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$1 trillion in stimulus at stake: The shape of a deal hinges on the Georgia Senate runoffs

November 23, 2020, 4:01 PM UTC

The power structure of Capitol Hill and control of the U.S. Senate will be decided by the outcome of two Senate seats heading for runoff elections in Georgia on January 5.

If Democrats take both Georgia seats, they’d have the power of the 50–50 spilt chamber through Vice President-elect Kamala Harris’ tie-breaking vote. But if Republicans secure one seat, they’ll maintain control of the Senate and Congress will remain spilt—given Democrats still have the U.S. House of Representatives.

And with stimulus unlikely to pass during the lame-duck session, control of the Senate next year is the key factor in determining the size and scope of the next economic aid package.

Just how high are the stakes? In the ballpark of $1 trillion. On Saturday, Goldman Sachs published a report that projects a $2 trillion economic aid package by February if Democrats win both Georgia seats. But if Republicans win one Georgia seat—and retain control of the Senate—Goldman Sachs projects an aid package between $700 billion to $1 trillion.

Back in May, House Democrats passed the $3 trillion HEROES Act, but the bill died in the Republican-controlled Senate. And during their negotiations with the White House, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer lowered their offer from $3 trillion to $2.2 trillion while the executive branch moved its offer up from under $1 trillion to $1.9 trillion. Yet the two sides failed to reach a deal before the election, which ousted President Trump.

But if Democrats win both Georgia seats, they’d be well positioned to pass a multi-trillion-dollar economic aid package following the inauguration of President-elect Joe Biden. In such a scenario, Democrats could even revoke their $2.2 trillion offer and do something closer to their original $3 trillion plan, by using a Senate procedure called budget reconciliation, Senate Democrats could pass a stimulus bill with a simple majority—thus not needing to win over a single Senate Republican vote.

“If both Georgia seats go Democrat, then I think the question then becomes not just how big is this bill, it’s how many additional big bills do we get?” Tom Porcelli, chief U.S. economist at RBC Capital Markets, recently told Fortune. “So much really relies on what’s going to happen on January 5.”

On the other hand, if Republicans win one Georgia seat, it’s likely there could be significantly less economic aid. After the election, the White House’s $1.9 trillion offer effectively died as Senate Majority Leader Mitch McConnell took the reins for Republicans in the stimulus talks. Led by McConnell, fiscally-conservative Senate Republicans prefer a smaller stimulus package. On two occasions this fall, Senate Republicans put forward a $500 billion “skinny” package—which doesn’t include items like a second round of $1,200 stimulus checks. Both times that package was blocked by Senate Democrats.

Pelosi still calls McConnell’s limited package a “non-starter.” But if Republicans retain the Senate, Democrats might be forced to scale back their stimulus ambitions in order to get a package passed.

And if Republicans do maintain control of the Senate, they might not act quickly. Eric Winograd, senior economist at AllianceBernstein, says he finds it “hard to believe that Republicans in the Senate who were not eager to pass a stimulus bill in the midst of an electoral campaign would be willing to do so in the early days of a Democratic administration.”

These high stakes could make the runoff Senate races among the priciest in history: Already, more than $126 million in political ads has been booked in Georgia.

A tight race

Among the two runoffs, one Georgia contest pits Democrat Jon Ossoff against incumbent Republican David Perdue. In the November general, Perdue bested Ossoff by 49.7% to 47.9%. However, Perdue was shy of the 50% needed to clinch the seat, so the race moved to a runoff.

Meanwhile, the other race will see Democrat Raphael Warnock up against Kelly Loeffler, who obtained the Senate seat through an appointment by Georgia Republican Gov. Brian Kemp in December 2019. The November contest, which included more than a dozen candidates, saw Warnock edge Loeffler 32.9% to 25.9%. The remaining one-third of the votes went to other candidates who did not qualify to advance to runoffs.

Early polling shows a tight race: Perdue leads Ossoff by 50% to 46% in a Remington poll of 1,450 likely Georgia voters between November 8 and 9. That same poll, which has a margin of error of 2.6 percentage points, puts Loeffler at 49% to Warnock’s 48%. Meanwhile, an InsiderAdvantage/FOX 5 poll of 800 likely Georgia voters conducted on November 16 finds Perdue and Ossoff tied at 49%, and Warnock besting Loeffler by 49% to 48%. Both races are within InsiderAdvantage’s margin of error of 3.5 percentage.

PredictIt gives Republicans 3-to-1 odds of claiming at least one of the Georgia Senate seat—and thus the Senate chamber. But party operatives on both sides see tight contests. Indeed, the November general election in Georgia was a nail-biter: Biden narrowly beat Trump in the Peach State by 49.5% to 49.3%, or just 12,670 votes.