Even if feverish speculation that an electoral blue wave is building proves correct, Democratic control of the White House and Congress wouldn't guarantee rapid delivery of a new COVID-19 stimulus package, one economist says
The reason: Winning a filibuster-proof majority in the Senate remains unlikely, and resistance to a large relief package in the chamber has been high.
Republican Majority Leader Mitch McConnell has already said he warned President Trump his members wouldn't support such a bill, despite pressure to offer assistance to frustrated voters before they cast their ballots.
And while traders on the prediction market website PredictIt are pricing in a 53% chance of a Democratic sweep, unless the party holds 60 or more Senate seats, lawmakers would "have to rely on the budget reconciliation process to pass a bill" without GOP support, wrote Andrew Hunter, senior U.S. economist at Capital Economics.
Doing so would prohibit Democrats from using the procedure to increase the federal budget deficit past a 10-year horizon.
More importantly, only one reconciliation bill on taxes and spending is allowed each year, resulting in the possibility of competing priorities, according to Hunter.
The Democratically-controlled House of Representatives on Oct. 1 passed an updated version of the $2.2 trillion Heroes Act, first approved in May, which includes stimulus checks, enhanced unemployment benefits, an extension of the paycheck protection program and aid to state and local governments.
Democratic presidential candidate Joe Biden, however, has also promised an aggressive spending plan to cover his healthcare, infrastructure, education and climate change proposals, which are estimated to cost up to $5 trillion.
“The upshot is that passing a quick stimulus bill to counter the pandemic would force the Democrats to wait to implement Biden’s broader economic agenda at a later date,” Hunter wrote.
Waiting to unleash a big stimulus plan might actually be Biden’s preferred choice, however, according to Matt Maley, Boston-based chief market strategist at Miller Tabak & Co.
He says newly elected presidents typically “make a few tough choices” during their first year in office, but design their stimulus plans to accomplish the most in the last years of their term in order to set themselves up for reelection.
“The best year of the stock market tends to be the third year, and it usually holds up pretty well in the fourth year,” Maley said.
Control of the Senate may be heavily influenced by the presidential race, where the latest RealClearPolitics polling average gives Biden a lead of 7.9 percentage points against Trump. Margins are tighter in battleground states crucial to an Electoral College victory, however.
Trump won the Electoral College in 2016 despite losing the popular vote to former Secretary of State Hillary Clinton by nearly 3 million.