elsewhere? As another important issue, the crisis at the World Trade Organization (WTO) has been building for some time now. The president assuming office in January 2021 will play an important role in the future of the multilateral organization. Finally, national security concerns will continue to drive the evolution of U.S. trade controls over the next several years. Recent restrictions on Chinese companies—from Huawei to WeChat—have demonstrated the important stakes, and often high-profile political significance, of these laws and regulations.

 

The Positions

China


Democratic: Vice President Biden walks a tightrope on China. Given the competing voices within the Democratic camp, and the political need to look tough on China, it is unlikely that a Biden administration would prioritize any rollback of the tariffs already in place on China. Biden has emphasized that his administration would be strong and consistent in pushing back against China over profound security and human rights concerns. Similar to Trump, Biden characterizes China as an economic adversary that flouts international rules on trade and needs to be countered. On the other hand, Biden has expressed a desire to avoid any additional tariffs or a new cold war. His preferred approach as president may be multilateral, focused on building closer ties with allies to keep China in check. Biden has suggested, for example, the possibility of the United States joining a slightly modified Trans-Pacific Partnership (now CPTPP), which he vocally supported during his years in the Obama administration.

Republican: In recent weeks and months, President Trump has made repeated references to "decoupling" the U.S. and China economies, signaling this would be a top priority during a second term. A Trump administration would likely focus on seeing whether the Phase One trade deal with China can survive and if further concessions can be wrung from China in a Phase Two deal. Trump has not ruled out additional "massive tariffs" on imports from China if such tariffs would apply useful pressure if or when the United States and China engage in further negotiations. Trump has pledged to bring back "1 million manufacturing jobs" from China and has floated the idea of tax credits for companies that return jobs from China. He has also called for a ban on federal contracts for companies that outsource to China.

National Security/Technology


Democratic: Biden has emphasized the position that national security and trade policy are closely linked. Particularly given the broad consensus on the national security risks posed by foreign tech products, data-sharing apps, and U.S. dependence on China for medical supplies, a President Biden would likely strengthen and enforce increasingly high-profile export control regulations. Biden would be unlikely to roll back the restrictions on the use of Chinese telecom equipment and he has cited national security concerns when discussing his goal of re-shoring supply chains for critical products, including medical equipment and supplies to semiconductors and communications technology. Implementing increasingly strict exports controls covering high-tech dual-use goods could be a tool to achieve his goal of bringing advanced tech manufacturing jobs back to the United States.

Republican: Trump has been consistently aggressive in implementing export controls and further empowering CFIUS to conduct stringent oversight on foreign investment in U.S. businesses (particularly tech firms) by geopolitical adversaries like China. The Trump administration's unabated skepticism of Chinese tech giants like Huawei—which over the past few years has spurred broad efforts to ban certain Chinese telecom equipment and services in the U.S. and cut these companies' access to U.S.-based technology—would continue if Trump is reelected. Recent executive orders targeting two Chinese companies that own widely downloaded mobile apps, like TikTok, are a leading indicator of the aggressive efforts that would come during a second term.

Trade Deals


Democratic: Vice President Biden has signaled that, at the start of a Biden presidency, pursuing trade deals would take a back seat to focusing on the domestic economy, strengthening the role of labor unions, and re-shoring critical supply chains to benefit U.S. workers. In any trade deals pursued by a Biden administration, Democrats would focus on the twin priorities of enforcing labor protections and strengthening protections for the environment, similar to congressional Democrats' demands for additional labor rights provisions before signing onto the United States-Mexico-Canada Agreement. With respect to potential trade deal partners, the status of ongoing U.S.-UK trade discussions could determine whether Biden would decide to continue where the Trump administration leaves off or find other potential partners. Claiming the Trump administration has "poked our finger in the eyes of all our allies," Biden has also signaled a desire to make trade deals and foster much closer trade relations with geopolitical allies – which may mean more of a focus on securing deals with the EU and Japan and potentially joining the CPTPP.

Republican: In his reelection pitch, Trump has continued to point to skills as a dealmaker. A second term of the Trump administration would likely see a continuation of his push for new bilateral deals over multilateral alliances or trade initiatives. In the current negotiations with the UK, it remains to be seen whether the two sides will be able to negotiate around the thorniest issues, such as the UK's agriculture and food safety standards and the U.S.'s restrictive government procurement rules. India, Brazil, and the EU would likely be among the other trade deal partners for a second-term Trump administration. A free trade deal currently being negotiated with Kenya, if successful, will likely serve as a model for bilateral free trade agreements with other African countries.

World Trade Organization


Democratic: Biden has historically been supportive of the World Trade Organization (WTO) and has viewed working with multilateral institutions as an effective way of pursuing the U.S.'s interests on trade. Nevertheless, a Biden administration would share some of the concerns about the WTO voiced by the Trump administration, namely weak enforcement of certain trade rules and liberalization commitments for more advanced developing economies, including China. Biden would be more likely than Trump to seek consensus to reform the organization and would be unlikely to continue the current administration's strategy of blocking the appointment of new judges to the WTO Appellate Body. A Biden administration would work to implement specific reforms and return to a more functional state while aggressively pushing the WTO to enforce its rules on China.

Republican: Trump's administration has been aggressive in its criticism and skepticism about the WTO, arguing that the international body has been too soft on China and has continued to give a pass to protectionist tariffs and measures used by major developing economies, including India and Brazil. The Trump administration has actively undermined the WTO's Appellate Body by continuing to block nominations of new judges, although so far it has stopped short of taking steps to pull the U.S. out of the organization. Current U.S. Trade Representative Robert Lighthizer recently notified the WTO of the U.S. intent to renegotiate its tariff schedules under the rarely used Article XXVIII. This latest development is a sign that, in a second term, the Trump administration would consider raising tariffs across the board to levels that it views as reciprocal to those imposed by major trading partners.

 

The Key Players 

If Democrats take control of Congress and the White House, Ron Wyden (D-OR) would be expected to chair the Senate Finance Committee. Six GOP Finance Committee members are either retiring or up for reelection in 2020, and Chuck Grassley's (R-IA) tenure as chairman of the Finance Committee ends this year. Thus, if the GOP maintains its Senate majority heading into 2021, the committee will be led by a new chairman, and its membership could look different.

Biden has not yet announced a short list of individuals under consideration for key trade posts such as secretary of commerce or U.S. trade representative. U.S. Trade Representative Lighthizer and administration trade insider Peter Navarro have both stressed the need for four more years of Trump in order to entrench the effects of the current administration's trade policies. Barring any significant developments, both would likely want to continue being part of that push.

Transportation and Infrastructure
+

The Issues at Stake

President Trump and Vice President Biden have each suggested trillions of dollars are needed to boost transportation infrastructure. Their plans and the means by which they would pay for the spending are vastly different. Both Trump and Biden, however, recognize the immense damage COVID-19 continues to inflict on various modes of transportation. Each will need to weigh the recent COVID-19 emergency spending measures and determine whether those were enough to keep transportation stakeholders satisfied. A challenge will be determining what level of investment is enough as the COVID-19 pandemic and its ramifications continue to unfold.

Various transportation modes are struggling and will continue to do so because of changes in travel habits. Until the impacts of COVID-19 truly wane, increased spending initiatives and infrastructure investment will be an important element of each political party's focus both during and after the election.

 

The Positions

Transportation Infrastructure Spending


Democratic: Biden released a four-year, $2 trillion infrastructure plan that includes various transportation-related initiatives. The plan increases spending for high-speed rail, transit, and pedestrian infrastructure, among others. Biden's proposal seeks to boost discretionary transportation grant programs managed by the Department of Transportation. Notably, Biden's plan includes numerous nods to the "Green New Deal" proposal coming out of the Democratic Party caucus, stressing the expansion of electric vehicle infrastructure, social equity, and access to non-vehicular modes of transportation. Currently, Biden's plan is to increase taxes on the wealthy and corporations in order to pay for the plan.

House Democrats have their own views of what a transportation infrastructure plan would look like. Chairman Peter DeFazio (OR-4th) has put forward a five-year, $760 billion infrastructure plan that includes transportation-related initiatives, including lowering greenhouse gas emissions, increasing transportation safety, and boosting investment in nearly every mode of transportation.

Republican: Trump has put forward a draft plan that would invest at least $1 trillion in infrastructure over 10 years. The president's proposal includes a long-term reauthorization of the highway bill (FAST Act) $200 billion for infrastructure priorities across a wide range of sectors, and boosts discretionary investment by way of increased grant spending.

Some Republican lawmakers have voiced concern about moving a large infrastructure bill in the wake of massive pandemic spending. Serious concerns about increased debt have been raised by Senate leadership.

Transportation Policy


Democratic: The FAST Act is set to expire on September 30. If Congress fails to pass a new bill, the Democratic Committee on Transportation and Infrastructure (T&I) leadership has signaled it would like to see a one-year extension of the Act passed. Neither Democratic nor Republican lawmakers would wish to see the highway bill expire in an election year without it being reauthorized or extended. The optics of it lapsing would have significant negative repercussions, technically and politically speaking.

Streamlining the environmental review and permitting of major infrastructure projects has been a high priority for both parties. But the parties differ with respect to how this is to be accomplished. Congressional Democratic leadership are opposed to the Council on Environmental Quality's (CEQ) final rule amending the long-standing interpretation of the National Environmental Policy Act (NEPA). The CEQ is already facing several legal challenges to the revised NEPA rules from environmental groups and state attorneys general. Democratic lawmakers have suggested they may use the Congressional Review Act to roll back this proposal if litigation is unsuccessful.

It is highly likely that a Democratic Congress and White House would move aggressively to promote the electrification of the transportation sector and revive Obama administration policies regarding automobile and light truck fuel efficiency standards. Moreover, it is almost a certainty that a Biden administration would allow California to continue to set its own higher standards and targets for electric vehicles sold in that state. One could also expect that the Democrats would seek to extend federal tax incentives nationwide for the purchase of EVs and could even create other tax incentives to promote the advancement of battery technology.

Republican: Various Republican lawmakers have concluded that it would be best to pass an extension of the FAST Act until a long-term solution is found. Because the Act and appropriations for government programs expire on the same day (September 30), it is rumored that an extension of the law could be attached to a continuing resolution.

In addition to revamping the NEPA regulations, the Trump administration has also taken several actions aimed at streamlining the permitting and environmental review process for infrastructure projects. This includes, most notably, issuing Executive Order 13807, Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructures Projects, better known as the One Federal Decision Policy which sets out a framework for coordination of permitting and review among agencies and revising the CEQ's regulations implementing NEPA.

A second Trump administration would continue to push back on individual state fuel efficiency policies and would give automobile manufacturers maximum flexibility in rolling out alternative fuel technologies over time. It is almost certain that there would be no financial commitments for high-speed rail projects or the development of electric vehicle infrastructure.

On funding initiatives, many Republicans would oppose any effort to increase the gasoline tax, in favor of additional support for public-private partnerships and offering greater control to local and state governments, but also demanding that those governments pay a higher share of infrastructure spending.

 

The Key Players

House T&I Committee Chairman DeFazio will undoubtedly play a leading role in moving Democratic transportation infrastructure policy, based upon the bill passed last July by the full House. The House Ways and Means Committee will have to write the tax sections of such legislation.

In the Senate, the Environment and Public Works Committee unanimously passed the highway sections of such a bill several weeks ago. Its bill was very different from the House bill, but it is still likely to be the basis for much of any new legislation next year. Three other Senate committees (Finance, Banking, and Commerce) play key roles in the passage of any comprehensive surface transportation infrastructure legislation, and none of them took any action during this Congress.

Roger Wicker (R-MS), chairman of the Commerce, Science and Transportation Committee, led a bipartisan group of Senators in introducing two bills during the pandemic aimed at boosting investment in local infrastructure (i.e., the LOCAL Infrastructure Act and the American Infrastructure Bonds Act). These could also be a part of the discussion next year on an infrastructure package.

Department of Transportation Secretary Elaine Chao will likely stay in her role for the current administration if Trump wins in November. She was secretary of labor during the George W. Bush administration, and she was the only member of his cabinet to serve the entire eight years. Biden's picks for his cabinet have yet to be unveiled. Press reports indicate that the short list for DOT secretary includes Los Angeles Mayor Eric Garcetti.