Joe Biden and the challenges that lie ahead
Joseph Biden’s ‘blue wave’ failed to materialise during last week’s election, leaving a split Congress. He will face challenges implementing any sweeping reforms.
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Less geopolitical uncertainty
Biden is likely to be less confrontational and take a more predictable and stable approach. His track record suggests seeking a broader alliance with European, North American and Asian allies yet confronting China on trade issues.
Whilst he will need to strike a balance between continuing the America First approach and building relations, the more steadfast style will help to alleviate a level of uncertainty. Biden’s proposals include ensuring federal agencies procure only US services and goods or imposing taxes to penalising US companies for moving jobs and manufacturing overseas.
Biden’s approach towards the World Trade Organisation (WTO) will offer the first indication of his stance on multilateralism. He has recognised the need for the organisation to be reformed but to do so he would first need to aid the leadership and appellant bodies issues.
A mixed bag of taxation
Biden has pledged to undo many of the taxation changes of Trump’s presidency affecting both individuals and companies. They include; raising the corporate tax rate to 28%, from 21%; only increasing taxes on those earning over $400,000 a year; putting the top individual income rate back to 39.6%, and asking for those making more than $1 million to pay the same rate on investment income as they do on their wages.
Biden’s stance on the deduction for State and Local Taxes (SALT), a $10,000 cap that passed under Trumps Tax Cuts and Jobs Act, is likely to be monitored closely by property owners and investors. Democrats have supported removing the cap as part of the Congressional packages to blunt the impact of the pandemic – something the President-elect may try to move forward once he takes office.
Can these reforms pass?
The Democratic party retained is House of Representative majority but as yet has failed to capture the Senate. The current results put Republican seats at 50 to the Democrats’ 48, with the final two to be decided by a run-off in Georgia on January 5th’. If the results of November 3rd are replicated, then each party will gain one of these seats yielding a Republican majority. However, if Democrats win both, then they have 50 seats each. This is important as when a vote is tied it can be decided by the Vice-President, which after January 20th will be Kamala Harris.
The division of Congress presents a problem for Joe Biden as his most radical policies are unlikely to receive Senate approval. However, his time as Vice President from 2009 to 2017, and as Senator from 1973 until 2009, amounts to significant experience in bipartisan politics. There remains much scope for scaled back or delayed versions of some Biden policies.
Longer-term, much could hinge on the 2022 mid-term elections when both a third of Senate seats and The House are up for grabs. A Democrat sweep of both would transform the power balance in Washington.