In a divided Washington, Biden could still wield economic power

WASHINGTON – President-elect Joseph R. Biden Jr. will take office in January with a weak economy weighed down by the coronavirus resurgence, millions of Americans still unemployed, and struggling and closed businesses as winter draws down .

Meeting this economic challenge and following through on his campaign’s tax and spending promises could be complicated if Republicans maintain control of the Senate.

But as President Trump has demonstrated time and again, Mr. Biden has the power to unilaterally pull certain levers, without congressional approval, and could influence the federal government’s economic policy-making mechanism through a range of executive actions, regulations and personnel changes.

“There is a tremendous amount to be done without Congress,” said Felicia Wong, who is an advisor to Biden’s transition board but speaking in her capacity as director of the Roosevelt Institute, a progressive think tank.

From finding ways to boost the economy and changing trade rules to tinkering with corporate taxation, here are some of the ways a Biden presidency could unilaterally influence economic policy.

Stimulus

As the election approached, Mr. Trump saw the limits of the White House’s ability to revive the economy without Congress. He reallocated some federal funds to temporarily expand expanded UI and allowed businesses to defer collecting workers’ payroll taxes, but found his hands largely tied beyond those measures. Economists and policy advisers say Mr Biden could seek other creative approaches if a Republican Senate blocks the kind of big spending package Democrats have pushed.

This includes student debt relief, which Ms. Wong says would work as a sort of stimulus by removing the burden of these payments. Mr Biden could order the Secretary of Education to cancel student loans up to a certain amount – Ms Wong would favor up to $ 50,000 to $ 75,000 for low- and middle-income households. This move, she said, would greatly benefit workers from racial and ethnic minority groups.

The administration could also use the executive branch to raise the minimum wage for federal contractors to $ 15 an hour, she said, which would give thousands of workers a pay rise.

Mr Biden will be able to exercise additional oversight over the $ 2.2 trillion stimulus package adopted in March. For example, small businesses that took out loans under the Paycheck Protection Program were required to keep workers on payrolls, and he could ask his Treasury Department to tighten up loans to make sure that the money was actually going to pay salaries and overheads.

Mr Biden could also take a page from Mr Trump and seek to reuse unspent funds from this stimulus legislation, including hundreds of billions of dollars that was earmarked for the paycheck protection program but never allocated before the Congress deadline. He could also rely on the Treasury to make the lending facilities established by the Federal Reserve more generous and more attractive to users, if they have not expired when he takes office.

Taxes

Mr Biden has proposed billions of dollars in tax increases on top incomes and businesses in his campaign. Much of that agenda would require congressional cooperation, but in a few areas a Biden administration could act on its own to raise taxes – largely by amending regulations governing the implementation of the 2017 tax law, signed by Mr. Trump.

Several of these regulations apply to income earned abroad by multinational corporations operating in the United States. A Biden Treasury Department could reverse a series of decisions Mr. Trump’s team made after the 2017 law was passed that effectively reduced the liability of multinationals under a pair of new taxes created by law, known as Base Erosion and Anti Abus Tax and the Global Intangible Low-Taxed Income.

Mr Biden campaigned on a pledge to increase U.S. tax debt on global corporate income, which he may attempt to do through regulation by changing the way debt is calculated. His Treasury Department could also try to roll back a so-called high tax exemption, which allowed some companies to lower their tax bills in the United States.

A Biden Treasury could also change regulations covering areas of opportunity, another creation of the 2017 law that aims to attract investment to areas of high poverty by offering tax relief. Such changes could make it more difficult for investors to qualify for zone tax benefits, and the Treasury could impose more stringent reporting requirements on projects that qualify for the breaks.

Trade

As Mr. Trump has shown, the executive branch has considerable latitude in trade policy.

Mr. Biden will face several near-term business decisions, including continuing Mr. Trump’s ban on TikTok and WeChat, popular social media apps, and maintaining U.S. tariffs on Chinese goods and metals. foreigners.

Mr Biden would not need Congressional approval to deal with these and other outstanding trade issues – including how to resolve a dispute with the European Union over subsidies for Boeing and Airbus, how to resolve the global negotiations on taxes on digital services and whether to follow them. on Mr. Trump’s plans to impose new tariffs on Vietnam.

“The administration would like to keep Congress in the loop, but it has a lot of leeway to walk away from Trump’s policies,” said Simon Lester, trade policy expert at the Cato Institute.

Mr Biden will also have wide latitude in determining his position on US economic relations with China, including whether to continue limiting US exports of sensitive technologies such as artificial intelligence and robotics. And the next president will also have to decide whether or not to pursue additional sanctions for human rights violations in China’s Xinjiang region and continue to try to block Chinese investment in the United States.

Congressional approval would be required if Mr. Biden was to enter into free trade agreements. But his advisers have said they are unlikely to strike new deals in the short term, focusing instead on national priorities.

Some of Mr. Biden’s other trade priorities transcend party lines and could win the support of Republicans in Congress – like tightening US purchasing rules to spend more federal dollars on US goods, or investing in domestic technologies like semiconductors to ensure that China does not gain edge.

Financial regulations

Some of the biggest changes to banking regulation in the Trump era were made by regulatory agencies, rather than Congress. Examples include a weakening of the Volcker rule, which prevents banks from betting for their own profit, and an overhaul of the community reinvestment law, which requires banks to invest in poor communities.

A new team of regulators will have leeway to reverse these adjustments or impose new ones – which will likely lead to increased oversight. Much like the slow pace of deregulation under the Trump administration, any change from the Fed and its fellow regulatory agencies will likely be small and steady.

“This is going to be a tough job for Democrats on the legislative front,” said Ian Katz, director and financial policy analyst at Capital Alpha Partners. “The action is really with the regulators.”

But the changes may not come so quickly, even as Mr Biden calls for more pro-regulatory officials for the various agencies. One of the most powerful regulatory positions – the Fed’s vice president for oversight – is held by Randal K. Quarles, a Trump nominee whose tenure is not until October 2021.

One area to watch is climate finance: The independent Fed has been slow to embrace climate stress tests, or to publicly consider how its own policies might address climate concerns, in a political context in which climate-related measures. climate seemed overtly political. That could change over the next four years.

Consumer protection

A Biden administration could wield tremendous influence over consumer protection, including those involving debt collection, payday loans and foreclosure abuse.

The Supreme Court ruled in June that the White House had the power to fire the director of the Bureau of Consumer Financial Protection without cause, rejecting a federal law aimed at limiting presidential oversight of independent agencies. That means Mr Biden will be free to replace Kathleen Kraninger, the office’s current director, with someone who will scrutinize businesses more rigorously and strengthen law enforcement.

Mr. Katz pointed out that payday loan regulations and a debt collection rule at the Consumer Financial Protection Bureau could be quickly put on the table.

Richard Cordray, the office’s former director, said in a white paper earlier this year that he should take steps to help people avoid foreclosures and evictions during the pandemic and to carefully monitor the practices of police officers. recovery.

“CFPB must ensure that businesses comply with all emergency protections on the books and maximize assistance to consumers to avoid garnishments, foreclosures and foreclosures,” said Linda Jun, advisor main policy at Americans for Financial Reform.