Georgia Senate races could determine fate of Biden agenda

President-elect Joe Biden prevailed over the weekend in a tight campaign for the White House, but how much he can get done could depend on two unsettled Georgia Senate races, experts said Monday.

The political capital of the country will shift to Atlanta for the next several weeks as incumbent Georgia Republican Sens. David Perdue and Kelly Loeffler battle to keep their seats in early January runoffs against Democrats Jon Ossoff and Raphael Warnock, respectively.

For the moment, Republicans hold the lead for control of the Senate, 49-48. The Republican candidate is expected to prevail in an undecided race in Alaska, which would give the GOP a 50-48 lead going into the Georgia contests.

If both Georgia Democrats win, the Senate would be tied, 50-50, which would give control to the Democrats by virtue of the vote of Vice President-elect Kamala Harris.

As the country emerges from a tense presidential election whose outcome President Donald Trump is disputing, Georgia was on the minds of analysts who spoke Monday at the Schwab Impact virtual conference.

The Georgia Senate races are “going to determine the achievable policy agenda for a Joe Biden presidency,” said Michael Townsend, Schwab vice president of legislative and regulatory affairs.

Last week, when the presidential election outcome was trending toward Biden, financial advisers breathed a sigh of relief that divided government appeared to lay ahead. Republicans are favored to win at least one of the Georgia races and maintain a slim majority, putting up a roadblock to Biden’s proposals to raise corporate taxes and individual taxes on the wealthy.

But even if Democrats take both Georgia races, a 50-50 Senate could derail or reroute Biden’s policy agenda because of potential resistance from Democrats in the middle of the political spectrum.

“There are enough moderate Democrats, it’s not going to be a blank check to do whatever they want,” Townsend said. “They’re going to have to be careful in that scenario.”

The early prediction that Republicans would hold onto the Senate has contributed to stock market gains because divided government will require Biden and Senate Majority Leader Mitch McConnell, R-Ky., to compromise, said Greg Valliere, chief U.S. policy strategist for AGF Investments.

“The Senate outcome was unambiguously positive for the market,” Valliere said. “Deals will be cut.”

It remains to be seen whether Democrats and Republicans will be able to reach an agreement on pandemic stimulus legislation. Democratic lawmakers have been advocating for a bill totaling $2 trillion or so, while Republicans have insisted on legislation totaling about $1 trillion or less.

Although the stock market soared Monday as a result of the election outcome and news of good results in the testing of a coronavirus vaccine, the economy and job market continue to struggle as the pandemic surges.

“I think it’s important [stimulus] be done before the inauguration,” said William Dudley, former president of the Federal Reserve Bank of New York.

Fed Chairman Jerome Powell has been urging Congress to approve more fiscal support for the economy.

“That’s a striking thing for the Fed chair to say as frequently as he’s saying it,” Townsend said.

But so far, Powell’s entreaties have not moved lawmakers to an agreement. The market upswing and good news about a vaccine may encourage Congress to wait a little longer before approving a stimulus package.

“It may come later rather than sooner,” Valliere said.