McConnell’s Leverage Over a Biden Administration

Plus, another record for Covid cases  [The Fisc](   By Yuval Rosenberg and Michael Rainey McConnell’s Leverage Over a Biden Administration Votes are still being counted and the winner of the presidential race remains uncertain, but the election results are shaping up to give Senate Majority Leader Mitch McConnell significant leverage over a potential Joe Biden administration — and the Kentucky Republican is reportedly ready to use it to shape not just legislation but the Democratic administration itself. We [told you yesterday]( how the GOP’s likely hold on control of the Senate could scuttle the most ambitious and progressive plans of an incoming Democratic administration, from a larger stimulus bill to expansion of the Affordable Care Act to reversing some Republican tax cuts. It’s still possible that Democrats will gain a 50-20 split in the Senate (a scenario that would require them to win runoffs for both Georgia seats), but some Democrats are already acknowledging they may have to set their sights lower and abandon plans to pass legislation through the Senate without relying on Republican votes by using a maneuver called “budget reconciliation” — the same way they had passed the Affordable Care Act and that Republicans pushed through their 2017 tax package. “We all felt that we had the possibility of being able to really change the direction of the country, and that’s not looking like a realistic possibility right now,” House Budget Committee Chairman John Yarmuth (D-KY) said, according to [The Washington Post](. “We had prepared a lot of memos on things like reconciliation that now we’re going to have to file away unless something crazy happens in the Senate.” Instead, any major legislation is likely to involve conflict and compromise. “If Republicans keep the Senate, you can forget the Biden agenda, but divided government doesn’t mean there won’t be action. We’ll just be back to governing by conflict,” Brendan Buck, who was a top aide to former House speaker Paul Ryan (R-WI), told the Post. “There will always be pressure points and funding deadlines that force action and force compromise.” But continued GOP control of the Senate may give McConnell leverage to shape more than legislation. “Republicans' likely hold on the Senate is forcing Joe Biden's transition team to consider limiting its prospective Cabinet nominees to those who Mitch McConnell can live with,” Axios’s Hans Nichols and Mike Allen [report](. “A source close to McConnell tells Axios a Republican Senate would work with Biden on centrist nominees but no ‘radical progressives’ or ones who are controversial with conservatives.” That reportedly could push Biden to drop some potential progressive Cabinet members in favor of centrist options more likely to be approved by Senate Republicans, like Lael Brainard, a member of the Federal Reserve’s Board of Governors, for Treasury secretary or Tony Blinken, who served in the Obama administration, for State. "It's going to be armed camps," the source close to McConnell told Axios. Quote of the Day: Would Trump Do a Big Stimulus Deal? "Trump does not want the last thing he does in office a $2 trillion debt spending bill. We want Biden to own that, not Trump." – Economist Stephen Moore, an adviser to President Trump, on the chances for a stimulus deal during the lame-duck session of Congress if Trump loses the election (via The Washington Post’s [Jeff Stein](. Layoffs Remain Stubbornly High as Covid Cases Hit New Daily Record No matter who wins the White House, they’ll be dealing with an economy that is still showing signs of serious stress. About 751,000 people filed initial state unemployment claims last week, the Labor Department [announced]( Thursday, a slight decrease from the week before but [more than analysts expected](. Another 363,000 filed for Pandemic Unemployment Assistance, the federal program that covers gig workers and the self-employed, bringing the total of new filers to roughly 1.1 million, little changed from last week. All told, about 21.5 million people are receiving come kind of unemployment assistance, a decline of 1.1 million from the week before — but about 15 times higher than the same time last year, before the Covid-19 took hold. Unprecedented conditions: Eight months after the pandemic began to tear through the U.S. economy, layoffs — which are roughly in line with new unemployment filings — are still at historically high levels. “Last week was the 33rd straight week total initial claims were far greater than the worst week of the Great Recession,” [said]( Heidi Shierholz of the Economic Policy Institute. A new Covid milestone: Economists worry that a new wave of infections could dramatically slow the already faltering recovery, and public health officials are delivering bad news in that regard. “The United States on Wednesday recorded over 100,000 new coronavirus cases in a single day for the first time since the pandemic began, bursting past a grim threshold even as the wave of infections engulfing the country shows no sign of receding,” The New York Times [reported](. Fed chief warns: Speaking to reporters after a meeting of the Federal Open Market Committee, Federal Reserve Chair Jerome Powell said that the outlook for the economy is “extraordinarily uncertain” and that he was concerned about the resurgence of the coronavirus. The pandemic is the biggest threat to the economy, Powell [said]( forcing households to run through the savings they accumulated from enhanced unemployment benefits and stimulus checks, which were provided by federal programs that have now run out of money, with no clear plan in sight to revive them. The Fed chief said he was confident that officials could maintain financial stability in the broader economy, but they would need help from lawmakers when it comes to households and consumer demand. “We’ll have a stronger recovery if we can get at least some more fiscal support, when it’s appropriate and at the size Congress thinks is appropriate.” Waiting for a vaccine: “A sustained recovery will not occur until a vaccine is widely available, likely in mid-2021, at best,” Dante DeAntonio, an economist at Moody’s Analytics, said in a note Thursday. Until then, risks to the labor market “are weighted heavily to the downside.” DeAntonio added that the “increased spread of the virus across much of the country could result in an even larger pullback in business activity than expected. Further, the breakdown of talks for additional fiscal stimulus prior to the election left households, businesses, and state and local governments in the lurch waiting for additional support. This will further weaken an already-fragile labor market recovery.” [The memes]( have made this wait at least a bit more tolerable. [This one]( may be our favorite. Send your tips and feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And please tell your friends they can [sign up here]( for their own copy of this newsletter. News - [Biden Close to Victory as Margin Narrows in Pennsylvania]( – Axios - [Hopes Rise for a Quick Vote on a New Stimulus Package]( – New York Times - [Democrats’ Ambitious Agenda for 2021 Runs Into Unexpected Obstacle — McConnell’s Resilience]( – Washington Post - [The US Just Reported 102,831 New Covid-19 Infections in 1 Day. That's an All-Time High]( – CNN - [Fed Chair Says Economy Will See "Stronger Recovery" With Stimulus Package]( – Axios - [Jerome Powell Sends a Warning About Tea Party Redux]( – Bloomberg - [Wall Street Rallies as Investors Believe Washington Gridlock Is Good for Business]( – Washington Post - [Pelosi Reportedly Declares Election 'Big Win' for Democrats. Moderate Democrat Profanely Disagrees.]( – The Week - [The Polls Underestimated Trump — Again. Nobody Agrees on Why.]( – New York Times - [In Midwest Battlegrounds, the Virus Met Another Concern: The Economy]( – New York Times - [Republicans Fend Off Democrats in Statehouse Fights]( – Stateline - [$26 Billion Settlement Offer in Opioid Lawsuits Gains Wide Support]( – New York Times - [Management Company Owned by Jared Kushner Files to Evict Hundreds of Families as Moratoriums Expire]( – Washington Post Views and Analysis - [Win or Lose, Trump Will Remain a Powerful and Disruptive Force]( – Peter Baker and Maggie Haberman, New York Times - [Are We Governable?]( – Jennifer Rubin, Washington Post - [Biden's Promise of Returning Things to Normal May Not Even Be Possible]( – Chris Cillizza, CNN - [Progressives, Here Are Five Reasons to Be Optimistic]( – Van Jones, CNN - [Richest Americans Win With a Divided U.S. Government]( – Ben Steverman, Bloomberg - [Health Care’s Boatloads of Cash Are Safe for Now]( – Max Nisen, Bloomberg Copyright © 2020 The Fiscal Times, All rights reserved. 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