Overview of Federal Election Results
The American public is witnessing a historic election. President-Elect Joe Biden received more popular votes, over 74 million, than any other presidential candidate. The election turnout percentage, 67% of eligible voters, is the highest since the election of 1900, when the electorate was much smaller, and yet results have not been finalized and may not be for some weeks to come.
While not official, with the calling of Pennsylvania, Biden currently has 279 electoral votes to President Donald Trump’s 214; 270 electoral votes are needed to win the race. The four states still being counted are Alaska, Arizona, Georgia and North Carolina. Biden currently leads in Georgia
and Arizona, while Trump is leading in Alaska and North Carolina. If those leads hold, Biden will finish with 306 electoral votes to Trump’s 232. Recounts have been requested in several states and lawsuits filed in others to either stop the current count or to throw out ballots. It may well be another week before there is an official victor. If Biden is officially declared the 46th President, this will only be the fourth time (Hoover 1932, Carter 1980, Bush 1992) in modern U.S. history that an incumbent president has lost reelection.
The makeup of the Senate currently stands at 48 Republicans and 48 Democrats with four races still outstanding. The races remaining are: Alaska, where Senator Dan Sullivan (R) is ahead and expected to win; North Carolina, where Senator Thom Tillis (R) leads by nearly 100,000 votes; and the two Georgia seats that are both headed to runoffs in January. The Georgia runoff elections will likely determine the final numbers in the Senate. While there is potential for a 50 – 50 split in the Senate with the vice president breaking the tie, the most likely scenario is continued Republican control with 51 or 52 seats.
The Democrats have secured enough seats to retain control of the House. To retain the majority, Democrats needed to secure at least 218 seats, which they have won as of this writing. While there are still 20+ Congressional seats that are undecided, if current leads hold, the Democrats will end with 223 seats to the Republicans’ expected 212. The Democrats went into Election Day expecting to expand their majority and instead the Republicans saw more gains.
There will be speculation on whether Speaker Nancy Pelosi should continue to serve in that role, but it is most likely that the current Democratic leadership will continue to serve in
their respective leadership roles. The same is true on the Republican side with Minority Leader Kevin McCarthy and his team likely remaining in place.
Coronavirus Stimulus/Government Funding
Should Joe Biden’s win hold and the House and Senate remain Democratic and Republican respectively, there may be added pressure on the parties to reach a COVID-19 stimulus deal this year, especially since the country is experiencing an increase of more than 100,000 cases per day. Senate Majority Leader Mitch McConnell has recently noted that Senate Republicans might have to give a little on aid to states and localities, a big Democratic priority. Senate Republicans continue to push for liability immunity for businesses. Previously, McConnell talked about passing a stimulus bill in early 2021.
It should be noted that Biden and McConnell enjoyed a good working relationship from years of working in the Senate together and from Biden’s years as vice president. This relationship could enable more deals to be cut into the future. The chambers would need agreement on the size of package and President Trump would need to agree to sign the legislation for any stimulus package to move forward.
Funding and/or programs that might be included:
- PPP extension – allocating another $250+ billion to the program and allowing hardest hit businesses to take out second loans
- $500 billion new state and local aid
- Another round of stimulus checks to individuals
- Expansion of employee retention tax credit
- Expansion of child tax credit.
Another priority of the lame duck session will be passage of a spending bill to keep the federal government open. The funding of several agencies and programs is currently scheduled to cease on December 11. Temporary funding authorization has been in effect since October 1, which marked the start of the current fiscal year. House and Senate leaders have agreed to work on a bill to provide permanent funding, which would likely be more than $1 trillion, for the rest of the fiscal year. As necessary legislation, a funding bill would be another huge
opportunity to pass tax extenders and other measures. Typically, lame duck Congresses have an easier time compromising in the weeks after an election, though again, President Trump’s signature would be necessary for passage.
President-Elect Biden has identified climate change as one of his top priorities as president, saying we must marshal the “forces of sciences in the battle to save our planet.” A Biden Administration is expected to restore through executive powers dozens of environmental regulations abolished by President Trump. While sweeping legislative reforms will encounter stiff resistance from Senate Republicans, some of the more immediate initiatives might include:
- Rejoining the Paris Agreement on climate change
- Restricting oil and gas drilling on
public lands and waters
- Initiating more aggressive review of pipelines that transport fossil fuels
- Providing federal incentives to develop renewable power
- Ratcheting up federal mileage standards for cars and SUVs and establishing the goal to eliminate carbon emissions
- Rebuilding diplomatic alliances and encouraging foreign countries to pursue more ambitious carbon reductions.
The most prominent provision of President-Elect Biden’s tax proposal during the campaign was an increase of the corporate tax rate from 21% to 28%. With the retention of Republican control of the Senate, a corporate tax increase will be off the table. It is now more likely that the 2017 Tax Cuts and Jobs Act’s corporate provisions will remain in place.
Retirement Plans and Health Insurance
As part of a broader COVID-19 relief package, a number of retirement and health plan provisions contained in the House-passed HEROES Act and the Senate’s HEALS Act package could be part of any year-end agreement or an agreement that moves forward in early 2021. Some of those provisions include:
- Relief of single-employer defined benefit plan funding requirements and interest rate assumptions
- Relief for funding requirements and financial assistance for multiemployer plans
- Extending and clarifying
provisions under the CARES Act related to suspension of required minimum distributions and administration of COVID-related loans
- Health plan requirements for covering COVID-related treatments at no cost sharing
- Subsidies for COBRA premiums
- Tax credits to employers for COVID-testing and protection supplies
- Facilitating on-site clinics and testing stations
- Allowing carry-over of flexible spending accounts.
Both parties agree on the need for relief for multiemployer pension plans, which are rapidly
approaching insolvency and, without action, would threaten to bankrupt the Pension Benefit Guaranty Corporation (PBGC), though the parties have proposed different approaches.
Another retirement initiative is SECURE Act 2.0, which builds legislation passed late last year to improve employees’ retirement savings. Provisions include:
- Expanding auto-enrollment in retirement plans
- Increasing required minimum distribution age to 75
- Allowing 403(b) plans to join Multiple Employer Plans and Pooled Employer Plans
- Allowing employers to provide 401(k) matches for student loan payments
correction procedures for 401(k) to allow for more self-corrections and a safe-harbor for correcting elective deferral errors.
Republicans and Democrats have signaled a willingness to work together on improving our infrastructure, which would spur economic growth and improve our nation’s network of roads, bridges, tunnels, railroads, airports and waterways. Early in 2021, legislation should be introduced and debated in both the House and Senate. Much of the groundwork has been completed over the past several months. Last year, the administration, Speaker Pelosi and Senate Minority Leader Chuck Schumer agreed to a $2 trillion infrastructure spending plan. Unfortunately, talks stalled and the deal fell apart.
Public support for
infrastructure spending is clear – nearly 80% of voters say government investment in infrastructure is important as the country recovers from COVID-19. A focus for Calfee will be on advanced technologies, a connected vehicle deployment pilot program, and advanced digital construction management systems. It’s also expected that the debate could center on the intersection of infrastructure and environmental policy.
On a bipartisan basis and as a partial response to COVID-19, the House and Senate should focus on several issues early in 2021:
- Deploying emerging technologies like Artificial Intelligence (AI), quantum, 5G, blockchain, and autonomous vehicles
- Developing and producing a crucial medicine, medical supply, ingredient, test and vaccine program
- Introducing a national data privacy standard.
We also expect a continued
bipartisan focus on China and legislation to promote U.S. global competition. For example, the CHIPS for America Act, legislation which is viewed as pro-tech, pro-jobs, pro-economy and pro-innovation by providing $22.8 billion in federal funding for new U.S. semiconductor facilities and R&D among other things. Both the House and Senate will continue to hold oversight hearings to advance improvements to the protection and enforcement of intellectual property (IP).
Financial Services/Real Estate
November will see a series of hearings on Capitol Hill with financial regulators. The expectation is there will be considerable discussion of the state of the financial services industry, particularly regarding lending to struggling businesses amidst the pandemic. Other areas for any lame duck and early 2021 agenda will likely include:
- Examining the need for the continuation of mortgage forbearance and rental assistance programs
- Concern over credit and liquidity issues
- Focus on the increased lack of
affordable housing, particularly in urban areas where there are more job opportunities
- Focus on incrementally strengthening consumer protection laws such as Dodd-Frank requirements and predatory lending laws (mortgage, payday and student loans)
- Proposals to strengthen fair housing laws.
Despite movement to prepare Fannie Mae and Freddie Mac to exit conservatorship, a Biden Administration is likely to replace the head of government-sponsored enterprises' (GSE) regulator and will continue the current status of the GSEs. In addition, while the Biden campaign proposed an elimination of the 1031 Like Kind Exchange for
investment real estate, this idea would not go forward if the Senate stays under Republican control.
Just to reiterate, control of the White House and the final composition of the House and Senate could change. However, we believe many of these issues will be front and center no matter the final results. We will continue to provide updates as more information becomes concrete.