From Farms to Pharma, What the Midterms Mean for Business

WSJ
President Trump attended a campaign rally for Republican U.S. Senate candidate Matt Rosendale in Montana on Saturday.
President Trump attended a campaign rally for Republican U.S. Senate candidate Matt Rosendale in Montana on Saturday. Photo: Carlos Barria/Reuters

From taxes to trade, this year’s midterm elections will have an impact on a range of issues facing American corporations. The Republican-held Congress has been largely supportive of the Trump administration’s policies, helping the president secure a big corporate tax cut and pursue deregulation. But Democratic control of one or both chambers could blunt the White House’s agenda.

TAXES: The Trump administration wants to make permanent new income tax cuts for individuals passed last year, a move that Wall Street analysts say could bolster consumer confidence and lift prospects for retailers, auto makers, tech firms and other consumer-goods companies. But the White House will need Republicans to retain control of Congress to pass legislation locking in those cuts. If the Democrats flip one or both chambers, those lawmakers instead are likely to push for an increase in the corporate tax rate.

Democrats could also advocate for new proposals that would raise taxes for hedge funds and private-equity firms and try to reshape international tax rules for firms with profits and operations abroad. While Mr. Trump can veto new legislation, Democrats could exert influence in other ways, pressing for such measures as part of broader budget talks.

TRADE: President Trump struck a new free-trade deal last month with Canada and Mexico that aims to replace the 24-year-old North American Free Trade Agreement. The revamped rules add new restrictions for manufacturers, such as auto makers, and agricultural producers reliant on duty-free trade in the region. But the new trade deal still needs congressional approval and it isn’t likely to go up for a vote until next year.

If the Democrats flip the House, Senate or both, the deal could face new obstacles with Democratic lawmakers expected to push for provisions more favorable to labor unions, political analysts say.

Any delays in its approval will also create new uncertainty for companies looking for clarity to move forward with investment decisions. On other trade issues, the White House has broad authority to impose import tariffs and has sought to negotiate new trade pacts with China, Japan and the European Union. But Mr. Trump needs congressional backing to put those deals in place.

(DE)REGULATION: President Trump has made deregulation a priority and is pushing for it in a variety of sectors, including autos, energy and finance. Oil and gas companies, along with coal producers, have been among the biggest winners so far in the administration’s push to ease mandates for reducing greenhouse gases. Auto makers are also benefiting from an effort to curb future fuel-economy requirements in cars and trucks.

If Republicans retain control, they will likely help push for more deregulation, as well as additional measures that weaken the Dodd-Frank financial overhaul act, parts of which were already rolled back by Congress earlier this year. If Democrats win power, they are likely to use their authority on oversight committees to throw up roadblocks to such efforts. They also could open investigations into how agencies are enforcing existing laws and press cabinet officials to justify their actions in testimony, which could invite greater regulatory scrutiny, especially for industries such as energy and finance.

INFRASTRUCTURE: The White House has pushed for a broad infrastructure-spending bill along the lines of a $1.5 trillion proposal it unveiled earlier this year that could benefit a variety of sectors, including construction, telecommunications and utilities.

Republican leaders in Congress have been lukewarm about increasing government spending on infrastructure, but a Democratic win could provide Mr. Trump the support needed to move it forward.

DEFENSE: A Republican victory in the House could intensify opposition over a White House plan to trim military spending. A win for Democrats could lead defense-spending bills to be delayed by cross-party disagreements over nonmilitary discretionary spending.

Also, Democratic control of the House could bolster efforts by some lawmakers to slow or freeze arms sales to Saudi Arabia because of concerns about the war in Yemen and fallout from the death of journalist Jamal Khashoggi. However, the White House can veto any such moves and contractors have in recent weeks played down their exposure to the kingdom.

AGRICULTURE: A swing in control could slow progress of a pending farm bill covering everything from crop insurance to food-stamp funding. Farm sector lobbyists see a chance for lawmakers to get a version to Mr. Trump to sign later this year before the newly elected Congress is seated.

If not, and Democrats win more seats, they could call for changes in controversial measures like proposed tighter work requirements for food-stamp recipients.

BIG PHARMA/HEALTH CARE: Drug prices are likely to remain an issue for lawmakers no matter the outcome. The administration is expected to keep pursuing measures to curb prices after the elections, and that effort may be limited if Republicans retain control of both houses.

Should the Democrats gain power, they may push for formal government monitoring of drug prices and to allow Medicare to negotiate directly with drugmakers. Likewise, if Democrats win the House or Senate, they are likely to press their advantage in support of the Affordable Care Act. Should Republicans hold on to power, they may try again to repeal the act, creating more uncertainty for health insurers.

Write to Chester Dawson at chester.dawson@wsj.com

Appeared in the November 5, 2018, print edition as ‘What the Midterms Mean for Business.’

https://www.wsj.com/articles/from-farms-to-pharma-what-the-midterms-mean-for-business-1541354400?mod=pls_whats_news_us_business_f

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