We have all heard of the importance of a every President’s first 100 days in office. Did you ever wonder where the “100 days” came? The “first” first 100 days actually began during Franklin Delano Roosevelt Presidency in 1933 where he rapidly moved legislation through Congress in an effort to provide relief to Americans recovering from the Great Depression. The bulk of the legislation came during the first three months, or roughly 100 days, of his administration. Since then, the “first 100 days” of a presidential term has taken on symbolic significance. It is these first 100 days that often serve as the measure of a President’s success. With President Biden’s administration hard at work, we wanted to take a look what we believe will be important policies and initiatives.
In a recent web event, Steve Pavlick, Washington Policy Analyst with Renaissance Macro Research, commented on what he thought Biden’s first 100 days might look like. He broke the down the administrations’ efforts into three parts: Relief, Rescue and Redistribution. Relief refers to pandemic-related stimulus in an effort to save jobs. Rescue refers to the proposed infrastructure spending to create new jobs. And finally, Redistribution focusses on tax changes to businesses and top income earners. Much like Trump’s first few days in office, executive orders and partisanship dominate President Biden’s early efforts. Remember, executive orders are not laws and therefore easily challenged in court. Pavlick mainly saw Biden’s executive orders as an undoing of Trump policies and a return, or “signal” to the return, to previous Obama / Biden policies. With a very divided country we can expect to see various states challenge Biden’s executive orders in the court room.
The relief bill currently being proposed would spend $1.9 trillion for items like stimulus checks to individuals, an extension of unemployment benefits, and increases to minimum wages. The American people are also expecting widespread distribution of vaccines by mid-summer. In order for this bill, or any major legislation for that matter, to pass the Senate, Biden would need 60 votes. With a split Senate, and the very partisan environment we have already mentioned, a 60-vote majority is very unlikely. So how can Biden get things done? He hopes to answer that in three words: Budget Reconciliation Act. This Act allows for a simple majority of 51 votes to pass temporary legislation related to taxes or spending. Using Budget Reconciliation, President Biden could get some of his initiatives through Congress, like the stimulus checks for individuals, the extension of unemployment benefits, and temporary tax changes. Others, like increasing the minimum wage, would fall outside the bounds of the Act (including priorities which we have not yet mentioned, such as gun control and immigration).
One thing to watch as the Biden administration navigates the political environment is the support any legislation receives from Joe Manchin, a Senator from West Virginia. Why would this lone Senator be so important to any of Biden’s policy successes? Here is our opinion. While the Biden administration and many Democrats want to advance a progressive agenda, they are constrained by politics. Not only is Democratic control of Congress very narrow, but Democrats themselves are not unified behind a progressive banner. Senator Manchin is the perfect example; he is a moderate Democratic Senator from an otherwise Republican State. In order to get through Congress, policies can’t move so far from the middle that they alienate the Moderates. Manchin is a critical voice for the Moderates.
For Biden, managing this dynamic will be tough. As a result of this balancing act, we do not believe that there is broad bi-partisan support for a $1.9 trillion stimulus package, but we do expect a stimulus package to be passed by the end of March. The size of the of the bill will tell us who has the upper hand. The closer the bill is to $1.9 trillion, the more power the Progressive Democrats hold, and the closer it is to $1.0 trillion, the more the moderate democrats are controlling the wheel.
With respect to Rescue, Mr. Pavlick suggested that President Biden has a legislative window that extends until June of 2022. After that, the window closes as Congress members and the parties shift their attention to the mid-term elections. Biden’s Rescue plan targets a $2.0 trillion bi-partisan infrastructure bill focusing on “Green”, or environmentally leaning, legislation incorporating both climate and trade. In Biden’s trade negotiations with China, he is asking Europe to join him in an effort to bring broader political pressure on the Chinese. It would seem unlikely that Europe would join us, since they recently put their own trade deal together with China. But we do expect trade negotiations between the US and China to continue. They simply won’t be as headline-grabbing as in the recent past. Pavlick did point out that he believes Taiwan to be a major focus for trade negotiations between China and US. It will center around the semiconductor industry and has both economic and national security implications. It is also expected that Biden will rejoin the Iranian nuclear deal, using the sanctions put into place under President Trump to force them back to the table and restructure more favorable terms for the US.
And finally, Redistribution. Redistribution is referring to tax increases on corporations and high-income earners. Corporate tax rates and capital gains (for higher earners) are the likely tax hike targets. We are already seeing dissention among Democrats with respect to timing. It is possible to use the Budget Reconciliation Act to raise taxes, but that would make tax hikes go into effect during 2022, an election year. Not ideal if you are trying to get reelected. Biden might hold off on tax increases until after the mid-term elections to avoid having it held against the Democrats. Again, this is a tough spot to be in between the Progressives and the Moderates which he has to manage. Lastly, we expect to see the approval of consumer protection legislation around retail investing. This is largely a result of the very recent and very public social media and retail investor activity involving the company Game Stop, the popular investing platform Robinhood, and the social media platform Reddit. It has already started out to be a very interesting 100 days.
On a separate note, we hope everyone has received their email invitation to our upcoming virtual event which will look at the Secure Act one year later. On Tuesday, March 2 from 11am to 12 noon, EST, Brian Dobbis, Director of Retirement Solutions at Lord Abbett, will lead us through an entertaining and information packed Zoom call titled, “What do retirement accounts, HSAs, and wealth transfer strategies have in common?” If you have not received the email or done the unthinkable and “accidentally” deleted the invitation, please reach out to our team for the link and we will be happy to send it to you. We hope you can make it. It will definitely be worth your time.