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Americans in swing states voted narrowly but collectively to return Donald Trump to the White House.

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The Republican Senate majority will help advance Trump’s nominees and legislative agenda.

The House majority may not be known for weeks. If the GOP wins, Republicans will have open field running on key legislation, beginning with taxes. If Democrats win the House, they will block Trump’s policy agenda – will that force bipartisan solutions or create more partisan gridlock?

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<a href="#financial">Financial Services</a>

In a nation divided down the middle over politics, and in a handful of states where those divisions are concentrated, Americans narrowly but collectively voted in one direction, returning Donald Trump to the White House. Aided by Republican gains in the Senate, Trump’s decisive Electoral College victory will have profound implications for key policies in 2025. The GOP’s Senate gains will ease confirmations for Trump’s Cabinet as well as for judicial and other nominees, and elevate Republicans’ leverage for the coming legislative battles on Capitol Hill. Votes are still being counted in some of the 435 House races, and the final results may not be known for weeks. As of Wednesday morning, it is possible that a narrowly divided nation has given Republicans unified political control of Washington and the opportunity to shape the most important policy decisions facing the country. But while Republicans could advance tax and certain other policy changes on their own, most legislation will require 60 votes in the Senate to advance – and that gives Democrats the ability to shape bipartisan outcomes even if Republicans control Congress.

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If Democrats squeak out even narrow control of the House, Trump’s legislative agenda would face a wall of opposition on that side of the Hill. Democrats would use their oversight committees and subpoena authorities to blanket the Trump administration with investigations, only adding to the political drama and making legislating on essential items – keeping the government funded, raising the debt ceiling and avoiding trillions of dollars in new taxes – that much more drawn out and contentious.

Republican and Democratic leaders are already war-gaming the election’s impact on the fate of policy debates that will dominate Washington in 2025. Based on our discussions with key lawmakers in both parties, we present you with our analysis of what Washington is thinking about this morning: how what happened last night – and what will happen in the coming weeks – will affect critically important legislation next year and beyond.

Washington’s tax-writers are already plotting post-election scenarios for the biggest policy battle coming in 2025: avoiding $4.6 trillion in tax increases on individuals, small businesses and large corporations.

In 2017, when Congress enacted the Tax Cuts and Jobs Act (TCJA), reforming the tax code was aspirational for the Republicans then in power. Other than political opportunity, there was no forcing mechanism compelling GOP lawmakers to act.

In 2025 – thanks to the TCJA’s expiring provisions – Congress has 4 trillion reasons to act. But to an increasing number of lawmakers, there’s a competing priority: the growing national debt. The limit on the government’s credit card will be breached next year, and Congress will have to vote to raise the debt ceiling to add to the current $35.8 trillion national debt.

The politics of cutting taxes – usually a winner for Washington – could be turned on its head by a debate over red ink. Failing to head off $4.6 trillion in tax increases could plunge the economy into a recession; failing to raise the debt ceiling could trigger global financial chaos. If lawmakers begin to view tax relief through the lens of “Is this tax cut worth borrowing billions of dollars from the Chinese Communist Party?” then every tax cut (including an extension of existing provisions) could be subject to heightened scrutiny by lawmakers.

When it comes to taxes, here are eight things on Washington policymakers’ minds this morning:

We may not know for days or even weeks which party controls the House, but that isn’t stopping Republican leaders from planning as if they will be in charge next year – and advancing a tax bill at the equivalent of legislative light speed. If a Republican election sweep is confirmed, the GOP will press for House and Senate tax votes in the first quarter of 2025, leaving stakeholders limited time to lobby for changes. Republicans believe speed would be critical to keep the tax issue from merging with the debate over raising the debt ceiling. But to move that quickly and to quell dissent from GOP deficit hawks, Trump would have to put his thumb on the scale to force Republican unity, especially around consideration of the budget resolution, which must pass before the reconciliation bill that would include the tax changes.

If Democrats win a majority in the House, the tax debate on Capitol Hill would be like trench warfare, with forward movement measured in inches. Final legislation would necessarily be bipartisan and likely not be completed (if at all) until the end of 2025, when many of the TCJA’s provisions expire. The policy concessions required by both parties to achieve consensus could create headaches for Democratic and Republican leaders. For example, Democrats would press Republicans to accept the expanded child tax credit, while Republicans would demand Democrats accept tax relief for higher-income taxpayers and investors. It also could create opportunities for unusual political alliances among populist factions in both parties. One potential outcome in a divided government: Congress passes a temporary extension for all of the TCJA’s expiring provisions, effectively kicking the can down the road until after the 2026 elections.

When the TCJA lowered the corporate rate to 21 percent, lawmakers made sure it was permanent. That means it won’t automatically reset to 35 percent in 2025. But that doesn’t mean companies are immune from future changes to the headline rate. If Democrats and Republicans share political power, Democrats are going to want policy wins in exchange for supporting GOP tax priorities – and that’s where the corporate rate faces political risk. While some Democrats want the rate to go back to 35 percent – or even higher – that’s unlikely under a divided government. But a corporate rate in the mid-20s married to a lower rate that incentivizes domestic manufacturing could be a bipartisan landing spot that allows both parties to gain other tax policy wins.

If Republicans sweep the elections, CEOs shouldn’t assume their corporations won’t face risk. House Ways and Means Committee Chairman Jason Smith, R-Mo., said during BakerHostetler’s Legislative Seminar this summer that prominent GOP lawmakers told him corporate taxes should be raised. “There are people on both sides of the aisle who believe the corporate tax rate is not [high] enough,” Smith said. “If you think the C corp is not on the table for discussion [in 2025] – every tax provision is on the table. Nothing is permanent.” The Republican Party that passed the TCJA is not the same as today’s GOP. While senior tax-writing Republicans would resist a higher corporate rate, the sentiment for it exists among some rank-and-file GOP lawmakers.

During the campaign, Trump tried to appeal to seemingly every constituency with calls to lower their taxes – including military veterans, seniors, first responders and hourly workers. Interest payments on your car loan? Yeah, that should be deductible on your Form 1040, Trump said. But he wasn’t alone: Democrats joined Trump in calling for eliminating taxes on tips. No matter which party controls Washington, shielding tip income from taxes has support – though the details will matter. Lawmakers would have big decisions to make on structuring relief to prevent the proliferation of tax avoidance schemes where regular income could be considered “tips.” Also to be decided would be whether to shield tips just from income taxes, which could cost $250 billion over 10 years, or also from payroll taxes, which would cost far more.

Could tariffs generate bipartisan support in a divided government and also be used to pay for tax cuts? Trump advocated across-the-board tariffs on all imported goods, and while that was panned by Democrats, the Biden administration has mostly kept in place the tariffs imposed by the Trump administration. Given the interest from both parties in boosting U.S. manufacturing and onshoring certain industries, populist-aligned Republicans and Democrats could see revenue from tariffs as a way to offset the cost of extending TCJA tax cuts (as well as to pay for other provisions). Expect a robust debate on the Hill about U.S. tariffs triggering retaliatory action by other countries, with American consumers left in the crossfire.

Many Democrats want to overturn the TCJA’s $10,000 cap on deducting state and local taxes (SALT), as do Republican lawmakers in high-tax states such as New York and California. Whether it’s a divided government or a GOP election sweep, Republicans will face an internal political conundrum over how to address SALT. Although Trump himself now wants to eliminate the SALT cap, most GOP lawmakers represent states where it doesn’t impact their constituents, and they see eliminating the cap as red states unfairly subsidizing high-tax blue states. Senior Republicans say eliminating the SALT cap couldn’t pass a GOP-led House, even with Trump’s backing. And if Democrats control the House, how SALT is resolved could be key to attracting Republicans to a final tax package in a divided government. A middle ground for both parties could be to keep the $10,000 SALT cap for individuals but double it for married couples earning up to $500,000. That would capture most taxpayers and cost about $100 billion over a decade – far less than the $1.17 trillion cost of eliminating the cap altogether.

One of the hallmark accomplishments touted by the Biden administration was passage of the Inflation Reduction Act (IRA), which added $670 billion in tax incentives for developers and manufacturers of renewable energy projects and technologies. Republicans mostly criticized the IRA, but IRA-funded projects are underway in red states and districts. If Democrats capture the House, they will fight to protect the IRA provisions. But even in a GOP election sweep, IRA incentives are unlikely to go away completely though some programs will be hotly debated as lawmakers eye revenue needed to pay for extending other tax provisions.

Healthcare policy has been in an unfamiliar place during the 2024 campaign: the background. It hasn’t been featured prominently in campaign ads, stump speeches or debates. Voters aren’t prioritizing the issue as much as they have in recent elections, according to polls.

Neither Trump nor Vice President Kamala Harris offered a sweeping vision to overhaul the sector. Yet despite having a less prominent place in this election, healthcare is never fully absent from voters’ or candidates’ minds, and Trump and Congress will have plenty of weighty issues to address.

When it comes to healthcare, here are eight things on Washington policymakers’ minds this morning:

The IRA’s Medicare drug price negotiation program was a signature accomplishment of the Biden administration, and while some congressional Republicans want to scrap it, Trump has also been an industry critic. Expect pharmaceutical manufacturers to continue to be in the crosshairs as policymakers press to drive down costs. Senior Republicans opposed to the IRA program want to piggyback on the Republicans’ plan for reconciliation tax legislation by including language that would effectively eliminate the penalty on pharma companies that fail to participate in the negotiation. That maneuver would require a Republican sweep of the election. Beyond drugmakers, Washington will continue searching for ways to drive down costs for patients, with pharmacy benefit managers (PBMs) targeted by both Republicans and Democrats. Legislation aimed at the drug middlemen advanced in the House and Senate earlier this year, and it could be the sweet spot for bipartisanship in 2025 in a divided government.

Hospitals and health systems found themselves under scrutiny recently in Washington, where historically they were mostly held harmless in healthcare debates. Legislation targeting cost transparency and consolidation in the sector gained significant traction in the current Congress and will continue to be a focus for key lawmakers in 2025. Meanwhile, physicians squeezed in their Medicare reimbursements are seeking another overhaul to their payment systems. Could savings from hospitals be used to fix doctors’ pay? Adjusting one provider’s reimbursement with cuts to another’s often triggers nasty battles within the sector, with individual providers lobbying aggressively to protect their share.

The Affordable Care Act (ACA) isn’t a realistic target for repeal, despite some conservatives’ wish and even if Republicans control Congress. But the trajectory of the program’s growth will be at stake next year as enrollees’ enhanced premium subsidies from COVID-relief legislation are set to expire at the end of 2025. More than 21 million Americans are enrolled in ACA coverage, and coverage for 3.4 million could be jeopardized if the subsidies are not extended. The subsidies are tax credits, so their fate will be tied to the broader tax debate. Eliminating the subsidy is a prime goal for Republicans who want to reprogram those savings to pay for extending the TCJA and for other new tax cuts. But extending the subsidies is a core priority for Democrats, who in a divided government will not trade them away.

Congress will see a significant health policy brain drain next year with the retirement of key lawmakers, including former physicians. The House Energy and Commerce Health Subcommittee will also have a new chairman and ranking member, with Reps. Diana DeGette, D-Colo., and Buddy Carter, R-Ga., currently the leading candidates for each party. DeGette and Carter could be strong partners on PBM reform, maternal health and telehealth. With Republicans taking the Senate majority, gastroenterologist Sen. Bill Cassidy, R-La., will now set the agenda on the Health, Education, Labor and Pensions Committee. Cassidy is a health policy wonk with an endless range of priorities, from regulating artificial intelligence to reforming the 340B Drug Pricing Program.

Where is PAHPA? The comprehensive Pandemic and All-Hazards Preparedness Act has typically been reauthorized with strong bipartisan support every five years, but last year’s renewal stalled amid a partisan stalemate over how to address drug shortages. Both sides remain completely dug in. There is currently no path forward, especially with the retirement of several important health leaders, including the Energy and Commerce Health Subcommittee’s top Democrat, Rep. Anna Eshoo, D-Calif., who led the development of the original PAHPA in 2006. With both sides entrenched, PAHPA may only advance if Republicans control Congress.

COVID-era flexibilities and coverage for telehealth services proved so popular that Congress continued extending them even after the pandemic officially ended. The most recent extension expires at the end of this year, but it is widely expected that Congress during the upcoming lame-duck session will extend those flexibilities, perhaps for as long as five years. If that stalls – disputes remain over offsetting the cost and how to prevent fraud – expect bipartisan support in the new Congress, regardless of the election outcome. Congress is also likely to extend hospital-at-home rules, which allow patients to receive some acute care services from their home.

Republicans and Democrats often can find common ground on promoting medical innovation, even in periods of partisan gridlock. Medical technology manufacturers could be a beneficiary if new leadership on key health committees looks for bipartisan wins. Legislation to ensure Medicare reimbursement coverage of new breakthrough technologies has bipartisan support – though cost remains a potential hurdle for the bill. Some senior congressional Democrats want to pair breakthrough reimbursement coverage with greater industry oversight by the Food and Drug Administration (FDA), and that could prove to be a speed bump slowing bipartisan passage. Senior lawmakers also have worked for years on an overhaul of how FDA regulates diagnostic tests, though they still struggle to overcome divisions among stakeholders, including clinical laboratories and academic medical centers. Despite those hurdles, both bills would be strong candidates for a potential legislative effort on innovation in the next Congress, regardless of which party controls the House.

Medical supply chains emerged as a top policy concern and lesson learned for Congress after COVID, and drug shortages have persisted and even grown since the pandemic. Worse, lawmakers recognize that the United States obtains many important supplies and inputs, such as active pharmaceutical ingredients, from countries with adversarial governments, such as China and Russia. Both parties continue to seek ways to bring production of basic medical supplies and pharmaceuticals onshore, but solutions are elusive. Congress faced similar concerns over semiconductors and responded with tens of billions of dollars in government subsidies to build new domestic fabrication facilities. Could a broad initiative to boost domestic production in medical supply chains be next for a divided government?

The fate of key policies – from financial institutions, capital markets and securities to insurance, digital assets and the use of artificial intelligence in financial services – hangs in the balance as votes continue to be counted.

A Republican election sweep would clean out Biden’s department and agency leaders, as well as pave the way for legislative and regulatory outcomes more favorable to financial industries. Still, Republicans’ populist sentiment – including vice presidential nominee JD Vance’s partnering with the Senate’s progressive leaders – could create industry risk not seen during the first Trump administration.

When it comes to financial services, here are six things on Washington policymakers’ minds this morning:

If a Republican election sweep is confirmed, Congress would move quickly in 2025 using the Congressional Review Act (CRA) to roll back Biden administration financial regulations.&nbsp;Trump signed resolutions disapproving 16 regulations promulgated at the end of the Obama administration, including two by the Consumer Financial Protection Bureau and one by the Securities and Exchange Commission (SEC). A second Trump administration and a GOP Congress would be just as aggressive in 2025. That probably explains why the Biden administration in April finalized 66 significant rules – a record number – just before the CRA’s lookback feature would have placed new regulations at risk of disapproval resolutions.

Trump will replace Biden’s appointees at the Treasury Department and most of the financial regulatory agencies. While the Republican Senate would take months to confirm nominees as replacements, Trump will quickly appoint acting leaders to ensure his administration’s policies – not Biden’s – are being implemented. Trump will designate a new SEC chairman soon after his inauguration. The current chair, Gary Gensler, could stay on as a commissioner during a second Trump administration until June 2026, when Gensler’s term expires. While Trump has told his supporters he would fire Gensler on day one, that move would not be as easy as it sounds.

If Republicans keep control of the House, we won’t know for weeks who will become the chairman of the Financial Services Committee.&nbsp;Four lawmakers are vying to succeed current Chairman Patrick McHenry, R-N.C., who is retiring at the end of the Congress. GOP leaders will interview the candidates – Reps. Andy Barr, R-Ky.; French Hill, R-Ark.; Bill Huizenga, R-Mich.; and Frank Lucas, R-Okla. – after Thanksgiving, with a December decision likely. But even that timeline could be pushed back if the House’s election outcome is delayed, with cascading delays on the House GOP’s leadership elections, too.

If Democrats win the House majority, there won’t be any drama about the top Democrat on the Financial Services Committee. Rep. Maxine Waters, D-Calif., would reclaim the chair, a position she held from 2019 to 2022. With Waters in charge, Democrats would immediately reinstate the Diversity and Inclusion Subcommittee, which Republicans eliminated when they took power in 2023. Waters’ policy agenda would include expanding affordable housing and boosting minority lending. She also wants to overhaul cryptocurrency regulation, although she would likely start with stablecoins and rewrite the digital asset market structure legislation that attracted 71 Democrats earlier this year.&nbsp;Waters supports easing rules around investing and will work with Republicans to tackle concerns about banks cutting off access to disfavored businesses, akin to what occurred during the Obama administration with Operation Chokepoint. Waters would also conduct aggressive oversight of the Trump administration and the private sector, and she would reinstate the annual hearing with the CEOs of the largest U.S. financial institutions.

With Republicans taking control of the Senate, Sen. Tim Scott, R-S.C., is in line to become chairman of the Banking, Housing and Urban Affairs Committee – unless Trump taps him for a Cabinet position.&nbsp;Scott’s policy priorities for the committee include comprehensive capital formation and housing legislation. He also expressed frustration earlier this year about the Senate’s opposition to digital assets legislation and indicated that he could create a dedicated digital assets subcommittee. If Scott does move to the Trump administration, Sen. Mike Rounds, R-S.D., is next in line to be committee chairman.&nbsp;

Democrats may be in the minority in the Senate in 2025, but look for progressives to be active on financial services issues, even after current Banking Committee Chairman Sherrod Brown, D-Ohio, lost his re-election bid. That’s because Sen. Elizabeth Warren, D-Mass., is likely to become the top committee Democrat even though she is currently fifth in seniority on the panel. More senior Democrats are not expected to relinquish their top roles on other committees, including Sen. Jack Reed, D-R.I., on the Armed Services Committee and Sen. Mark Warner, D-Va., on the Intelligence Committee. Warren will not be able to advance legislation from her minority position, and she cannot issue subpoenas. But she would use the leadership position to promote the party’s progressive financial services agenda as well as conduct aggressive oversight of the Trump administration and the private sector.

Energy and environmental policy represents the starkest difference in vision between Democrats and Republicans. Trump recently called concerns about the environment “one of the greatest scams of all time.” Much of that difference in vision will play out at the Environmental Protection Agency (EPA). Similarly, the focus of committee activity on the Hill and the legislative agenda in each chamber of Congress stands to be 180 degrees different depending on which party holds the majority – but there may also be some room for bipartisanship.

When it comes to energy policy, here are three things on Washington policymakers’ minds this morning:

The 118th Congress made significant progress on improving the federal process to approve infrastructure projects, but comprehensive permitting reform eluded lawmakers. While reducing regulatory barriers is typically a conservative policy goal, and environmental advocates object and worry about weakening protections, permitting reform became an important goal for Democrats. That is because the same complicated project approvals that affect fossil fuel development also have held up some of the IRA’s implementation, including for clean energy project siting, transmission infrastructure for wind and solar, and mining of materials needed for clean energy technology. Regardless of the final outcome of the elections, permitting reform could be an important bipartisan win in the next Congress – though Republicans’ attempt to unwind the IRA could spook Democrats from supporting changes to permitting.

Republicans uniformly opposed the IRA – but its clean energy tax credits created a divide within the GOP. While most conservatives wish to repeal the IRA, some Republicans not only believe the subsidies can be beneficial for the climate but also see public and private funding flow to their districts and states as the IRA is being implemented. Even House Speaker Mike Johnson, R-La., recently acknowledged some IRA provisions are helpful and said he would like to take a “scalpel, not a sledgehammer” to the law – much to the consternation of his right flank. Trump and Republican leaders will have to navigate the changing politics around the IRA, especially if the GOP sweeps the election and pushes big tax changes in 2025.

Trump will move quickly to dismantle most of Biden’s EPA actions regarding power plants, tailpipe emissions and fuel economy rules and more. The deregulatory moves and potential legal challenges will present an interesting early view of how courts respond to the Supreme Court’s overturning of <em>Chevron </em>deference. Andrew Wheeler, Trump’s former EPA administrator (and potentially a top candidate to return to the post), has noted that although overturning <em>Chevron </em>was a long-held conservative goal, judges on both ends of the ideological spectrum will have more leeway to overturn rules – perhaps putting some of Trump’s regulatory actions at enhanced legal risk.

What Washington is Thinking About This Morning…

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