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Assessing prospects for change under the Biden administration

Consider three factors: likelihood of legislation; complexity of regulatory action; and timeline for infrastructure development

It is no coincidence that the oval office now gives pride of place to a portrait of President Franklin D. Roosevelt. The Biden administration has big ambitions. But is the US really heading into a period of rapid and potentially transformational change driven by the federal government?

It's possible. President Biden is expected to drive hard in a number of areas, from addressing climate change and investing in infrastructure to expanding healthcare coverage and reforming immigration laws. And all this is in addition to priorities such as containing COVID-19, maintaining America's technological leadership, re-shoring jobs and strengthening US relationships with allies.

It is important to remember, however, that there are significant structural factors that could slow, limit or even prevent change from happening in many areas. At a high level, companies should consider three factors to ensure their business planning is based on a realistic understanding of the potential and timeline for change.

Earl on one-party rule (1:01)

1. Likelihood of legislation

The Democrats now control both houses of Congress and the White House, but only by a slim majority. As a result, most legislation is unlikely to pass unless it has bipartisan support. Democrats control the House by six seats. They control the Senate, which is split 50-50, only because Vice President Kamala Harris holds the tiebreaking vote.

But in the Senate, the filibuster can be invoked in most scenarios, raising the threshold for passing legislation to 60 votes. Despite talk of eliminating the filibuster, for now it appears unlikely that the votes are there to do so.

Earl on the talking filibuster (1:40)

Options for getting around the filibuster are limited. The Biden administration used the only major option, the "budget reconciliation" process, to pass its COVID-19 stimulus package by a simple majority. But Senate rules place significant restrictions on this process. Most importantly, reconciliation can only be used for bills that are directly related to mandatory spending, raising revenues or addressing debt limits, and the process historically has only been able to be used once a year. However, due to a 2021 ruling by the Senate parliamentarian and the fact that the end of each Federal fiscal year falls in September—the administration may have the opportunity to do three, or perhaps even more, reconciliation bills in 2021.

Earl on the prospects for infrastructure (1:06)

There may be hope for legislative action in areas where there is broad agreement across party lines, potentially including an infrastructure bill. Even in those cases, however, the devil is in the details. Infrastructure has been on the "to do" list of both parties for decades, but there is still disagreement about what counts as infrastructure, how much to spend, and whether to raise taxes to fund it.

Using reconciliation could be an option to enact an infrastructure bill, but there are big hurdles that would have to be overcome. Under the Senate's "Byrd rule," named for Senator Robert Byrd, all spending would have to be completed within a ten-year window, which can be difficult to achieve for large infrastructure projects. Moreover, proponents would have to overcome committee opposition to mandatory spending proposals that bypass the annual appropriations process.

Outside of reconciliation, the odds of passing meaningful legislation are slim unless there is significant bipartisan agreement. Even major climate change legislation may be hard to pass given that there is significant disagreement on the issue, both between the parties and even among Democrats.

This strongly suggests that the Biden administration will look to executive orders and regulations to achieve many of its ambitions.

 

2. Complexity of regulatory action

As we have seen, presidents often seek to act quickly through executive orders. These can be effective but may be reversed by subsequent administrations. For example, President Trump issued orders to facilitate the Keystone XL pipeline and expedite oil and natural gas leasing on federal lands and offshore waters. In the first month of his administration, President Biden issued an order to halt development of the Keystone Pipeline and pause new oil and natural gas leasing on federal public lands and offshore waters.

Moreover, executive orders can only be used to implement domestic measures where Congress has granted the president broad authority. In most cases, Congress grants authority to specific agencies and sets out detailed instructions that limit the regulatory actions those agencies can take.

Regulatory action can be more effective, but the regulatory process usually takes time and often involves complex tradeoffs. It can take months to more than a year just to fill decision-making positions that require Senate confirmation. Moreover, it is necessary in most cases to give notice of potential regulatory changes and provide a period for public comment. As a result, it can several years to issue new rules on controversial matters, and new rules are often challenged in court.

Earl on government intervention (0:51)

Adding to the complications is the reality that changing rules often involves making difficult choices among competing policy priorities. Take climate change as an example. The Biden administration has made it a priority for the US to lead on climate change issues. Presumably that would involve accelerating adoption of carbon-reducing or carbon-zero technologies, in part by driving down their costs and speeding deployment. To that end, regulators could expedite permits and prioritize the lowest-price bidders, which in many cases will be foreign companies who manufacture abroad.

But policies that expedite permits and encourage outsourcing and imports conflict with other administration priorities, such as ensuring environmental justice, creating jobs at home, maintaining America's competitive advantages in technology and innovation, and protecting national security.

Figuring out how to make the right tradeoffs can itself slow the regulatory process significantly.

 

3. Timelines for infrastructure development

In cases where policy goals hinge on building new infrastructure, timelines can extend to years or even decades. Actually building large-scale projects like pipeline networks is challenging and time- consuming under ideal conditions, and projects often hit delays. Moreover, the permitting process can be byzantine, and necessary approvals may be fraught with social and political complexity.

Consider carbon capture and storage (CCS) technology, which removes harmful carbon emissions from the air. Some experts say that the world cannot achieve its climate goals without implementing CCS at scale, and the Biden administration is considering increasing incentives already in place in the US to encourage its use. But significantly increasing CCS capacity involves not only building CCS facilities to capture carbon but also developing storage solutions and constructing pipelines to transport captured carbon to designated storage basins.

The time it takes to conduct the required studies and obtain permits from federal and state governments often vastly exceeds the time needed to actually construct the facilities. This can significantly extend timelines, especially when projects cross state borders, as pipelines often do. And the permitting process may involve getting approvals in multiple environmental areas—such as water and wetlands, species and habitat, air quality, drinking water—not to mention for pipeline safety and historic preservation (for details, see "How US environmental laws and regulations affect carbon capture and storage").

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The Biden administration has an ambitious agenda. But given structural factors and the current political climate, it will have to navigate numerous challenges to realize its ambitions. Companies that keep these three factors in mind can plan more effectively for the changes that are most likely to materialize in the coming years.

 

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