American companies have had plenty of time to consider what a Joe Biden presidency will mean for them. Here’s a closer look at what will shape the agenda for various industries.
Wall Street reprieve
The money business dodged the blue wave, but a purple ripple could change that. Going into the election, the worst-case scenario for banks like JPMorgan, Goldman Sachs and Citigroup was a Democratic sweep of both arms of government. That would have given a clear platform for ideas like the breakup of large lenders or proposals to curb stock buybacks and impose taxes on financial transactions.
Those are now vanishingly unlikely. Nor is there much to worry about from more onerous regulation — especially because Republicans did little to unravel the post-crisis protections in the first place. And while President-elect Joe Biden would get to put forward his own people to run financial regulators, those will likely have to pass muster with moderates, even if Democrats manage to get control of the Senate. Financial industry executives may even be on the shortlist, and the revolving door will still revolve.
The other touchy subject is taxes. Biden’s proposed rise in the corporate income tax rate from 21 percent to 28 percent would affect financial institutions as it would most companies. But his talk of raising personal rates for top earners and capital gains would hit finance, with its heavy concentration of wealth, hard. That, too, now faces heavy dilution. Every Senate vote counts, and many rely on Wall Street employees for votes and contributions.
A stale joke in President Donald Trump’s Washington is that every week is infrastructure week, yet no major plans are ever announced. Biden has promised a $2 trillion program centered on clean energy, the creation of well-paid jobs and equity in where and how investments are made.
Trump has pruned the forest of red tape that can strangle private-sector infrastructure projects, raising hopes at companies that invest in such things, like Brookfield Asset Management and Blackstone. Biden’s manifesto makes it sound as though Democrats might let some of it regrow. That may be appropriate, for example in pursuit of a carbon pollution-free electricity generation sector by 2035. And tax breaks and other incentives could encourage investment. There’s a danger, however, that the burden could fall heavily on the budget.
An analysis by the Wharton School at the University of Pennsylvania says that extra federal spending on infrastructure may allow states and municipalities to invest less — but that such projects boost productivity and therefore wages and gross domestic product. Trump has left much on the to-do list for Biden. And to mobilize vast reserves of cash waiting for the opportunity, states and localities may need to get friendlier with the private sector. Done right, infrastructure investment does come with payback.
Back on the bus
Public transit may have had a rough year as Americans avoided crowded buses and trains — but it was a big winner on election night. Voters across the country approved ballot measures to fund better transportation. In Austin, Texas, around 60 percent of voters supported a property tax hike that would, among other things, fund more light rail and bus routes. Many other areas followed suit, like Fairfax County, Virginia, which approved borrowing money to pay for transit improvements, and Sonoma County, California, which voted to maintain a sales tax to make updates like expanding bus services. Biden is also an evangelist for Amtrak trains, which he took almost daily between Delaware and Washington for 36 years.
Is a boost for public transportation bad for the private kind? Not necessarily. Leading car companies, like $31 billion Ford Motor and $53 billion General Motors, would have continued shifting toward electric vehicles no matter who was elected president. A Biden administration could mean tougher emissions standards but less concern about divergence between regulations in the large liberal state of California and in the rest of the country. And manufacturers should have fewer concerns that material costs could increase because of tariffs or unpredictable trade policies that disrupt supply chains. The modernization of transit may now shift into a higher gear.
Energy goes greener
Biden has called for a “transition” from oil and other fossil fuels — but his plan doesn’t call for a production ban. Instead, it pledges to make polluters bear the cost of carbon emissions and proposes large investments in green technologies.
The actions merely echo where the market is going anyway. Cost declines in green energy production have been relentless and are driven more by technology than policy. Solar panels, batteries and wind turbines steadily become more efficient and cheaper, allowing them to outcompete fossil fuels in power production today and in transit tomorrow. Trump promised to end “the war on coal” and rolled back environmental regulations to encourage production and use. Yet U.S. coal production this year is expected to be about 30 percent lower than when he entered office, as utilities shut uneconomical electricity plants.
Even without Senate backing, Biden can wield influence. Where Trump pulled America out of the Paris Climate Agreement, Biden could put it back in. The way government agencies interpret pre-existing rules is critical and comes from the top. Companies already moving away from high-polluting fuels are already on the right political track. For holdouts like ExxonMobil, the writing is on the wall.
Eat, drink, be merry
Consumer goods companies will have their eyes on one big — or maybe small — prize: stimulus. The Covid-19 relief package that passed in the spring included $1,200 checks and extra unemployment benefits. The results were clear. In April, 64 percent of adults said they could find $400 in cash to meet emergencies, but that rose to 70 percent in July, according to the Federal Reserve. Companies from Clorox to Kraft Heinz reported strong sales — and consumers’ trading up to higher-margin items.
The big question is how much support is on the way. Democrats and Republicans have been far apart over how much stimulus is needed, with numbers from $500 billion to over $2 trillion. With wafer-thin Senate control, or none at all, Democrats might have to rein in expectations. The outgoing president’s views matter, too, because he remains in office until January. But all sides will recognize that the cost of doing nothing is high. After the $600 weekly boost in unemployment payments ended in July, consumer spending slowed.
The legal cannabis industry laid down new roots this year. Voters in New Jersey, Arizona, South Dakota and Montana approved possession of marijuana for recreational use. Yet without a clear Democratic lead in the Senate, the prospects that a federal law would give weed the green light are slim. In short, this should be good for the product, if not so good for the companies that make it.
Bringing New Jersey into the fold of states that let adults buy and consume cannabis is a big step. It increases the pressure on neighboring states like New York to do likewise or see potential tax dollars leak away. Illinois, for example, estimates that one-quarter of cannabis sales happen out of state.
But without legislation permitting weed companies to use nationally chartered banks — or deduct their expenses from taxable income — the industry will struggle to create attractive investments that big institutions want to own. Expect no big changes in the short term. Further out, the smoke signals are clear.