A Narrowly Democratic Congress Could Boost Spending and Growth

Winning two Georgia Senate races gives Democrats control of the U.S. Senate by the narrowest of margins – and for the fourth time in the history of the Republic there will be a 50–50 Senate with Vice President-elect Kamala Harris able to cast the 51st vote.

What can we expect from a unified, albeit narrowly, Democratic Washington? We expect more spending on COVID-19 relief in the near term with a longer-term focus on “economic rebuilding,” a central message of President-elect Joe Biden’s campaign, which could include an infrastructure bill, healthcare, and other non-economic priorities such as a voting rights bill. However, as we move from campaign rhetoric to the realities of policymaking, investors should prepare for the invariably bumpy and slow process of passing comprehensive legislation, especially with a 50–50 Senate.

Fiscal priorities for 2021

We believe that with control of Washington in 2021, the Democrats will likely focus on four fiscal priorities:

More COVID relief: An additional round of COVID stimulus will likely be the Biden administration’s first priority, with a deadline of mid-March when many of the provisions in the $900 billion (roughly 4% of U.S. GDP) December-passed COVID bill expire. No one knows for sure how big a bill

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