Post-Election Outlook - What the Business Community Can Expect from the Incoming Biden Administration

Looking ahead and predicting what will happen in the aftermath of a contentious election has always been a bit tricky. But, given the unpredictability that continues to define the U.S. political system and the unprecedented challenges currently facing our country, reading the tea leaves for 2021 and beyond is a particularly difficult proposition. As of the date of this writing, the results of the presidential election are being disputed. In addition, control of the Senate is still undecided pending the results of two runoff elections in Georgia—both taking place on January 5. All of this makes setting expectations for the business community in the coming year more difficult.

The only real certainty in the coming months is that the public health and economic crises wrought by the COVID-19 pandemic will continue to drive much of the policy conversation, just as it drove the political conversation in the last months of the 2020 election campaign. With a recent surge in cases, hospitalizations and deaths in numerous regions of country, focus on the pandemic will intensify between now and Inauguration Day. Going forward, whether it’s another major outbreak or news relating to the development or distribution of a vaccine, any significant event—positive or negative—in the ongoing effort to contain and treat the virus will have a major impact on the policy landscape.

Still, many other policy matters are also important to consider as we look forward to next year, including several that could have a significant impact on the business community. This article assumes that the results from the recent presidential election will be upheld and that President-elect Biden will ultimately be inaugurated in January. Obviously, if events unfold differently, the outlook would be much different under a second Trump administration. Operating under these assumptions, we will attempt to crystallize what to expect from a Biden administration in five major policy areas that are of particular interest to the business community.

1. COVID-19 Response

The COVID-19 pandemic will continue to dominate the public policy conversation when the Biden administration takes over on Inauguration Day. So far, the debate among experts and policymakers regarding the pandemic has largely focused on what seem to be two competing objectives: 1) containing the virus and 2) spurring economic recovery.

In the days since the election, President-elect Biden has announced the formation of a COVID-19 advisory board to “help shape [his] approach to managing the surge in reported infections; ensuring vaccines are safe, effective, and distributed efficiently, equitably, and free; and protecting at-risk populations.” In addition, Pfizer, Inc. announced that an experimental vaccine it had been working on has shown to be 90% effective in preventing patients from contracting the virus. And, the leaders of both the House and Senate have called for additional economic stimulus legislation, though Democrats and Republicans remain largely at odds over the size and scope of a potential relief package.

Looking forward to 2021, the pandemic response plan President-elect Biden released during the campaign prioritizes the development of a national COVID-19 testing strategy. This includes, among other things, significant federal investments to rapidly expand production and distribution of tests and double the number of drive-through testing sites. The president-elect also intends to leverage the Defense Production Act to ramp up production of personal protective equipment (PPE)—such as masks and face shields—to meet current needs and replenish stockpiles for the future. He has also signaled his intention to implement some form of a national mask mandate by working with state and local leaders. He could also utilize the president’s authority over U.S. government property and public transportation.

Finally, as progress continues in the development of effective COVID-19 vaccines and treatments, Biden’s plan focuses on guaranteeing equitable distribution. This includes a proposed $25 billion investment to develop and distribute a vaccine, with a goal to make it available to every American at no cost. 

To help ensure these efforts to slow the pandemic do not unduly hamper the economic recovery, Biden has pledged to develop consistent, science-driven standards and guidelines for navigating the pandemic and reopening the economy. The standards—which will be developed by the CDC—will be aimed at helping state and local governments make decisions about opening or closing schools and businesses based on the evidence of risk and viral spread within a specific community. President-elect Biden also plans to work with Congress to provide additional federal resources to stimulate the economy and prevent future job losses. This includes the creation of a renewable fund to help state and local governments address shortfalls and prevent cuts to essential jobs and services, as well as additional funding to help small businesses cover costs associated with reopening.

While some of these measures can be implemented purely through executive action, many of them will require congressional cooperation—particularly those requiring new funding. Recent months have demonstrated just how difficult it is to reach an agreement among elected leaders on COVID-19 relief measures Ultimately, providing an effective COVID-19 response will depend largely on the Biden administration’s ability to work with Congress and build the necessary consensus for these proposals. As a result, the Georgia Senate races could have a significant impact on the course the federal government takes on these matters. 

2. Tax and Economic Policy

Proposed changes to the U.S. Tax Code play a central role in President-elect Biden’s domestic economic policy agenda. Most of the discussion of Biden’s tax plan during the campaign centered on changes to the individual tax system. These included raising the federal income tax rate and adding additional payroll taxes for individuals earning more than $400,000 a year, as well as changes to the estate tax and Child and Dependent Tax Credit.

While rarely the focus of campaign ads, the president-elect’s plan also includes several significant changes to the business tax system. For example, the Tax Cuts and Jobs Act signed by President Trump in late 2017 lowered the U.S. corporate tax rate from 35% to 21%. Biden has pledged to increase the rate to 28%, roughly the same level proposed by the Obama administration in its second term. In addition, the Biden plan would impose a 15% minimum tax on corporate book income of $100 million or more in an effort to ensure that no major corporations are able to avoid taxes altogether.

In addition, Biden intends to expand existing tax credits related to renewable energy, including those for carbon capture and storage. Key elements of his energy plan include restoring the Energy Investment Tax Credit and the Electric Vehicle Tax Credit. 

With respect to international tax, Biden supports doubling the tax rate on Global Intangible Low Tax Income (GILTI) earned by foreign subsidiaries of American companies. He has also proposed determining companies’ GILTI tax liability on a country-by-country basis, rather than using the worldwide average as under current law. He has also proposed a “Made in America” tax credit to partially offset the costs of manufacturing companies’ investments intended to create jobs in the U.S. rather than offshore, including reopening or retooling domestic manufacturing facilities, increasing wages for workers and relocating overseas jobs to the U.S. Finally, Biden’s plan includes a surtax on goods manufactured offshore by foreign subsidiaries that are sold back to their U.S. parent companies.

If Republicans maintain control of the Senate, the prospects for any major changes to the tax system—particularly if they involve rate increases—will dim significantly. Under that scenario, the Biden administration would likely shift much of its tax policy focus to the regulatory side. For example, the new administration may seek to amend or repeal the Trump administration’s rules allowing companies to opt-out of the GILTI tax under certain conditions.

3. Trade, National Security and Foreign Relations

While most observers expect the new administration to prioritize domestic stimulus and infrastructure investments, the president-elect has indicated that he will immediately begin to work on restoring frayed relationships with U.S. allies and reasserting U.S. leadership on the world stage. This will likely mean more collaboration in dealing with shared geopolitical and security challenges, including those involving China and Russia. It will likely also mean the U.S. will rejoin various international organizations and agreements, including the Paris Climate Accord and the World Health Organization. 

More specifically, the Biden administration will almost certainly change the tone of U.S. interactions with our most significant international competitor: China. While the president-elect has been critical of the Trump administration’s reliance on blunt instruments like tariffs in its trade wars, he has also publicly acknowledged the need to address China’s unfair trade practices, including intellectual property theft and strict conditions on U.S. investments. This largely reflects a bipartisan consensus that sees China as a growing threat to U.S. leadership in the global economy. The incoming administration will likely take time to reevaluate existing tariffs on Chinese imports while pursuing a more multilateral approach to address China’s trade practices.

Moreover, the Biden administration is likely to remain vigilant in national security reviews including those conducted by the Committee on Foreign Investment in the United States (CFIUS). Consistent with recent legislation and regulations updating CFIUS authorities, the Biden administration will likely continue vigorous national security reviews of foreign investments in sensitive U.S. industries, while restoring the confidential nature of CFIUS deliberations in sharp contrast to the Trump administration’s approach in CFIUS’ review of the pending TikTok transaction. In addition, the Biden administration is unlikely to deploy national security tools such as Section 232 steel and aluminum tariffs to gain advantage in trade negotiations.

On trade policy more generally, the Biden administration will likely shift the focus away from bilateral negotiations with individual countries and pursue more regional trade agreements. On the substance of agreements, the president-elect has stated that his administration’s trade policies will be more focused on protecting U.S. workers, which means placing a higher priority on labor and environmental standards when agreements are being negotiated.

Biden’s “Made in All of America” plan includes proposals to strengthen and more strictly enforce “Buy American” rules for government procurement, with a particular focus on medical supply chains and pharmaceuticals as well as vital emerging technologies such as artificial intelligence. President-elect Biden has also stated that he wants to expand “Buy American” regulations so that they apply to other forms of government purchases and investment.

The Biden administration’s tactics with respect to trade will certainly change and the application of U.S. trade policy with our allies, China and others will likely be more consistent and aid U.S. companies in their long-term business planning.

4. Regulatory Changes: Environmental Standards and Banking

The central focus of Biden’s plan for addressing climate change is establishing a long-term goal to achieve net-zero carbon emissions in the U.S. by 2050. Many components of the plan—most notably, the $2 trillion aggregate investment to develop and transition to alternative and renewable energy sources—will need to be implemented through legislation. Other elements will likely be addressed through the regulatory system and other executive actions. Biden’s regulatory proposals include reinstating Obama-era regulations on pollution caused by substances like mercury, methane and uranium, and imposing both more rigorous fuel economy standards for the auto industry and more aggressive emissions rules on new buildings and home appliances. He has also pledged to stop issuing new oil and gas permits on public lands and in public waters.

With regard to the banking industry, the president-elect has discussed plans to restore and strengthen Dodd-Frank regulations, many of which have been rolled back by the Trump administration. He also intends to utilize the Consumer Financial Protection Bureau (CFPB) to crack down on abusive lending practices and strengthen oversight of high-interest consumer lending, including credit cards.

This is another area that will likely be heavily influenced by the outcome of the Senate runoffs in January. Most Republicans have been strongly supportive of the Trump administration’s deregulation efforts and are unlikely to support legislation to reinstate many Obama-era rules on banking or environmental standards. The Biden administration will be able to tackle several of these efforts through administrative rulemaking or other executive action. However, between the complexities of the rulemaking process and structural changes to the regulatory system implemented under the Trump administration, simply rescinding more recent regulations to restore many of those that were previously in place could take many months or even years. 

5. Healthcare

The COVID-19 pandemic will likely dominate the national healthcare discussion in the first several months of the new administration. However, the president-elect has signaled that he intends to take significant action to fill gaps in the U.S. health system beyond addressing the needs of the current crisis. Most of Biden’s healthcare plan revolves around bolstering and expanding the Affordable Care Act (ACA).

In addition to reversing executive actions taken by the Trump administration that have, in his view, weakened the ACA, President-elect Biden intends to further expand health coverage by offering a public health insurance option similar to Medicare. Any American dissatisfied with his or her insurance options would theoretically be able to purchase this government-provided insurance through the ACA exchanges. In addition, Biden supports making the public option available at no cost to those who would have been eligible for the ACA’s Medicaid expansion had their states opted to participate in the program.

Beyond added coverage options, Biden’s healthcare plan includes several steps intended to reduce the cost of prescription drugs. For example, he wants to remove current legal restrictions that prevent Medicare from negotiating with drug companies to lower costs and stop consumers from purchasing drugs from other countries with stricter price controls. He has also proposed a review board to set the prices that federal health programs will pay for specialized and exclusive drugs and treatments on the market with little or no competition and regulations to limit price increases under these programs to inflation. In addition, he supports legislation to prevent pharmaceutical companies from deducting advertising expenses from their taxes.

In the decade since the passage of the ACA, the national healthcare debate has only grown more divisive and contentious. Many of the coverage elements of the Biden plan were considered during congressional deliberations on  the ACA and were ultimately discarded due to insufficient support. To enact these policies now, the new administration will have to find ways to bring many of those who opposed new government-run insurance options in 2009 on board while also appeasing those in the president-elect’s own party who support the elimination of private health insurance in favor of so-called “Medicare for All” proposals. This would be a difficult proposition under any circumstance. If Republicans maintain control of the Senate, any legislation viewed as an expansion of the ACA will face an uphill battle.

Conclusion

President-elect Biden clearly has ambitious plans to tackle the challenges facing our country. However, as is often the case, the goals of the new administration will have to be tempered by the reality of a divided electorate, and, depending on the outcome of the remaining Senate races, the limitations created by divided government. Still, even if major legislative changes prove to be beyond reach at the outset of the new administration, many options exist within the powers of the executive branch. Therefore, that the Biden administration’s posture on significant issues impacting the business community will differ measurably from that of the current administration is a safe assumption with or without the full cooperation of Congress.