Business groups breathe sigh of relief over prospect of divided government

Lobbying firms are telling their clients that two more years of divided government is the best-case scenario and most likely outcome of the 2020 elections. 

Business groups had been bracing for a blue sweep that carried with it the risk of progressive policies and ramped-up regulations. Instead, the prospect of a split Congress and the gridlock that comes with it is being welcomed by many clients.

“Typically, my clients are happier when there’s a divided government. It’s a little bit more stable and they can plan better for the long-term, despite things taking longer to cross the finish line,” said Amy Smith, a policy adviser at Arnold & Porter.

Loren Monroe, a principal at BGR, said companies often prefer the certainty provided by a slower legislative process, particularly when there are familiar faces in leadership posts.

“More than anything, the business community craves predictability, so there is some relief when anticipating a new president who has a governing track record, a known Senate leadership on both sides of the aisle, and a House leadership that they’ve worked with over the last couple of years,” Monroe said.

President Trump enjoyed unified government during the first half of his term, but without a slew of major legislative victories to accompany it beyond tax cuts and criminal justice reform. The subsequent two years have often been defined by gridlock on issues like COVID-19 relief and police reform.

But lobbyists are hopeful things will work differently under President-elect Joe Biden, who spent decades in the Senate and facilitated deals with congressional Republicans when he was vice president.

Trade groups are optimistic that a Biden presidency, combined with a Republican-controlled Senate and Democrat-led House could open the door for moderate pro-business policies.

One Republican lobbyist called divided government “very good” for business.

“It means the most dramatic and radical permutations of a Democratic sweep are off the table. On a process basis, you’re not going to move towards eliminating the filibuster, adding votes to the Supreme Court, or adding new states to the union to solidify and make permanent the Democrat majorities in Congress,” the GOP lobbyist said.

Republican control of the Senate is still uncertain since the majority won’t be decided until two runoff elections are held in Georgia on Jan. 5. The expectation, however, is that Senate Majority Leader Mitch McConnell (R-Ky.) will retain his post in the 117th Congress.

Smith noted that “Biden’s starting M.O. will be to work with his Republican colleagues, work to compromise, not work to push the progressive policies.”

Biden’s long career in Washington, coupled with his previous work with McConnell and Speaker Nancy Pelosi (D-Calif.), has K Street optimistic that gridlock won’t necessarily mean a legislative standstill.

“His Senate roots, his long-standing working relationship with Leader McConnell and most importantly his laser-focus on hitting the ground running creates a real opportunity to break legislative gridlock,” said Arshi Siddiqui, a partner at Akin Gump.

“When you add in Pelosi and McConnell, all the major players have worked together before, they’re institutionalists, and at the end of the day they want to see where they can find common ground,” she added.

McConnell, who was first elected in 1984, was colleagues with Biden in the Senate. Their relationship will soon be put to the test.

“Putting aside the lobby shops or the policy shops is the fact that President-elect Biden and Sen. McConnell have a long-standing relationship. I’m sure it hasn’t always been perfect, but they have a relationship. The relationship between McConnell and Biden is going to be far better than the relationship between Pelosi and Trump,” said former Rep. Joseph Crowley (D-N.Y.), senior policy adviser with Squire Patton Boggs.

Pelosi had a good relationship with former President Obama, and lobbyists expect she will have the same relationship with Biden.

“Certainly having somebody who has relationships with many of the senators and some of the House members, I think, can help to move issues along, especially when you’re looking at a stimulus package and a large COVID relief package,” said former Rep. Jeff Denham (R-Calif.), who’s now government affairs counselor at K&L Gates. “I think there’s a willingness of business across the country to engage and see if we get some bipartisan movement.”

House Republicans did surprisingly well on Election Day, flipping back several seats Democrats won in the 2018 midterms and narrowing the Democratic majority.

Slimmer margins in the House give GOP Leader Kevin McCarthy (Calif.) a little more leverage than he’s had the past two years.

“The surprise performance of House Republicans strengthens McCarthy’s hand to be more influential in the House,” said Marc Lampkin, chair of Brownstein Hyatt Farber Schreck LLP government relation practice.

Those slim margins increase the odds of compromise, lobbyists said.

“With closely divided government next year, it will certainly be a challenging environment to get legislation passed unless nearly all sides have signed off. But Leader McConnell, President-elect Biden and Speaker Pelosi know better than anyone how to legislate and have tackled big issues together in the past. So while there may be fewer legislative vehicles, there will be clear paths for getting things done,” Monroe said.