Biden focus on regulation could have broad impact

Katie Deal , Washington Analyst,
US Equity Division

Efforts to achieve environmental goals may be consequential.

The balance of power between Republicans and Democrats in the Senate will shape President‑elect Joe Biden’s legislative agenda, determining the extent to which he can push through tax increases and influencing the size and scope of spending associated with any pandemic relief and recovery packages.

If Republicans retain control of the Senate—which would include the Senate’s committees and agenda—Biden would need at least one or two GOP senators to achieve his legislative goals.

Biden has signaled his intention to use his administration’s regulatory authority to pursue many domestic policy priorities. Investors should not overlook how potential changes related to the environment, health care, and technology could affect some sectors and industries.

Environmental Policies

Biden supports the passage of “green infrastructure” legislation to help spur the economy’s recovery from the coronavirus pandemic. Throughout his campaign, Biden proposed tax credits for electric vehicles, clean manufacturing, renewable power, and energy storage projects as well as spending on electric vehicle charging stations and other infrastructure initiatives.

While a GOP majority in the Senate would limit the scope of Biden’s environmental legislation, his administration’s efforts to address climate change could come at the regulatory level. This approach would involve implementing more stringent environmental rules than those that President Donald Trump removed or weakened.

The president‑elect promised to crack down on greenhouse gas emissions through tougher fuel economy standards for vehicles and tighter standards for methane leaked into the atmosphere by oil and gas operations. Regulatory agencies are also likely to tighten their requirements for permitting, leading to higher compliance costs for oil and gas wells, pipelines, and other fossil fuel infrastructure.

Biden does not support a national ban on the practice of hydraulic fracturing, a technique used to extract hydrocarbons trapped in shale formations. However, he has expressed support for a moratorium on new oil and gas lease sales on federal lands, halting the issuance of new drilling permits in these areas, and adjusting the royalty structure for wells to reflect environmental costs.

Investors should also expect Biden to take a more holistic approach to environmental regulation, embedding climate review processes across the federal government and employing more agencies to implement rules related to climate change—not just the Environmental Protection Agency.

[Biden’s] approach would involve implementing more stringent environmental rules than those that President Donald Trump removed or weakened.

Health Care and Big Tech

Although Biden’s emergence as the Democratic presidential nominee significantly reduced the odds of an overhaul of the US health care system, his administration could pursue policies at the regulatory level that would address pricing in the pharmaceutical industry. We would also expect regulators to reverse Trump administration rulemaking that discouraged participation in the Affordable Care Act while also proposing changes to expand health insurance coverage to more individuals.

Increased regulatory scrutiny should remain a fact of life for “big tech,” with a Biden Justice Department and Federal Trade Commission likely to challenge the dominant US internet and social media companies on the premise of anticompetitive action. Despite bipartisan concern about these companies’ growing power, a lack of consensus on the best way to address data privacy and content liability concerns should limit the near‑term risk of legislative action on these fronts.

Investors should also expect Biden to take a more holistic approach to environmental regulation…

Some Caveats

Regulatory actions will be an important pathway for the Biden administration to achieve its policy goals, in my view, but these changes will take time to implement. If the GOP retains its Senate majority, Republicans could seek to delay the appointment of the president‑elect’s choices to head federal agencies. While “acting” officials can perform the “nondelegable duties” of vacant offices, delays in confirmations would influence agencies’ productivity. Agencies will also need time to transition, build up staffing, and execute the rulemaking process.

Investors should also bear in mind that the Biden administration’s policy priorities could shift depending on the success of federal government’s efforts to curb the coronavirus pandemic and support the US economy.

Sign up for US Equity insights from T. Rowe Price

Share this article:

Share on linkedin
Share on email
T.Rowe Price 2020 Election Blog
US Flag

Political blog

Read our US political analyst’s blog posts for updates from Washington with an investment slant.

Important Information

The specific securities identified and described are for informational purposes only and do not represent recommendations.

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

This material is issued and approved by T. Rowe Price International Ltd, 60 Queen Victoria Street, London, EC4N 4TZ which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.

© 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.


You might be interested in…

See our comprehensive range of US equity funds

Thank you for registering for US equities updates. The latest insights will be sent straight to your inbox, in the meantime access our latest thinking:

Important Legal Information

This site is intended for financial intermediaries in the United Kingdom. I have read the terms detailed below and confirm that I am a financial intermediary and that I wish to proceed. By accessing this website, you consent to T. Rowe Price collecting information by way of cookies.

Information contained in the T. Rowe Price website is not intended for investors in any jurisdiction in which distribution or purchase is not authorised, including the jurisdiction of the reader of this information, where applicable. For example, the information herein is not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America to or for the benefit of United States persons.

Information obtained from this site is intended specifically for the individuals who have agreed to these Terms and Conditions and may not be redistributed without prior consent from the T. Rowe Price Legal department.

The information is designed for professional investors, including financial intermediaries or members of the media, and is published for informational purposes only. In particular, the information is directed at only informing persons falling within one or more of the following categories:

(a) A government;
(b) A bank or insurance company;
(c) A pension fund or charity;
(d) Persons whose ordinary activities involve them, as principal or as agent, in acquiring, holding, managing or disposing of investments for the purposes of a business carried on by them or whom it is reasonable to expect will, acquire, manage or dispose of investments for the purpose of such a business;
(e) Persons whose ordinary business involves the giving of advice, which may lead to another person acquiring or disposing of an investment or refraining from so doing;
(f) Representatives of the media for corporate and background information about T. Rowe Price.

Persons who do not fall into one of the above categories should not act upon the information contained herein.

Certain persons may have access to information regarding the T. Rowe Price Funds SICAV, an investment company incorporated as “Société d’Investissement à Capital Variable” (‘SICAV’) under the laws of Luxembourg and the T. Rowe Price Funds OEIC, an open-ended investment company (‘OEIC’) incorporated in England and Wales. The sub-funds referred to on the site are only offered by the current prospectus. The prospectus contains more complete information about the sub-funds, including investment objectives, charges and expenses. However, the prospectus and other information relating to the sub-funds will not be intentionally distributed to persons in any country where such distribution would be contrary to local law or regulation.

Past performance is not a guide to future performance. The value of securities and any income generated from them might decrease as well as increase. Changes in rates of exchange may also have an adverse effect on the value, price or income of securities. Investors should also be aware of the additional risks associated with investments in emerging markets, high yield securities and smaller companies.

This information herein does not constitute investment advice and the products described may not be available to or suitable for all investors. You should consider, if appropriate, obtaining independent professional advice before making an investment decision.

Unless otherwise noted, the content appearing in this Section of the T. Rowe Price website has been issued by T. Rowe Price International Ltd, 60 Queen Victoria Street, London EC4N 4TZ, which is authorised and regulated by the U.K. Financial Conduct Authority with the reference number 194667.