File 022372

Election 2016: Trump Wins Presidency, Republicans Hold Congress (File 022372)

Ernst & Young analysis of the 2016 U.S. presidential election results, Republican control of Congress, and policy agenda implications for the incoming Trump administration.
Summary
A comprehensive political analysis document dated November 9, 2016, examining Donald Trump's unexpected victory over Hillary Clinton in the 2016 presidential election with 279 electoral votes. The document details Republican control of both the Senate and House of Representatives, Senate race results across multiple states, and discusses the challenges and opportunities for the new administration including Supreme Court vacancy, healthcare policy, tax reform, and trade negotiations.
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Election 2016: Trump Wins Presidency,
Republicans Hold Congress
Washington Council Ernst & Young 9 November 2016
After the most tumultuous and unpredictable campaign in modern history, Republican Donald Trump
upset Democrat Hillary Clinton to win the Presidency, claiming at least 279 electoral votes (270
electoral votes to win) to Clinton’s 228, with results in Arizona, Michigan, and New Hampshire still
outstanding, according to the Associated Press. The popular vote margin remains close, with Trump
currently trailing by approximately 200,000 votes out of a total of almost 120 million votes that have
been counted. Clinton’s blue wall of support was pierced by Trump with unexpected wins in
Pennsylvania and Wisconsin. He also won the needed battleground states of Florida, Ohio, and North
Carolina. With fewer losses than expected, Republicans will retain their majorities in the House and
Senate, thereby controlling both ends of Pennsylvania Avenue.
Clinton, who called Trump last night to concede the race, said this morning, “I offered to work with him
[Trump] on behalf of our country” and “our nation is more deeply divided than we thought,” but went on
to say, “we stand together…and our best days are still ahead of us.” In his remarks shortly before 3:00
AM, President-elect Trump said, “It is time to bind the wounds of division. It is time for us to come
together as one united America.” He went on to say that it was “not a campaign, but an incredible
movement.” And, alluding to his policy agenda, Trump said we “would be working together to begin the
task of rebuilding our nation and renewing the American dream.” Trump has touted an agenda of
revitalizing the economy and promoting job growth by reforming the tax code, rebuilding America’s
infrastructure, repealing and replacing “Obamacare,” and being “tough” on immigration and in
renegotiating international trade agreements.
Maintaining the Senate majority will give Republicans the ability to set the agenda in the
Senate. However, bipartisan cooperation still will be necessary to achieve meaningful policy
accomplishments as Senate rules generally require a 60-vote threshold for movement on most
issues. An early challenge may be filling the Supreme Court vacancy created by the death of Antonin
Scalia in early 2016 – one that could spark fireworks on Capitol Hill and across the country’s highly
charged political environment. How Republicans, Democrats, and Trump navigate through the process
of nominating and confirming a new Justice to the Supreme Court is likely to set the tone in the Senate
for the next two years. The nature of Speaker Paul Ryan’s relationship with President-elect Trump and
his often unruly House Republican Conference is not clear at this time. However, the House Republican
“Better Way” agenda, which was developed in consultation with the Trump campaign, is now a focal
point for congressional action.
A
O
R
C
O
M
N
K
Y
Electoral votes
Trump Clinton
279 228
Leaning Democratic
Leaning Republican

Contents
Election results
Senate profile
House profile
Administration and agenda
Lame-duck session 2016
Tax
Health
Energy
Financial services
Trade
2
4
6
8
11
13
17
19
21
23
1 | Election 2016
Election results
With Republicans set to control the White House, Senate, and House
of Representatives for the session of Congress beginning in January
2017, the lame-duck session of the current Congress between now
and the end of this year seems likely to be limited to keeping the
government funded beyond the expiration of the current continuing
resolution on December 9, 2016. President-elect Trump and the
Republican Congress are certain to provide ambitious policy agendas
with plenty of proposals to analyze and the need for significant
legislative activity. However, it remains to be seen where Democrats
and Republicans, particularly in the Senate, will be able to forge
compromise.
With 24 of the 34 Senate seats up for election on November 8th held
by Republicans, and many of those seats quite vulnerable, retaining
control is a major victory for Senate Majority Leader Mitch
McConnell (R-KY) and his Republican majority. Currently,
Republicans are expected to hold at least 51 seats in the new
congress, with Senator Kelly Ayotte’s (R-NH) reelection bid in New
Hampshire still undecided. In Louisiana, State Treasurer John
Kennedy (R) received 25 percent of the vote and Foster Campbell
(D), a member of the Louisiana Public Service Commission, received
17% in a crowded 24 candidate “jungle primary” to advance to a
runoff election to be held on December 10, 2016. Senior House
Ways and Means Committee member Charles Boustany (R-LA) fell
just short in his quest to make the two-candidate runoff receiving
15% of the vote. While the Louisiana seat is technically undecided,
the state went strongly Republican in the Presidential election and
Kennedy is heavily favored to hold the seat.
Illinois Senator Mark Kirk (R-IL) lost his race to Rep. Tammy
Duckworth (D-IL). In Indiana, Rep. Todd Young (R-IN) won his race
against former Democratic Senator Evan Bayh (D-IN) to succeed
retiring Senator Dan Coats (R-IN). In Nevada, Catherine Cortez Masto
(D-NV) beat Rep. Joe Heck (R-NV) to hold the seat of retiring Senate
Democratic Leader Harry Reid (D-NV). In other notable races:
► Ohio: Once ground zero for Senate control, Senator Rob Portman
(R-OH) easily beat former Governor Ted Strickland (D-OH).
► North Carolina: In a race that was consistently within the margin
of error in recent days, Senator Richard Burr (R-NC) held onto his
seat against former state legislator Deborah Ross (D-NC).
► Pennsylvania: Behind in most recent polling, Senator Pat Toomey
(R-PA) prevailed against former federal and state environmental
official Katie McGinty (D-PA).
Select Senate race results
Arizona
Kirkpatrick
McCain
Colorado
Bennet
Glenn
Florida
Murphy
Rubio
Illinois
Duckworth
Kirk
Indiana
Bayh
Young
Missouri
Kander
Blunt
Nevada
Cortez Masto
Heck
New Hampshire
Hassan
Ayotte ?
North Carolina
Ross
Burr
Ohio
Strickland
Portman
Pennsylvania
McGinty
Toomey
Wisconsin
Feingold
Johnson
2 | Election 2016
Election results
Along with the House GOP majority, Senate Republicans will unambiguously set the agenda in the new Congress. However,
with a closely divided Senate, Republicans will be well short of the 60 votes necessary under the Senate rules to bring
debate to a close (cloture) and advance controversial legislation without votes from the other party. Narrow Republican
and Democratic majorities in the recent past have both found their legislative agendas stalled unless they were willing to
compromise to attract bipartisan support.
One area where 60 votes are not required is confirming appointments to the Administration and the Federal courts, with
the exception of the Supreme Court. There could be speculation about whether Senate Republicans would consider a rules
change to create a 51 vote threshold for Supreme Court nominees, also known as the “nuclear option.” But any serious
consideration on this front is far from certain.
Republican House losses in the election were minimized for a number of reasons, including the Republican turnout for
Donald Trump, the relatively static map created by the post-2010 redistricting process, and highly localized campaigns
run by Republican House Members in marginal districts where support for Trump was weaker. With a loss in the single
digits, the GOP majority goes from 246 members to somewhere in the 230s, giving Republicans a margin of 20 or so seats
versus the current 30.
3 | Election 2016
Senate profile
Current Majority Leader McConnell will stay in the post after successfully working this past session to keep the Senate in
Republican hands, while Senator Charles Schumer (D-NY) will take over for retiring Senator Reid after 12 years as
Democratic Leader. Given that Republicans held control of the Senate, McConnell will spend the next two years working
toward a filibuster-proof 60-vote majority in the 2018 elections, when 25 Democratic or Independent seats are up for reelection,
compared with only eight Republicans. Schumer will likely try to reach some compromises with Republicans while
distinguishing his party ahead of 2018, and will likely be pulled left, with the influence of Senators Elizabeth Warren (D-
MA) and Bernie Sanders (D-VT).
Leadership elections are expected to be held on Wednesday, November 16, and committee ratios, likely to be close to
what they are now, will be determined soon after the Senate reconvenes. Predicting the chair and ranking members of
Senate committees immediately after an election is speculative because members with seniority will be able to choose
between chairmanships and must adhere to Senate Republican committee leadership term limits. Republican senators may
serve as chairman for six years and six years as ranking member for any one committee, on a cumulative basis. Following
is a discussion of expected select committee chairmen and membership for 2017. An added complication could arise
should sitting Republican senators be tapped for cabinet positions in the Trump administration.
AGRICULTURE, NUTRITION, AND FORESTRY (Same leadership as 114 th Congress)
Chairman Pat Roberts (R-KS)
Ranking Member Debbie Stabenow (D-MI)
APPROPRIATIONS
Chairman Thad Cochran (R-MS) Ranking Member ?????
Several Democrats on the committee with significant seniority are in line to choose other ranking positions: Leahy -
Judiciary; Murray - HELP; Feinstein - Intelligence; Durbin, who serves as the Assistant Democratic Leader, and doesn’t
take a ranking member position on a major committee; and Jack Reed - Armed Services. However, given the importance
of the Appropriations Committee and its responsibility for preparing bills to fund the government, it would be surprising
that the ranking position would be very far down that list.
ARMED SERVICES (Same leadership as 114th Congress)
Chairman John McCain (R-AZ)
Ranking Member Jack Reed (D-RI)
BANKING, HOUSING, AND URBAN DEVELOPMENT
Chairman Mike Crapo (R-ID)
Ranking Member Sherrod Brown (D-OH)
Senator Richard Shelby (R-AL) has served his six-year limit as Chairman.
BUDGET
Chairman Mike Enzi (R-WY)
Ranking Member Bernie Sanders (I-VT)
If Senator Murray retains the ranking slot on HELP, former presidential candidate Sanders will continue to fill the ranking
member role.
COMMERCE, SCIENCE, AND TRANSPORTATION (Same leadership as 114th Congress)
Chairman John Thune (R-SD)
Ranking Member Bill Nelson (D-FL)
4 | Election 2016
Senate profile
ENERGY AND NATURAL RESOURCES (Same leadership as 114th Congress)
Chairman Lisa Murkowski (R-AK)
Ranking Member Maria Cantwell (D-WA)
ENVIRONMENT AND PUBLIC WORKS (Same leadership as 114th Congress)
Chairman John Barrasso (R-WY)
Ranking Member Tom Carper (D-DE)
Jim Inhofe (R-OK) has exhausted his six-year limit. Senator Barbara Boxer (D-CA), the current ranking member of EPW, is
retiring. Senator Carper could opt for the post over his current position on the Homeland Security and Governmental
Affairs Committee. If Carper decides to stay at HSGA, Senator Ben Cardin (D-MD) would have the option of ranking
member of EPW or Foreign Relations. If Cardin should choose Foreign Relations, Senator Sanders would be next in line for
the ranking member position. Barrasso can be expected to continue the criticisms of current Chairman Inhofe of EPA
regulations and their effect on US energy development and the energy industry.
FINANCE (Same leadership as 114th Congress)
Chairman Orrin Hatch (R-UT)
Ranking Member Ron Wyden (D-OR)
Senator Hatch will continue to serve as Chairman by way of an agreement reached with Senator Grassley, who is actually
more senior to Senator Hatch on the Committee. (Grassley will serve as Judiciary Chairman.) Dan Coats (R-IN) is retiring
from Congress. Senators Richard Burr (R-NC) and Pat Toomey (R-PA) both won re-election races. Eight Democratic
committee members will be running for re-election in 2018: Debbie Stabenow (D-MI), Maria Cantwell (D-WA), Bill Nelson
(D-FL), Robert Menendez (D-NJ), Tom Carper (D-DE), Ben Cardin (D-MD), Sherrod Brown (D-OH), and Bob Casey (D-PA).
FOREIGN RELATIONS (Same leadership as 114th Congress)
Chairman Bob Corker (R-TN)
Ranking Member Ben Cardin (D-MD)
HEALTH, EDUCATION, LABOR, AND PENSIONS
Chairman Lamar Alexander (R-TN)
Ranking Member Patty Murray (D-WA)
If Senator Murray opts for ranking member of Appropriations, Senator Sanders would be in line to be ranking member of
HELP where he could be expected to use the position to highlight income inequality.
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
Chairman Ron Johnson (R-WI)
Ranking Member Claire McCaskill (D-MO)
Senator McCaskill will get the ranking member position if Senator Tom Carper (D-DE) opts for ranking member of EPW.
JUDICIARY
Chairman Charles Grassley (R-IA)
Ranking Member Patrick Leahy (D-VT)
Senator Leahy will have the option of choosing ranking member of either Appropriations or Judiciary. Most think that with
the expectation of at least one Supreme Court nomination and immigration reform legislation in the next two years, he will
opt to stay in the ranking position on Judiciary.
5 | Election 2016
House profile
By retaining control of the House and Senate, with the loss of only a few seats, and winning the White House, Republicans
believe they have a mandate to govern. The potential for a Freedom Caucus challenge to Paul Ryan’s leadership is unlikely
given the party’s strong showing. The path is clear for the Speaker to pursue the policy actions described in the “Better
Way” policy platform developed earlier this year and promoted through the ubiquitous presence of a pamphlet describing
the plan that he used during the campaign and press appearances. That effort generated interest from Trump, who
adapted his tax plan to reflect some of the proposals.
The week following the elections and prior to Thanksgiving will be focused on internal party organizational issues,
including the election of party leadership, and discussion around Republican conference and Democratic caucus rules and
the makeup of the Steering Committee, which will determine committee assignments. The leadership of the chamber will
be decided in closed-door meetings during this time, with a formal floor vote for Speaker in January. Some Steering
Committee decisions regarding committees are likely to take place after Thanksgiving and to include ratification of
committee chairmanships and Speaker-appointed committee memberships, as well as appointments of members to vacant
slots on “A” committees (including Ways and Means, Energy and Commerce and Financial Services). Ryan and Democratic
Leader Nancy Pelosi (D-CA) will conduct a negotiation to determine committee ratios, which would be expected to be close
to what they are now.
WAYS AND MEANS (Same leadership as 114th Congress)
Chairman Kevin Brady (R-TX)
Ranking Member Sander Levin (D-MI)
Republican members Boustany and Young ran for Senate ,and Rep. Robert Dold (R-IL) lost his re-election campaign,
leaving three open seats. Republicans under consideration for Committee seats include Reps. Carlos Curbelo (R-FL), Mike
Bishop (R-MI), Bradley Byrne (R-AL), Jackie Walorski (R-IN) and Andy Barr (R-KY). Longtime Democratic members Charles
Rangel (D-NY) and Jim McDermott (D-WA) are retiring.
ENERGY & COMMERCE
Chair John Shimkus (R-IL)/Greg Walden (R-OR)
Ranking Member Frank Pallone (D-NJ)
Rep. Fred Upton (R-MI) will reach his term limit as chairman of the Energy and Commerce Committee and will step down at
the end of the current Congress. Rep. Upton noted that he’s “not planning to” seek a waiver of the term limits. The two
current frontrunners to replace the outgoing chairman include Reps. John Shimkus (R-IL) and Greg Walden (R-OR). Rep.
Shimkus has seniority on the committee, but Walden has also generated party support related to his role serving as
chairman of the National Republican Congressional Committee for the past two election cycles. Rep. Joe Barton (R-TX) is
also expected to run for the Chairmanship. The powerful Republican Steering Committee, consisting of Republican
leadership as well as rank-and-file members, will decide in a private meeting who will lead the committee in the 115 th
Congress. Adding to the leadership shuffle at the Energy and Commerce Committee, the current chairman of the E&C
Subcommittee on Health, Rep. Joe Pitts (R-PA), is retiring at the end of the Congress. Rep. Tim Murphy (R-PA) is under
consideration to replace him.
EDUCATION & THE WORKFORCE
Chairman Virginia Foxx (R-NC)
Ranking Member Bobby Scott (D-VA)
Current Chairman John Kline (R-MN) did not seek reelection. He will likely be succeeded as chair of the House Education
and Workforce Committee by Rep. Foxx. She has had a limited role on pension and retirement issues, but has been a
reliable voice for limited government regulation and joined in opposing the Obama Administration’s investment advice
regulations. Where Chairman Kline put pension reform high on the committee’s agenda, Foxx has not signaled a strong
interest in making pension issues a priority.
6
| Election 2016
House profile
APPROPRIATIONS
Chairman Rodney Frelinghuysen (R–NJ)
Ranking Member Nita Lowey (D-NY)
BUDGET
Chairman Tom Price (R-GA)
Ranking Member John Yarmuth (D-KY)
Current ranking Member Chris Van Hollen (D-MD) was elected to the Senate; Yarmuth is expected to replace him.
FINANCIAL SERVICES (Same leadership as 114th Congress)
Chairman Jeb Hensarling (R-TX)
Ranking Member Maxine Waters (D-CA)
JUDICIARY (Same leadership as 114th Congress)
Chairman Bob Goodlatte (R-VA)
Ranking Member John Conyers (D-MI)
OVERSIGHT (Same leadership as 114th Congress)
Chairman Jason Chaffetz (R-UT)
Ranking Member Elijah Cummings (D-MD)
TRANSPORTATION (Same leadership as 114th Congress)
Chairman Bill Shuster (R-PA)
Ranking Member Peter DeFazio (D-OR)
7 | Election 2016
Administration and
agenda
Looking ahead to the Trump administration and a
Republican-controlled Congress, the focus will be on
Trump’s top priorities: infrastructure, tax reform,
dismantling the Affordable Care Act (ACA), and
immigration reform. President-elect Trump highlighted
his commitment to infrastructure investment during his
victory speech early November 9. “We are going to fix our
inner cities and rebuild our highways, bridges, tunnels,
airports, schools, hospitals,” he said. “We’re going to
rebuild our infrastructure, which will become, by the way,
second to none. And we will put millions of our people to
work as we rebuild it.” Trump would fund infrastructure
investment through public-private partnerships and
private investments through tax incentives rather than
tax reform, though he has called for early action on that
issue as well. On October 22, Trump outlined a voter
contract for his first 100 days plan that calls for
enactment of:
► The Middle Class Tax Relief And Simplification Act
(comprehensive tax reform);
► The End the Offshoring Act, to establish tariffs to
discourage companies from laying off their workers in
order to relocate in other countries and ship their
products back to the U.S. tax-free;
► The American Energy & Infrastructure Act, to leverage
public-private partnerships and private investments
through tax incentives to raise $1 trillion in
infrastructure investment over 10 years;
► The School Choice And Education Opportunity Act, to
expand primary education options and make college
more affordable;
► The Repeal and Replace Obamacare Act, to repeal the
ACA and replace it with Health Savings Accounts;
► The Affordable Childcare and Eldercare Act, to allow
Americans to deduct childcare and elder care;
► The End Illegal Immigration Act, to fund the
construction of a wall on the Mexican border;
► The Restoring Community Safety Act, to reduce crime;
► The Restoring National Security Act, to rebuild the
military by eliminating the defense sequester and
expanding military investment; and
► The Clean up Corruption in Washington Act, to enact
“new ethics reforms to Drain the Swamp and reduce
the corrupting influence of special interests on our
politics.”
As part of the voter contract announced in October,
Trump has also pledged to act on his first day in office to
“cancel every unconstitutional executive action,
memorandum and order issued by President Obama.”
Trump advisor Anthony Scaramucci said in October that
the new administration would repeal the rulemaking on
conflicts of interest in the delivery of investment advice to
IRA and 401(k) plan investors.
Regulations that have been finalized cannot be
unilaterally vacated by executive order without
intervening regulatory or legislative action. In order to
make changes to final regulations without legislative
action, agencies are typically required to follow the
administrative procedural process which requires a notice
and comment process prior to modifying regulations. If
an Administration wishes to repeal or revise a final
regulation through the administrative process, the agency
may be required to demonstrate that its actions are not
“arbitrary and capricious,” and based on more than a
change in political views. It is possible that a new
Administration could dispense with the notice and
comment process by moving to issue an interim final rule,
replacing the previous regulation. In this situation, the
agency could be called on demonstrate that it acted with
“good cause” to circumvent the typical notice and
comment requirements.
A new Administration could also use its executive power
to affect the level of legal defense of challenges to
existing regulations provided by the Administration or
temporarily refuse to exercise its enforcement
responsibilities until compelled through legal action or
public pressure.
Trump also intends to immediately begin the process of
filling the Supreme Court vacancy created by the death of
Antonin Scalia in early 2016 – one that could spark
fireworks on Capitol Hill and across the country’s highly
charged political environment. How Republicans,
Democrats, and Trump navigate through the process of
nominating and confirming a Justice to the Supreme
Court is likely to set the tone in the Senate for the next
two years.
Trump also intends to act on trade issues on his first day
in office, including:
► announcing his intention to renegotiate or withdraw
from NAFTA;
► ·announcing withdrawal from the Trans-Pacific
Partnership; and
8
| Election 2016
Administration and
agenda
► directing Treasury to label China a currency
manipulator.
Consistent with Trump’s desire to change the way
business is conducted in Washington, he also pledges to
act on his first day in office to:
► propose a constitutional amendment to impose term
limits on all members of Congress;
► require that for every new federal regulation, two
existing regulations must be eliminated; and
► impose a five–year ban on White House and
congressional officials becoming lobbyists after they
leave government service.
(The Trump Contract with the Voter is available at
https://assets.donaldjtrump.com/CONTRACT_FOR_THE_
VOTER.pdf)
Budget. While President-elect Trump has vowed to act
quickly on repeal of the ACA, it is difficult to see how that
can be accomplished outside of reconciliation instructions
for FY 2018. “When we win on November 8th, and elect a
Republican Congress, we will be able to immediately
repeal and replace Obamacare. I will ask Congress to
convene a special session,” he said November 1.
An early focus of attention will be the first Trump budget
proposal and the congressional FY 2018 budget
resolution. As with the past several years under divided
government, a main issue will be how to address the
Budget Control Act sequester for FY 2018. According to
the Congressional Budget Office, the cap on discretionary
budget authority originally established by the Budget
Control Act is set at $1.156 billion in 2018, though it will
be reduced by automatic procedures unless Congress
intervenes. CBO said the reduction will total $91 billion
for 2018: $54 billion for defense and $37 billion in 2018
for nondefense. Therefore, total budget authority is
slated to be $1.065 trillion, split between $549 billion for
defense and $516 billion for nondefense. Both Trump and
Speaker Ryan want to eliminate the sequester as it
applies to defense, but would likely want to maintain the
sequester for non-defense spending.
As reported in Politico last month, Speaker Ryan is bullish
on using the “budget reconciliation” process to pass
significant tax reform. “This is our plan for 2017,” Ryan
said, waving a copy of his “Better Way” policy agenda.
“Much of this you can do through budget reconciliation.”
He said key pieces are “fiscal in nature,” meaning they
can be moved quickly through a budget maneuver that
requires a simple majority in the Senate and House.
9
Use of “Budget Reconciliation” to enact legislation
involves a two-step process. First, both Chambers of
Congress need to pass a concurrent Budget Resolution
(requires only simple majority in the Senate) that contains
“reconciliation instructions.” These instructions are
directions to committees of jurisdiction to change the
spending or revenue numbers (or both), and to report
back the changes by a date certain. A budget resolution
generally is a legislative vehicle that serves as the
blueprint for fiscal policy and establishes a framework for
consideration of spending and revenue bills for the
coming fiscal year. Technically, a budget resolution is a
“concurrent resolution” which is binding in the House and
the Senate. Because a concurrent resolution is not
submitted to the President for signature, it does not have
the force of law.
The second part of the process is to pass “reconciliation”
bills that adhere to the reconciliation instructions from
the budget resolution.
Reconciliation bills can involve changes to spending,
revenue, or the debt limit (or any combination of the
three). Importantly, these reconciliation bills also only
require a simple majority in the House and Senate for
passage.
Reconciliation bills carry strict debate time and
amendment restrictions, but unlike a budget resolution,
reconciliation legislation contains specific spending and
revenue policy changes that are signed into law by the
President. In the Senate, debate is limited to 20 hours.
While only a simple majority is required for passage in the
Senate, 60 votes are required to waive violations of the
so-called “Byrd rule,” which prohibits the inclusion of
provisions that increase the budget deficit for the period
outside the budget window, usually a 10-year period. An
unlimited number of amendments may be offered and
voted upon, even after the 20 hours of debate have
expired – a process often referred to as a “vote-a-rama”.
This process is attractive because of the simple majority
vote in the Senate, but carries with it restrictions such as
the ten-year expiration for titles of the bill that increase
the deficit outside the budget window.
It was used by President George W. Bush to pass
significant tax cut legislation in 2001 (the “Bush tax
cuts”) and is expected to be considered next year for tax
reform. Note that the Bush tax cuts were originally
sunsetted at the end of ten years due to the Byrd
rule. Subsequent legislation passed outside reconciliation
process made many of these provisions permanent.
| Election 2016
Administration and
agenda
Debt limit. The debt limit will be reinstated after March
15, 2017, though Congress will likely have additional time
to either suspend or increase the limit. Extraordinary
measures that can be undertaken by the Treasury
Department should allow Treasury to continue meeting its
financial obligations until at least midsummer of 2017,
according to a September 13 posting by the Bipartisan
Policy Center. When the debt limit is reinstated, the
federal government’s accumulated debt will immediately
equal the new ceiling, which is projected to be
about $20.1 trillion. The optics of the figure surpassing
$20 trillion could spur lawmakers to be even more
adamant about demands for spending cuts in return for
supporting an additional increase or suspension of the
debt limit.
FAA reauthorization. The Airport and Airway Trust Fund
taxes expire after September 30, 2017, along with
Federal Aviation Administration (FAA) spending authority,
both of which were last extended in July. Privatization of
the air traffic control system was a sticking point in
negotiations this year. The FAA bill can be a vehicle for
other tax legislation.
Personnel. The fact that Trump has not held political
office and is not a traditional Republican puts a new spin
on filling out his administration. Press reports have
speculated about potential cabinet appointments. Trump
has reportedly said that Goldman Sachs alumnus and
campaign finance chairman Steven Mnuchin could be a
possible nominee for Treasury secretary.
Economic advisers that have represented Trump on the
campaign include investor Wilbur Ross and economists
Peter Navarro, Larry Kudlow, and Stephen Moore.
New Jersey Gov. Chris Christie is in charge of Trump’s
transition. Politicians who have supported and served as
surrogates for Trump and could possibly be tapped for
Cabinet posts include: former New York mayor Rudy
Giuliani, former House Speaker Newt Gingrich, Senator
Jeff Sessions (R-AL), Dr. Ben Carson, and former Alaska
Governor Sarah Palin. Senate Foreign Relations
Committee Chairman Bob Corker (R-TN) was reportedly
under consideration for the vice presidential pick and
could be tapped for a Cabinet post.
Economic packages pursued by past presidents
Barack Obama
Took office January 20, 2009
George W. Bush
Took office January 20, 2001
Bill Clinton
Took office January 20, 1993
George H. W. Bush
Took office January 20, 1989
Ronald Reagan
Took office January 20, 1981
American Recovery and Reinvestment Act of 2009
Enacted February 17, 2009
► Stimulus legislation, included bonus depreciation
Economic Growth and Tax Relief Reconciliation Act of 2001
Enacted June 7, 2001
► The “Bush tax cuts” reduced individual rates, repealed the
estate tax
Omnibus Budget Reconciliation Act of 1993
Enacted August 10, 1993
► Increased individual, corporate taxes
Omnibus Budget Reconciliation Act of 1990
Enacted November 5, 1990
► Increased individual taxes despite “no new tax” pledge
Economic Recovery Tax Act of 1981
Enacted August 13, 1981
► Sharply reduced individual, corporate taxes
10
| Election 2016
Lame-duck session
With the Republican sweep in the election, the sense is
the lame-duck legislative agenda will be minimalist, with
Republicans having little motivation to engage in other
business aside from funding the government beyond
December 9. Congress returns the week of November 14
for organizational meetings and then departs again for
Thanksgiving week, leaving lawmakers only a couple of
weeks to finish their legislative business. Other
possibilities include: a defense authorization bill; the
conference report for an omnibus energy bill; the “21 st
Century Cures” bill increasing funds for medical research
and accelerating drug approvals; the Water Resources
Development Act (WRDA), which would also carry money
to address the drinking-water crisis in Flint, Michigan; tax
extenders provisions; and retirement savings measures.
Government Funding. Under the stopgap continuing
resolution (CR) cleared on September 28, funding for the
government will expire on December 9. Only one of the
12 fiscal 2017 appropriations bills has been sent to the
President so far. The government funding bill may take
the form of a large omnibus bill or continuing resolution,
if the House and Senate Republican leadership’s
preference for moving spending bills on a standalone
basis or in packages does not pan out. Given the election
results, leaders are likely to limit the length of the
spending bill to a handful of months to allow the Trump
administration an opportunity to help shape fiscal 2017
spending next year. Speaker Ryan has said he favors a
strategy of combining spending bills into “minibus”
vehicles, but Senate Democrats have said such an
approach could be a tactic to get around the spending
caps Congress agreed to on a bipartisan basis last year.
The bill(s) may include additional spending to address
flooding in Louisiana and elsewhere, and damage from
Hurricane Matthew. If the vehicle for government funding
is a large omnibus bill, Republicans may push for some
conservative policy “riders” as their price for accepting
the budget numbers that were negotiated last year.
Tax. There are no must-pass tax issues for the lame-duck
session, and it is unclear whether there will be
consideration of expiring tax provisions, House and
Senate miscellaneous tax bills, and tax technical
corrections. House Ways and Means Chairman Brady is
opposed to addressing tax extender provisions this year,
preferring to look forward to tax reform; that could also
be the position taken on other tax issues given that
Republicans will control Washington and have a shared
interest in tax reform. However, Senate Leader McConnell
previously committed to addressing energy tax extenders
this year, so they could still come up for consideration.
11
Pensions. The Senate could consider the Retirement
Enhancement and Savings Act, a package of measures
affecting multiple-employer pension plans, 401(k) plans
and annuities, which was approved on a unanimous vote
by the Senate Finance Committee on September 21. The
committee also approved the Miners Protection Act, which
would fund retiree health and pension benefits for coal
miners, which a majority of the committee’s Republican
members opposed.
Health. One of the top Republican legislative priorities for
the lame-duck session is the 21 st Century Cures bill, a
package of measures intended to spur new medical
treatments and boost funding for the National Institutes of
Health, the FDA, and White House initiatives such as
“precision medicine” and the Cancer Moonshot. Questions
remain in both the House and Senate over how to pay for
the bill and the size of the funding increases, but Senator
McConnell has said the bill “could end up being the most
significant piece of legislation we pass in the whole
Congress.”
On the House side, this continues to be the top priority of
the Chairman of the Energy and Commerce Committee
Fred Upton. Leaders of the Energy and Commerce
Committee said on September 29 that they had been
“working hard for months, and we will continue to work
toward an agreement that can pass both chambers and be
signed by the President.” The House passed its version of
the 21 st Century Cures bill (H.R. 6) in July 2015 by a vote
of 344-77, including nearly $9 billion in new research
funding for the NIH and reforms to the FDA’s process for
approving certain new medicines and medical devices. In
the Senate, the Health, Education, Labor, and Pensions
(HELP) Committee has passed a package of 19 bills aimed
at accelerating approval of new drugs and medical devices
and attracting talented researchers to the FDA, but the full
Senate has yet to consider the bills. HELP Committee
Chairman Lamar Alexander (R-TN) told Bloomberg BNA in
June that the impediments to passage are the proposals’
complexity and disagreements over how to pay for
them. Negotiations continue.
Speaker Ryan has also listed passage of mental health
legislation as one of his priorities for the lame-duck
session. H.R. 2646, a bill sponsored by Rep. Tim Murphy
(R-PA) that passed the House almost unanimously in July,
would expand Medicaid coverage of mental health
services, fund more psychiatric hospital beds and change
privacy rules to allow caregivers to receive more
information about patients.
| Election 2016
Lame-duck session
A Senate version (S. 2680) prompted Democratic
concerns over funding levels, privacy issues, and other
matters. This issue is one that could slip into the next
Congress if negotiators are unable to reach an agreement
given the limited time available.
Another outstanding year-end issue for Congressional
leaders is whether to address the pending Medicare Part-
B premium increases facing new and some existing
Medicare enrollees caused by a smaller annual Social
Security cost-of-living adjustment (COLA). Congress has
acted in the past to avert premium increases due to
modest COLA adjustments before the premium increases
take effect. Additional Medicare changes that are
bipartisan in nature could be added to this Part B
adjustment if leaders agree to move forward. Up for
potential consideration are a handful of Medicare-related
bills that have already passed the House or Senate in the
114 th Congress, as well as a package of provisions
recently unveiled by the Finance Committee that would
address how chronic conditions are managed in the
Medicare population.
Additionally, Congress continues to contemplate action in
the lame duck session to address the Obama
Administration’s proposal to modify the payment
mechanisms for Part B Medicare drugs. While the
proposal has not yet been finalized, concerns about the
size and scope of the proposal have been raised by
Congress.
Energy. House and Senate conferees also hope to finish
negotiating the final version of the bipartisan, omnibus
Energy Policy Modernization Act (S. 2012, H.R. 8).
Among many other provisions, that bill would give the
Energy Department emergency authority to protect the
electric power grid from physical and cyber threats;
require the Federal Energy Regulatory Commission
(FERC) to expedite consideration of pipeline siting
applications; ease procedures for mining certain minerals
on federal lands; increase water allocations to address
drought in California; and change forestry management.
There will also be a push to complete the Water Resources
Development Act (WRDA). In September, both the Senate
(S. 2848) and House (H.R. 5303) overwhelmingly passed
bills that need to be reconciled, but the two chambers
have not yet formally gone to conference. One factor that
is likely to expedite a conference and floor votes is the fact
that in September, in order to resolve a deadlock over
government funding, Speaker Ryan made a commitment
to move assistance to Flint, Michigan (which has faced a
drinking-water crisis) as part of the WRDA bill.
Energy measures could also come up as Republican
“riders” on a year-end spending bill, such as provisions
blocking the EPA’s Clean Power Plan or the “Waters of the
U.S.” wetlands rule. House Majority Leader McCarthy has
also said the House will consider a bill offering a tax credit
for new nuclear reactors.
Financial Services. House Financial Services Chairman
Jeb Hensarling (R-TX) has said he hopes for a lame-duck
floor vote on his CHOICE Act, which would repeal much of
the Dodd-Frank Act and replace it with a system in which
banks would become exempt from many prudential rules if
they agree to a much higher leverage ratio. The committee
passed the CHOICE Act on a party-line vote in September.
The Wells Fargo scandal could pose a hurdle for that plan,
because Hensarling’s bill would repeal the Consumer
Financial Protection Bureau’s (CFPB) new rules limiting the
use of mandatory arbitration clauses in bank contracts.
Wells Fargo has been criticized for requiring its account
holders to agree to such clauses, restricting their ability to
sue the bank after as many as 2 million unauthorized
accounts were discovered.
The Financial Services Committee will hold a second
hearing on November 30 on the Wells Fargo issue, with
CFPB Director Richard Cordray testifying. SEC Chairman
Mary Jo White will also testify on November 15.
12
| Election 2016
Tax
The surprising results of yesterday’s election have teed
up comprehensive tax reform as a clear priority for the
new Republican President and the Republican Congress.
A unified Republican government makes the process of
achieving significant tax reform much more manageable
next year, in particular because Speaker Ryan during the
campaign pledged to move such a plan in the form of socalled
budget reconciliation legislation, which would mean
that only a simple majority of senators would be
necessary to pass the plan, rather than the usual 60-vote
majority. A lot of the groundwork has been laid through
proposals and negotiations over the last three or four
years on various key aspects of business tax reform, but
Congressional Republican leaders and the new President
will have to decide whether to push forward with
legislation that embodies the House Republican Tax
Reform Blueprint, or the outlines of a tax reform plan that
President-elect Trump championed during the campaign.
One significant difference is that the Blueprint, according
to its authors, is largely revenue neutral using dynamic
scoring, while the Trump plan was scored by various nongovernmental
groups as losing trillions of dollars.
House Speaker Ryan has said on multiple occasions that
tax reform is his top priority. The Blueprint, the sixth and
final plank of Ryan’s “Better Way” campaign to provide
policy alternatives, proposed a 20% statutory corporate
tax rate, a 25% business tax rate for pass-through
entities, a move toward a cash-flow consumption tax
through immediate expensing for all businesses and
elimination of deductibility of net interest expense, a
territorial international tax system, a border tax
adjustment mechanism, and elimination of most business
preferences except the R&D tax credit and LIFO.
Interestingly, all of these pieces of business tax reform
may be fair game in discussions with Democrats, but the
two parties differ greatly over whether to reduce
individual tax rates – a key component of both the
Blueprint and the Trump campaign agenda – and over
important revenue issues, including whether reform
should be revenue neutral on a static basis, and whether
timing and one-time revenue raisers should be used to
pay for permanent tax rate reduction. The use of budget
reconciliation, however, could make many of these
differences irrelevant as Senate Democrats could have
little power to change or block the legislation on the
Senate floor.
Along with the 20% statutory corporate tax rate, the
Blueprint includes a 25% business tax rate for passthrough
entities; and individual rates set at 12%, 25%, and
33%.
13
Ways and Means Republican tax staff is in the process of
receiving feedback and building out the tax reform
Blueprint by drafting detailed statutory language. The
publicly expressed goal is to have that effort completed
by the end of 2016. In October 14 remarks at University
of Wisconsin—Madison, House Speaker Ryan said, “I really
want to get tax reform running as quickly as possible…”
Asked September 29 whether there is opportunity for
progress on big-ticket items in 2017, Senate Majority
Leader McConnell said, “We need to do tax-reform –
comprehensive tax-reform – not piecemeal.”
Trump’s tax plan differs from the Blueprint in that the
corporate tax rate would be lower – 15% – with the same
rate imposed on pass through entities. The latest
statement from the Trump campaign suggests that small
business owners do not retain earnings may face double
taxation.
Individual income tax rates would be 12%, 25%, and 33%,
the same as the House Republican tax reform Blueprint.
Trump and his staff have supported a 10% tax rate on the
deemed repatriation of previously untaxed foreign
earnings of US companies, but the campaign never made
clear whether they still support repeal of deferral in a new
international tax system going forward.
Trump has pledged to work with House Republicans on
tax issues and, in addition to adopting their proposed
individual rates, brought his plan closer to theirs by
announcing support for immediate expensing of new
business investments for manufacturers. The House plan
proposed expensing in conjunction with eliminating the
deductibility of net interest expense. In the follow-up to a
September 15 speech to the Economic Club of New York,
Trump clarified that he believes expensing should be
limited to manufacturers and those who elect expensing
will lose the deductibility of corporate interest expense.
The Trump campaign also clarified in September that they
favored repeal of most corporate tax expenditures,
except for the R&D Credit. While continuing to call for
repeal of the estate tax, Trump proposed disallowing a
step-up in basis for estates over $10 million: “The Trump
plan will repeal the death tax, but capital gains held until
death will be subject to tax, with the first $10 million taxfree
as under current law to exempt small businesses and
family farms. To prevent abuse, contributions of
appreciated assets into a private charity established by
the decedent or the decedent’s relatives will be
disallowed.”
| Election 2016
Tax
Trump additionally proposed capping itemized deductions
at $100,000 for single filers and $200,000 for married
filers and highlighted the benefits of his proposals for
working Americans and the middle class. “By lowering
rates, streamlining deductions, and simplifying the
process, we will add millions and millions of new jobs. In
addition, because we have strongly capped deductions for
the wealthy, and closed special interest loopholes, the tax
relief will be concentrated on the working and middle
class taxpayer…,” he said. “This is a working and middleclass
tax relief proposal.” A campaign fact sheet
proclaims that Trump’s economic proposals would add 25
million jobs over a decade, which equates to 200,000 new
jobs per month.
The motivating factors for tax reform will remain the
same as they were in the current Congress, but unified
government should make enacting tax reform much
easier. The statutory corporate income tax rate is seen as
too high and the international tax system compels profit
shifting to low-tax jurisdictions and erodes the US tax
base. That phenomenon escalated this year with the
European Commission’s latest state aid decision, which
was seen as demonstrating a tension between the US and
Europe over who should tax the foreign income of US
multinationals.
The passage of the EU’s harmful tax competition directive
will lead to enactment in all EU countries of a variety of
measures that could increase taxes on US companies
operating in Europe, while implementation of innovation
box regimes in many countries, following the OECD BEPS
project outline, will make it more attractive for US
companies to move intellectual property and exploit that
IP into those jurisdictions. The Administration took
significant steps this year to try to prevent further
erosion of the US tax base through regulatory action to
deter inversions and earnings stripping, but all involved
said these were Band-Aid approaches that were no
substitute for US tax reform.
Design issues – international tax reform. As has been the
case for the last few years, there is broad agreement on
the design elements of business tax reform, and more
specifically, international tax reform, but the devil is in
the details. For example, the House Republican Blueprint
on tax reform calls for a 8.75% tax rate on previously
untaxed accumulated foreign earnings held in cash or
cash equivalents, and a 3.5% tax rate on all other
accumulated earnings, with tax liability payable over an
eight-year period.
This is the same tax treatment of accumulated foreign
earnings called for under former Ways and Means
Committee Chairman Dave Camp’s (R-MI) Tax Reform Act
of 2014.
But in a departure from the Camp bill, the Blueprint also
calls for a move to a destination-basis tax system, under
which border adjustments exempt exports from tax while
taxing imports, making the tax jurisdiction the location of
consumption rather than production. Exempting exports
from US tax and taxing imports regardless of where they
are produced will eliminate incentives for US businesses
to move or locate operations outside of the United States
under a territorial tax system, according to the Blueprint.
By relieving exports from US tax while imposing US tax on
imports, the Blueprint would eliminate the need for any
new exemption or territorial tax system to be
accompanied by a minimum tax or any other more
conventional anti-base erosion measure, thereby
sidestepping one of the more intractable and divisive
debates among the business community over the past
several years of tax reform discussions.
Developing a workable border adjustability mechanism
that is not actually a component of a value-added tax
presents some significant policy and technical hurdles.
US companies that are net exporters could end up in a
perpetual tax loss position, and handing out refunds to
some of the largest US companies may not work from a
political standpoint, particularly as the domestic income
of US companies (including the suppliers for exporting
companies) is subject to tax. How to apply the border
adjustability concept to cross-border flows of capital, or
whether to exempt financial transactions must also be
considered.
While moving to a form of exemption system has some
level of bipartisan support, more liberal Democrats will
insist on a more pure worldwide system that includes
repeal of deferral. Senate Finance Committee Ranking
Member Wyden (intermittently) and Senator Warren
(consistently) have both backed the latter approach, and
Speaker Ryan noted the differing viewpoints in
September given that Democrats increasingly call for a
worldwide system and repeal of deferral.
14
| Election 2016
Tax
“There is a big gulf between our two views... We believe
that we should have a pure territorial system… And so I do
believe that this issue is coming,” Ryan said. “I don’t think
you can stand against a territorial system much longer.”
Ryan also remarked that “the experience I had when I was
Ways and Means chair with [Democrats] was not a
pleasant one, and I don’t know if that’s going to change.”
In a September 8 New York Times op-ed, Senator Warren
said foreign developments are increasing pressure on
Congress to cut corporations “a new sweetheart deal” in
tax reform, but lawmakers should instead take the
opportunity to collect more revenue from corporations.
“Preferential tax treatment, either through special rates
or deferred due dates, creates a huge financial incentive
for American companies to build businesses and create
jobs abroad rather than in the United States. Our tax code
should favor jobs and businesses at home – period,”
Warren said.
Along with these political and mechanical questions, there
is the question of whether such a system, embedded in an
income tax rather than a value added tax or other true
consumption tax, is legal from an international trade
perspective.
Design issues – paying for rate reduction. There may
also be tension among House Republicans given that the
Blueprint has not had a full airing among members – it
was released soon before Congress left for its summer
recess – and the drafting of legislative language may
make apparent what is necessary to achieve the stated
goals, particularly the reduced rates: a 20% statutory
corporate tax rate; a 25% business tax rate for passthrough
entities; and individual rates set at 12%, 25%, and
33%. Once the details are hashed out, the Blueprint could
present just as many trade-offs as previous serious tax
reform proposals. While the mix of winners and losers
may be different than under other proposals, the ultimate
fate of the Blueprint will still be determined by the same
fundamental political dynamics that would face any tax
reform proposal.
For example, the Blueprint would permit companies to
fully and immediately deduct the cost of all tangible and
intangible property, with the exception of land. However,
the Blueprint also would correspondingly deny deductions
for net interest expense. Companies must therefore
weigh whether losing interest deductions is a cost they
are willing to incur in exchange for full expensing (and a
20% corporate rate).
The purpose for denying deductions for net interest
expense is to prevent a presumed double benefit from
fully expensing leveraged purchases of property.
However, the exclusion of land from full expensing under
the Blueprint would be particularly severe for debtfinanced
purchases of land because the land would not be
eligible for full expensing (or apparently even
depreciation as under current law), while deductions for
interest expense on the debt would not be permitted.
Moreover, the persistent issues under current law
involving the allocation of purchase price between nondeductible
land and immediately deductible
improvements on the land would be intensified under the
Blueprint. Other aspects of paying for a reduced
corporate rate will not come easier in the new Congress.
The allure of reducing business tax rates did not draw
members to support the bill presented to them by former
Ways and Means Chairman Dave Camp.
Corporate integration. In the Senate, Finance Committee
Chairman Hatch continues to go his own direction on tax
reform, touting a corporate integration plan that could be
a substitute for or be complementary to a rate reduction
effort that includes international tax reform. Hatch says
he is still aiming to release a corporate integration
discussion draft. Chairman Hatch has said the proposal
could accomplish the international tax reform that is
widely seen as necessary, and the reception to the draft
could dictate how strongly he tries to advance the
proposal next year. The draft is expected to pair a
dividends-paid deduction with a mandatory 35%
withholding tax for dividends and interest. Other senators
and third parties have raised concerns about a corporate
integration plan, including:
► that the proposed 35% withholding tax expected would
penalize tax-exempt entities like retirement plans and
deter foreign investment in the United States; and
► that a dividends paid deduction would, by reducing
corporate tax liability, diminish the effectiveness of
current tax incentives like the R&D credit and
accelerated depreciation, and disadvantage startup
companies more likely to retain their earnings rather
than pay dividends.
Extenders. The fate of tax extenders (and certain other
tax issues) will likely depend on both what can be
accomplished during the 2016 lame-duck session and the
success of the likely focus on tax reform in early 2017.
15
| Election 2016
Tax
There is a push to include the provisions that expire at the
end of 2016 in year-end legislation, though if that is
unsuccessful the issue will certainly return in 2017, either
through inclusion in a tax reform measure or separately if
those efforts have played out.
The 2015 tax legislation made some extender provisions
permanent and extended others for five years, meaning
the two-year extensions that expire at the end of 2016
will be the focus of the next effort.
There will certainly be attention paid to these provisions
during any discussion of tax extenders in 2017.
Tax treaties. Action on the eight Foreign Relations
Committee-approved tax treaties that Senator Rand Paul
(R-KY) wants renegotiated over information sharing
concerns is seen as overdue. The treaties include: new
protocols amending US tax treaties with Switzerland,
Luxembourg, Spain and Japan; new tax treaties with
Hungary, Chile and Poland; and a multilateral convention
on tax administration. There have been no plans
announced for trying to move the treaties during the
lame-duck session, though such an effort is possible.
State tax issues. In August, House Judiciary Committee
Chairman Goodlatte released a second discussion draft
related to remote sales tax that would apply tax at the
destination state of the goods, rather than on the location
of the seller, which was his previous approach. The tax
would be imposed at a single rate determined by the state
of the purchaser, but using the tax base of the state of
origin.
Chairman Goodlatte wanted a vote this year on the
proposal, which had the support of Speaker Ryan, but this
vote is not likely to occur during the lame duck session.
When Congress approved a customs reauthorization
measure that made permanent the Internet Tax Freedom
Act in February, Senate Majority Leader McConnell said
he had provided assurances to supporters of the
Marketplace Fairness Act “that we’ll have an opportunity
to consider that sometime this year.” Since that is not
likely to occur during the lame-duck session, the issue is
sure to resurface in 2017.
In September, the House approved by voice vote the
Mobile Workforce State Income Tax Simplification Act
(H.R. 2315), to prohibit wages earned by an employee
who performs employment duties in more than one state
from being subject to income tax in any state other than:
(1) the state of the employee’s residence, and (2) the
state within which the employee is present and
performing employment duties for more than 30 days
during the calendar year. Senate Finance Committee
member John Thune (R-SD) sponsors a Senate version of
the bill (S. 386), though the outlook for the issue is
unclear.
16
| Election 2016
Health
With a Trump win and Republicans maintaining control of
the House and Senate, the health agenda promises to be
one of the greatest policy areas of change in the next
Congress.
ACA Repeal/Replace. In January, following a 240-181
vote, the House sent to the President H.R. 3762,
Restoring Americans’ Healthcare Freedom Reconciliation
Act – a piece of legislation which dismantled key
provisions of the Affordable Care Act (ACA). The same
legislation was approved in the Senate on a vote of 52 to
47. Although the President ultimately vetoed the
legislation, it represents a blueprint for Congressional
action in 2017 to repeal core components of the ACA.
The reconciliation process allows leaders to call up
legislation and pass it with a simple majority vote in the
Senate—avoiding a potential filibuster. Reconciliation
rules in the Senate are complex, enforced by the Senate
Parliamentarian, and constrained by CBO scoring rules
and conventions – which combine to determine what can
and cannot be included in a reconciliation bill.
Reconciliation is a powerful tool but its use is limited to
policy changes that have a direct impact on taxing or
spending levels. Because they have used this process
before, Republicans have a road map of the changes that
will be possible through the use of reconciliation in a
closely divided Senate. Find a link to a summary of the
Reconciliation bill that passed in 2015 here. Donald
Trump has been less prescriptive in terms of the specifics
of the ACA replace plan that he supports. But generally,
he has called for a special session of Congress to
completely repeal the ACA and replace it with a plan that
allows consumers to buy insurance across state lines,
allow individuals to deduct the cost of health care on their
federal tax returns, expand Health Savings Accounts
(HSAs) and block grant Medicaid. Speaker Paul Ryan and
the House GOP introduced a proposal to replace the ACA
that can be found here. Because the Senate GOP did not
introduce their own ACA replace plan, negotiations
between the chambers will be required before a strategy
is developed.
User Fee Legislation. The Senate HELP Committee and
the House Energy and Commerce Committee are tasked
with the reauthorization of the Prescription Drug User Fee
Act (PDUFA), the Generic Drug User Fee Act (GDUFA), the
Biosimiliar User Fee Act (BsUFA), the Medical Device User
Fee and Modernization Act (MDUFMA). These programs
must be reauthorized in 2017 to ensure that sufficient
industry fees are available for the FDA to continue to
consider the applications of drugs and devices.
The Food and Drug Administration (FDA) and relevant
industries have reached draft agreements on the user fee
proposals. The proposals are historically bipartisan
priorities and are expected to be approved by Congress
next year. Some of the drug pricing issues raised by
Democrats in 2016 could potentially become embroiled in
the FDA user fee legislation negotiations. Even though
Donald Trump has voiced some populist concerns about
the increasing cost of prescription drugs, the risk of drug
pricing policy changes being enacted next year are less
likely given that Hillary Clinton did not win the White
House and the GOP continues to control the House and
Senate. But Democrats are likely to continue to highlight
the issue and seek policy changes to address it.
Mental Health/ Opioids. Currently, discussions are
ongoing to find a compromise that can be enacted on
mental health legislation in the lame duck Congress and
possible further action to address the opioid addiction
crisis that was such a big issue in so many election
campaigns. But disagreements over funding levels, gun
issues and the privacy of medical records persist. It
remains to be seen if negotiators can reach agreement on
these issues in the lame duck session of Congress or if the
issue will be revisited in the next Congress.
MACRA Oversight. Congressional oversight of the
Centers for Medicare & Medicaid Services’ (CMS)
implementation of the Medicare Access and CHIP
Reauthorization Act of 2015 (MACRA) is expected to
continue following several House and Senate hearings
held over the past several months and recent publication
of a final rule on the matter.
In 2015 Congress passed MACRA which overhauls how
Medicare pays for physician services. The legislation
repealed the Medicare physician sustainable growth rate
(SGR) formula and instead moves to a new two-track
payment system called the Quality Payment Program
(QPP). The two tracks of the QPP seek to tie an increased
percentage of physicians’ Medicare fee-for-service
payments to outcomes through the Merit Based Incentive
Payment System (MIPS) and also to encourage the
adoption of alternative payment models (APMs).
At recent House and Senate hearings, members from
both parties expressed concern about MACRA’s potential
adverse impact on smaller independent and rural
physician practices. While the final rule attempts to
address these concerns, it is expected that Congress will
continue to utilize its oversight power to monitor
implementation.
17
| Election 2016
Health
Healthcare Reauthorization Priorities. The Children’s
Health Insurance Plan (CHIP) will expire and needs to be
reauthorized in 2017. CHIP is a federal and state
partnership program which provides health coverage to
an estimated 8.9 million low-income children. In 2015,
President Obama signed the Medicare Access and CHIP
Reauthorization Act which extended CHIP for an
additional two years; without an extension of the program
in 2017 the program will exhaust its funding and states
will be required to continue the children’s coverage
through Medicaid until 2019, due to the ACA’s
maintenance of effort (MOE) provision unless the ACA is
repealed. The reauthorization process will create an
opportunity to consider additional policy changes
including changes to the CHIP and Medicaid programs.
The ACA also created a funding stream for community
health centers. In 2015, a bipartisan vote in Congress
extended the Community Health Center Fund by an
additional two years (FY 2016 and FY 2017). It is likely
that lawmakers will push to extend funding of community
health centers into future years beyond 2017.
Chronic Care. In late October, Senate Finance Committee
Chairman Hatch and Ranking Member Wyden along with
Senators Johnny Isakson (R–GA) and Mark Warner (D-VA),
co-chairs of the Finance Committee Chronic Care Working
Group, released a discussion draft with proposals to
improve health outcomes for Medicare beneficiaries living
with chronic conditions. Potential Senate legislative
action on the discussion draft is possible in the lame duck
session, but it is also possible the bill will be taken up in
the next Congress.
18
| Election 2016
Energy
Donald Trump is widely expected to significantly depart
from the priorities of the Obama Administration by
favoring development of additional conventional energy
resources and attempting to put the brakes on new
environmental initiatives. The GOP majorities in the
House and Senate have a similar agenda and Democrats
in Congress are expected to mobilize in opposition -- in
particular by leveraging their power in the Senate to
filibuster legislation – and publicly highlight the potential
impacts of a Trump administration’s policies.
Trump has pledged to cancel US participation in the 2015
Paris Climate agreement, and opposes implementation of
the Obama Administration’s Clean Power Plan (CPP). His
campaign literature is heavily salted with proposals to
provide regulatory relief to fossil fuel industries and
slanted in favor of new administrative initiatives to foster
conventional energy development. Specifically, his
website calls for the following energy-related initiatives:
► Make America energy independent, create millions of
new jobs, and protect clean air and clean water;
conserve our natural habitats, reserves and resources;
unleash an energy revolution that will bring vast new
wealth to our country.
► Declare American energy dominance a strategic
economic and foreign policy goal of the United
States.
► Unleash America’s $50 trillion in untapped shale, oil,
and natural gas reserves, plus hundreds of years in
clean coal reserves.
► Become, and stay, totally independent of any need to
import energy from the OPEC cartel or any nations
hostile to our interests.
► Open onshore and offshore leasing on federal lands,
eliminate moratorium on coal leasing, and open shale
energy deposits.
► Encourage the use of natural gas and other American
energy resources that will both reduce emissions but
also reduce the price of energy and increase our
economic output.
► Rescind all job-destroying Obama executive actions.
Mr. Trump will reduce and eliminate all barriers to
responsible energy production, creating at least a half
million jobs a year, $30 billion in higher wages, and
cheaper energy.
Given the predominance of oil and gas executives
amongst his kitchen cabinet, it is also widely expected
that President-elect Trump will try to halt additional
environmental regulatory measures proposed by the
Obama Administration, such as methane emission
curbs. It should be noted that it is difficult legally to
change or repeal regulations which have been
promulgated in final form – such as the CPP – without
going through the Administrative Procedures Act
process. Environmental lawyers can be expected to
litigate at every step of the way if Trump attempts to
bypass Congress and eliminate the CPP by Executive
Order, and the courts may well serve as a brake on such
actions. However, environmental advocates who would
have likely tried to push a President Clinton to
administratively expand the scope of the CPP’s carbon
emission regulations beyond the electric power sector,
potentially economy-wide under Section 115 of the Clean
Air Act, may now be left to using a litigation route to try
to force the Environmental Protection Agency to expand
the CPP to achieve this goal.
During the campaign, Trump also specifically rejected the
idea of using a carbon tax/carbon pricing as a means of
encouraging market-driven emission reductions. With
GOP chairmen of the tax-writing committees in the House
and Senate, it is very unlikely that they will schedule
hearings or markups to move carbon taxes – other than to
schedule votes in the House or Senate aimed at
undermining vulnerable Democrats up for reelection in
2018.
Additionally, the President-elect has vowed to allow
energy infrastructure projects, like the Keystone Pipeline
and other industrial facilities which have faced denials or
delays under the current Administration, to move
forward. Trump has proposed a $1 trillion infrastructure
plan that would rely heavily on private-public partnerships
by providing a tax credit to encourage private investors to
fund projects overseen by states and municipalities. As
conceived by Trump’s advisors, the tax credit would apply
to infrastructure projects with a dedicated source of
revenue, such as toll roads, airports or utilities financed
at least in part by fees paid by users. Decisions on which
projects to fund would generally be left to the states.
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| Election 2016
Energy
Trump’s tax reform plans generally adhere to the
precepts of the House Republican tax reform Blueprint,
but he differs with that outline in some important
respects. The House Blueprint proposes, among other
things, to allow 100% expensing of qualified business
investments and to deny the deductibility of net business
interest expenses. It would also eliminate most fossil fuelspecific
tax incentives such as deductions for intangible
drilling costs (IDCs) and percentage depletion, but its
proposal to allow expensing of all business investment
would mitigate the loss of many of the specific
deductions. The Blueprint appears to allow both
independent and integrated producers to deduct 100% of
IDCs in the year they are paid or incurred. While this
would preserve the status quo for independent producers,
allowing integrated oil and gas companies to also expense
100% of IDCs could increase the rate of return on oil and
gas wells drilled by integrated companies. This change, in
combination with the possible loss of the percentage
depletion deduction (which allows cost recovery in excess
of cost basis) could ultimately make independent
producers less competitive with integrated companies.
Trump offered qualified support for the Blueprint’s
proposal to allow 100% expensing – but would limit the
provision to manufacturers – and those who elect
expensing will lose the deductibility of business interest
expenses. Further, he may be more inclined to keep
traditional fossil fuel-specific tax incentives, such as the
deduction for intangible drilling costs and the percentage
depletion deduction.
While President-elect Trump has spent much of his time
discussing federal policy issues surrounding conventional
energy resources, he has expressed opposition to
continued federal support for the development of wind
and solar energy and has said that he will eliminate all
federal spending for clean energy research. How he
proceeds in the new Congress may be heavily influenced
by both electoral politics (e.g., ethanol-rich Iowa largely
supported his candidacy) and the pre-existing dynamics in
Congress. Many congressional Republicans have opposed
even temporary extensions of renewable energy
incentives and the fate of these provisions may well be
linked to the effectiveness of the Democratic minority.
20
| Election 2016
Financial Services
Republicans’ retention of the House and Senate majorities
means that President-elect Trump will have partners in
both banking committees to help implement an agenda
heavy on deregulation. The new Senate Banking
Committee chairman will be Mike Crapo (R-ID), who has a
solid working relationship with returning Ranking Member
Sherrod Brown (D-OH) and could work productively with
him in a handful of areas. On the House side, Rep. Jeb
Hensarling (R-TX) returns as chairman of the Financial
Services Committee. A fierce opponent of the 2010
Dodd-Frank Act, Hensarling will have Trump’s support in
renewing his effort to repeal and replace the Dodd-Frank
Act and continuing the panel’s aggressive oversight of
financial regulators. Given Republicans’ narrow majority
in the Senate, Democrats’ ability to filibuster
controversial bills in that chamber will make it difficult for
House and Senate GOP leaders to push through a broad
dismantling of major elements of Dodd-Frank, something
the President-elect called for during the campaign. But
given that Republicans will have full control of the
executive and legislative branches for the first time since
2006, the GOP base will be dismayed if they don’t try
anyway. Short of that broader effort, bipartisan
compromises in the areas of bank capital and regulatory
relief for smaller banks seem achievable.
Senate Banking Committee. Crapo is widely seen as
working constructively with Sen. Brown – a stark contrast
to Brown’s relationship with current Chairman Richard
Shelby (R-AL), who has been unable to agree with
Democrats on much legislatively. In a July interview,
Crapo called Brown “straightforward and honorable” and
said that while they were far apart in terms of their
political views, “the fact is we have been able to find
significant areas of consensus where we can agree to
move forward on good policy, so I expect that we would
be able to do that.” The leading options for an early
bipartisan effort include a bill providing regulatory relief
from some Dodd-Frank provisions to community banks, a
high priority for both Crapo and Brown. Such a bill might
include language raising Dodd-Frank’s $50 billion asset
threshold, above which banks must submit to more
rigorous prudential supervision by the Fed. Crapo and
Brown also could agree on modest structural changes to
the Federal Reserve, unless pressure from the Trump
White House for a more ambitious Fed reform bill – like
the package of changes passed by the House in November
2015 – derails that effort. Crapo and Brown could also
conceivably agree on more stringent capital standards for
the largest banks, a theme that Brown hammers at every
opportunity.
As Shelby did, Crapo is expected to maintain the
committee’s focus on rules and bodies created by the
Dodd-Frank Act, such as the Financial Stability Oversight
Council (FSOC) and the Consumer Financial Protection
Bureau (CFPB), which suffered a judicial setback when a
federal appeals court on October 11 ruled that its
structure was unconstitutional. Crapo has also been
skeptical of the new supervisory authorities the 2010 law
gave the Fed to oversee larger banks and insurers that
are designated as systemically important by the FSOC.
Crapo could work collaboratively with Ranking Member
Brown on a legislative follow-up to the Fed’s recent report
criticizing banks’ trading of physical commodities; one
obvious possibility is to repeal the merchant banking
exemption given to the holding companies for Goldman
Sachs and Morgan Stanley, as the Fed recommended.
Finally, a post-crisis system for housing finance – i.e., the
future of Fannie Mae and Freddie Mac – still looms as the
biggest area left unaddressed by the 2010 financial
reforms, but a bipartisan effort to establish a new system
drafted by Crapo and then-Chairman Tim Johnson (R-SD)
in 2013-14 foundered when the Banking Committee’s
liberal Democrats (and some Republicans) declined to
support the centrist proposal. Since then, few signs have
emerged about how to structure a new housing finance
system in a way that could survive a Senate filibuster, and
President-elect Trump did not address the issue during his
campaign.
House Financial Services Committee. After years of
confrontation with a Democratic White House and
Democratic appointees to financial regulators, Chairman
Hensarling will shift strategies now that the executive
branch is in more friendly hands. Hensarling is not likely
to improve his contentious relationship with Rep. Maxine
Waters (D-CA), however, who will return as ranking
member and is certain to push back on Hensarling’s
efforts to replace the 2010 reforms with more
conservative approaches. While Hensarling has regularly
done battle with officials at the FSOC, Treasury, SEC and
the Fed, new leadership is expected at those agencies –
though even Republican appointees will be constrained by
the existing statutory mandates in Dodd-Frank, unless the
new Congress is able to alter the law with legislation. At
the Fed, Chairman Janet Yellen’s term does not expire
until January 2018. President-elect Trump frequently
criticized Yellen as being overly “political” during the
campaign.
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| Election 2016
Financial Services
During the four previous years of Hensarling’s
chairmanship, most of the committee’s major bills died
quietly in the Senate, such as efforts to repeal much of
Dodd-Frank (the CHOICE Act), impose substantial reforms
upon the Fed, restructure the CFPB and strip the FSOC of
various powers. That may change now that the House,
Senate and White House will operate with greater
coordination, though the threat of the Senate filibuster
limits what Republicans can achieve. Hensarling notably
has enjoyed a longtime friendship with Vice Presidentelect
Mike Pence, which will give him a powerful ally in the
White House as the new administration plots its strategy
for financial regulation and nominates key appointees for
the regulatory agencies. Hensarling agrees with Senators
Crapo and Brown on the importance of capital for big
banks, but he wants to reward banks with relief from
much of Dodd-Frank’s supervisory regime if they agree to
a higher leverage ratio. Hensarling can be expected to
reintroduce his CHOICE Act and Rep. Bill Huizenga’s (R-
MI) package of Fed reforms (the FORM Act), and to renew
the panel’s aggressive oversight of the CFPB, the FSOC
and other bodies established by Dodd-Frank. Republicans
have also been critical of moves by global regulatory
bodies to set capital and liquidity rules for “systemically
important” banks and insurance companies.
Wells Fargo Scandal. Lawmakers in both the House and
Senate are certain to resume their investigations of Wells
Fargo in the wake of revelations that the bank’s
employees created as many as 2 million accounts without
customers’ consent. Hensarling and other Republicans
want to use the scandal to raise questions about the
performance of the CFPB and the Office of the
Comptroller of the Currency (OCC), while Ranking
Member Waters has vowed to offer a bill breaking up
Wells Fargo into smaller companies. On the Senate side,
Ranking Member Brown has used the scandal to focus on
mandatory arbitration provisions in financial contracts,
and will likely propose legislation prohibiting such clauses,
though Sen. Crapo is unlikely to support him. In an
editorial piece in October, Camden Fine, president of the
Independent Community Bankers of America (ICBA),
wrote that he “fully expected” that Wells Fargo’s new
policy of notifying customers whenever a new account is
created in their name, along with “far more stringent
policies, will ultimately become mandatory as
policymakers respond to the scandal with additional
regulatory burdens on banks of all sizes.”
Oversight of Regulators. As they have in previous years,
the banking committees in 2017 will devote considerable
time to overseeing rules issued by financial regulators.
These will include the still-unfinished interagency rules for
clawing back incentive compensation drafted by the SEC,
the Fed, the FDIC and other agencies; the CFPB’s
controversial new rules for prepaid cards, payday lenders
and mandatory arbitration clauses; the global Financial
Stability Board’s forthcoming regulations for capital held
by large insurers; and the international Basel Committee’s
rules for bank capital, which are expected to be issued by
the end of this year. The Banking Committee must also
schedule hearings for high-level Treasury nominees, as
well as nominees for key vacancies at the SEC, CFTC, the
Federal Reserve and the Ex-Im Bank, which were never
filled in the current Congress because of lingering
disputes with the Obama administration.
Two Deadlines to Watch: 1) the largest banks resubmit
their “living will” resolution plans in May 2017, always a
source of contention for critics of “too big to fail”; 2) the
Terrorism Risk Insurance Act (TRIA) expires at the end of
2017, forcing yet another ideological dispute over
whether the federal backstop program should be
renewed.
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| Election 2016
Trade
Trade legislative issues could figure prominently in 2017.
During the campaign, President-elect Trump argued
vigorously against the proposed Trans-Pacific Partnership
(TPP), vowed to renegotiate the North American Free
Trade Agreement (NAFTA) and pledged to label China as
a currency manipulator, which could trigger the
imposition of significant tariffs on Chinese imports.
Senate Finance Committee. President-elect Trump may
find himself somewhat at odds on his trade agenda with
Senate Finance Committee Chairman Hatch who has
supported numerous trade agreements during his
congressional tenure.
House Ways and Means Committee. House Republican
trade leaders – including Speaker Ryan and Ways and
Means Chairman Brady – played a pivotal role in
advancing President Obama’s trade initiatives through
Congress, including passage of Trade Promotion
Authority (TPA) in 2015. A key question is how closely
they will work to support President-elect Trump’s trade
restrictionist agenda.
Trans-Pacific Partnership Agreement. Unless TPP can
be approved in the 2016 lame-duck session (an extremely
unlikely prospect, as discussed above), TPP will not be
ratified.
Transatlantic Trade and Investment Partnership
Agreement. US and EU trade negotiators failed to make
much meaningful progress on TTIP in 2016. Prospects for
TTIP are dim, given the President-elect’s trade priorities
and a potential chill in US-EU relations.
Other trade agreements? The Trade Promotion
Authority, enacted in 2015, provides enhanced fast-track
procedures for trade agreements reached before July 1,
2018, with a possible extension to July 1, 2021. Will
President-elect Trump decide to launch additional trade
agreements that could be considered under the fast-track
authority in Congress? Following the U.K. vote on Brexit
this summer, some Members of Congress expressed an
interest in a possible US-U.K. free trade agreement.
23
| Election 2016
Topics

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Donald Trump Real Estate Mogul
Hillary Clinton Former Secretary of State
Mitch McConnell Senate Majority Leader
Charles Schumer
Elizabeth Warren
Bernie Sanders U.S. Senator
Paul Ryan Speaker of the House