President-elect Joe Biden may have limited levers to influence the U.S. economy as it recovers from the worst recession since the Great Depression.
The prospect of a GOP-controlled Senate, which could scale back or block a major fiscal response to the coronavirus, means Biden might need to rely on the sorts of expansive executive measures President Trump used to shape his economic agenda on issues like trade, regulation and emergency spending.
“It’s not going to be as easy as it would have been had there been a Democratic sweep, where they could have used budget reconciliation to pass a lot of their agenda,” said G. William Hoagland, senior vice president of the Bipartisan Policy Center.
“I do think the Biden administration is going to have to start thinking about how to achieve their goals without legislation, and looking more at the executive process,” he added.
The ever-worsening COVID-19 pandemic plunged the country into one of its worst downturns on record, with recent spikes in infection rates threatening to send the economy plunging again. Economists are nearly unanimous in their view that a strong fiscal response will be central to the recovery, though they vary on how much money Congress should approve.
Senate Majority Leader Mitch McConnell (R-Ky.), who is urging a smaller-scale approach, made clear that he will be taking a more central part in talks over the next COVID-19 package now that the election is over. Senate Republicans have endorsed legislation in the range of $600 billion to $1 trillion in recent months.
But Speaker Nancy Pelosi (D-Calif.), whose chamber passed a $3.4 trillion bill in May and then a $2.4 trillion version in early October, walked away from a $1.8 trillion offer from the Trump administration just weeks ago, and has indicated that her ambition for a large stimulus package remains intact.
New COVID-19 cases have broken records day after day, soaring past an unprecedented 140,000 in one day this week.
Biden, who will not be sworn in until Jan. 20, may largely be sidelined in the time-sensitive negotiations. In the meantime, two key unemployment benefit programs are set to expire on Dec. 31.
If Democrats fail to win both runoff elections in Georgia on Jan. 5, Biden may have to fall back on the kinds of executive actions Trump used extensively during his presidency when Congress would not pass related legislation.
But Trump’s expansive use of executive power may leave Biden with new avenues for action.
“I think, unfortunately, President Trump has set a precedent on some of this,” said Hoagland.
Trade is one of the clearest areas where Biden can take unilateral action.
“On trade policy, most of what the Trump administration has done was through executive action,” said Chad Bown, an economist at the Peterson Institute for International Economics in Washington.
Trump used laws on national security to circumvent Congress and ignite a slew of trade wars, most prominently with China, but also with Europe and other key allies.
Trump is expected to leave office with tariffs intact on hundreds of billions of dollars worth of U.S. exports.
“With a Biden administration, all of that could be tweaked, overturned, or even left alone through similar executive action,” said Bown.
It’s likely Biden will seek to reduce tariffs through negotiated agreements, meaning he will not lift tariffs right away. If he waits for larger deals, however, trading partners are likely to remove their own taxes on U.S. products, which could help struggling American companies.
“American businesses, manufacturers, exporters and farmers who have paid billions of dollars in tariffs to the federal government continue to struggle amid the economic crisis. As President-elect Biden works to help the economy recover, he must make ending the trade war a top priority,” said Jonathan Gold, spokesperson for Americans for Free Trade, an anti-tariff advocacy group.
Biden could also follow in Trump’s footsteps on unemployment insurance. After failing to strike a deal on renewing $600 in weekly additional unemployment payments that expired July 31, Trump used executive actions to provide extra funding.
He ordered the Federal Emergency Management Agency to use money from its disaster relief fund to pay $300 in weekly additional benefits for any states that wanted them. The program took weeks to set up and only lasted for a month and a half, but it nonetheless put money into people’s pockets without a deal in Congress.
While that kind of approach alone will do little to sustain a recovery, Biden could keep the strategy in his back pocket to boost benefits if Democrats are dissatisfied with what the GOP agrees to in a final COVID-19 relief bill.
But it is unclear whether Biden will be willing to push executive authority as far as Trump has.
“The Trump administration did not feel bound by whether actions were legal in many cases, and the Biden administration, appropriately, will be more careful,” said the Economic Policy Institute’s Heidi Shierholz, who was chief economist at the Labor Department during the Obama administration and is now considered a contender for Biden’s Council of Economic Advisors.
One of Trump’s most controversial moves to circumvent Congress was declaring a state of emergency to divert billions in defense funds to build a wall on the southern border. Lawsuits against the move dragged out while the wall was built.
That, Shierholz says, may be beyond the scope of what an institutionalist like Biden thinks is appropriate.
“The Biden administration will do anything they can legally do, and I don’t know if diverting defense funds qualifies,” she said.
Shierholz noted there are several other important actions Biden can take without Congress, but many of them would be slow-going regulatory moves.
Among them: putting in place emergency temporary standards on COVID-19 at the Occupational Safety and Health Administration to make people feel safe about returning to work; raising the minimum wage for workers on federal contracts; restoring Obama-era policies on overtime protection; and changing standards to help workers get more benefits.
“That is money that you’re putting in the hands of middle class people,” she said.
Hoagland added that even with the expanded executive world Trump leaves behind, the most important economic policies — particularly fiscal policy — still require legislation.
Biden’s best chance to restore the economy, he said, will be to follow through on his campaign promises to find common ground with Republicans and get things done.
“On the big issues, he’s going to have to work with Congress, and there’s going to have to be compromise, which is not a bad word,” Hoagland said.