The Biden administration isn’t wasting any time in rolling up its sleeves and pushing through as much policy as possible.
But why, exactly? Jim Rickards has the answer below.
Before we get to that, yesterday I mentioned to you that my colleague Greg Canavan, editor of Greg Canavan’s Investment Advisory, is running a free event that kicks off this Thursday called ‘Life at Zero’.
Interest rates globally are likely to be stuck around near-zero for the foreseeable future making his ideas timely. You don’t want to miss this event, click here to register.
Now it’s over to Jim.
Until next time,
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Shae Russell,
Editor, The Daily Reckoning Australia
The Biden Policy Fast Track
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The waiting is over. The Biden administration is in place and operating at full speed. Some cabinet officials are still awaiting confirmation, but the key seats are filled and those awaiting confirmation are building their teams and refining their policy initiatives despite not officially holding office. This administration is off to a fast start and policy is being pushed on a fast track.
There are two reasons for this. The first is that the Biden team is really the Obama team with new titles. Obama officials on the National Security Council are now at the State Department. Other Obama officials formerly at the State Department are now running the National Security Council. Former Assistant Secretaries have now returned as Deputy Secretaries, a more senior office.
Some of the recycled Obama officials have reappeared in surprising but no less important roles. Prominent among these is Susan Rice, who was National Security Advisor to Obama, but is now head of the Domestic Policy Council for Biden. A shift from foreign affairs to domestic policy is a bit unusual, but what matters is that Susan Rice is an ultimate insider who is intensely loyal to Obama.
The line between foreign and domestic policy can be blurry anyway when it comes to issues like climate change and trade policy. The point is Obama has a pipeline to Rice, who will be in the room at the White House whenever important decisions are made.
The second reason for the Biden policy fast track has to do with the history of policy during the Obama administration (2009–17).
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Why Biden is in a rush
Obama had a solid victory in the 2008 election and the Democrats controlled the White House, the Senate (by a substantial 59-41 margin, including two independents who voted with Democrats), and the House of Representatives (also by a substantial 236-178 margin). Control of the Senate meant the White House could also control judicial appointments. In effect, the Democrats under Obama controlled Washington, DC.
That didn’t last. In the 2010 mid-term elections, the Republicans took 63 House seats from the Democrats and gained control of the House of Representatives 242-193. This was the heyday of the Tea Party movement, which propelled Republican candidates nationwide.
The Republicans did not take control of the Senate in 2010, but they did pick up six seats, which left the Democrats with a vulnerable 53-47 seat margin. Republicans used filibuster rules (which require 60 votes to break) effectively to block many Obama initiatives, including judicial appointments. Finally, in 2014, the Republicans took control of the Senate by a 54-46 seat margin and held control until the 2020 election.
The point is that Obama’s window for aggressive policy advances was brief. It was greatly weakened in 2010, then was closed entirely by 2014. This dilution is clear from Obama’s legislative achievements. Obamacare (officially the Affordable Care Act) became law on 23 March 2010. The Dodd-Frank financial reform legislation was passed on 21 July 2010. That was it. Obama had no significant legislative accomplishments after the mid-term elections in November 2010.
By early 2014, Obama was reduced to saying, ‘I’ve got a pen, and I’ve got a phone.’ This meant that Obama could lobby over the phone and could sign executive orders with his pen. But executive orders can quickly be reversed or rescinded by another president as they were by Donald Trump in 2017.
The policy window could close
The new Biden team (really a recycled Obama team) internalised this lesson. The policy window may be open only briefly. Republicans are in a good position to regain the House of Representatives in 2022 (they only need to pick up six seats). The Senate is divided 50-50 today (with Democrats in control because Vice President Harris has a tie-breaking vote). The likely outcome in 2022 is too close to call today, but a flip to Republican control is a real possibility.
In short, the Biden team realises they may only have two years to push their agenda without effective Republican opposition. They don’t want to repeat the mistake of the Obama administration. Biden’s mission is clear — get as much done as possible in the next two years and lock it in with legislation that will be difficult for Republicans to reverse. There’s not a day to waste and Democrats are acting accordingly.
All the best,
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Jim Rickards,
Strategist, The Daily Reckoning Australia
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