Corporate America prepares for life in purple

Acreage Holdings

07/11/2020 17:02

(The authors are Reuters Breakingviews columnists.  The
opinions expressed are their own.)
    By Breakingviews columnists
    NEW YORK/SAN FRANCISCO, Nov 7 (Reuters Breakingviews) -
A merican companies have had plenty of time to consider what a
Joe Biden presidency will mean for them – thanks in part to an
abundance of polls predicting a landslide that didn’t quite
happen. But the drawn-out election results, and the ongoing
uncertainty over which party will prevail in the Senate, is an
amuse-bouche for the gridlock and for what lies ahead.
Breakingviews takes a closer look at what will shape the agenda
for various industries.

    WALL STREET REPRIEVE
    The money business has dodged the blue wave, but a purple
ripple could still dampen the ankles of the masters of the
universe. Going into the election, the worst-case scenario for
banks like JPMorgan  JPM.N , Goldman Sachs  GS.N  or Citigroup
 C.N  was a Democratic sweep of both arms of government. That
would have given a clear platform for ideas like the breakup of
large lenders put forward by Senator Bernie Sanders, the
elevation of Elizabeth Warren as secretary of the Treasury 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 since
Republicans did little to unravel the post-crisis protections in
the first place. And while a President 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 tax. Biden’s proposed rise in
the corporate income tax rate to 28% from 21% 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
Democrats like Charles Schumer of New York rely on Wall Street
employees for votes and contributions. Mass decampment to
low-tax Florida can wait, for a couple of years at least. (By
John Foley)

    HAPPY VALLEY
    For Big Tech, what comes next is more a question of people
than policy. Alphabet’s  GOOGL.O  Google unit, Amazon.com
 AMZN.O , Apple  AAPL.O  and Facebook  FB.O  are all under
antitrust investigation by the Justice Department or the Federal
Trade Commission. Prosecutors have already filed a lawsuit
against search giant Google. The big variable is who a Biden
administration chooses to lead them – and what level of
aggression that produces.
    The technology sector is in the unenviable position of
having enemies on both sides. The progressive push against the
industry means Mark Zuckerberg and Jack Dorsey, of Facebook and
Twitter  TWTR.N  respectively, can forget the kid-glove
treatment they received last time a Democrat occupied the White
House. Facebook could face even more scrutiny given the clashes
the Biden campaign had with the social network over election
content. And Republicans are unlikely to forget the platforms’
enthusiastic policing of Donald Trump’s false claims of winning
the election while the count was still ongoing  urn:newsml:reuters.com:*:nL1N2HR1JX.
    But slim Senate control – for either party – will benefit
Big Tech. It makes it harder to pass legislation on antitrust
reform to break up the firms or ban them from buying rivals. The
same goes for plans to roll back legal liability protections for
online content posted by users, which will likely get bogged
down by partisan politics because both parties disagree on what
constitutes objectionable material. The one area that could see
meaningful progress is proposals to boost privacy. That happens
to be an area where the industry welcomes joined-up regulation,
and there’s less political bickering. (By Gina Chon)

    INFRASTRUCTURE WEAK
    A stale joke in Trump’s Washington is that every week is
infrastructure week http://www.breakingviews.com/considered-view/u-s-will-miss-out-on-infrastructure-again-in-2018/?bved=NDI%3D&bvshr=OTg4NjU%3D,
 yet no major plans are ever announced. Biden has promised https://joebiden.com/clean-energy
 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 who invest in such things, like Brookfield Asset
Management  BAMa.TO  and Blackstone  BX.N . Biden’s manifesto
makes it sound like 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, though, that the burden falls heavily on D.C.’s budget
 urn:newsml:reuters.com:*:nL1N2EG1F5.
    An analysis from the Wharton School notes that extra federal
spending on infrastructure may allow states and municipalities
to invest less – but that such projects boost productivity and
therefore wages and GDP. Trump has left much on the to-do list http://www.breakingviews.com/considered-view/trump-budget-is-schizophrenic-on-infrastructure/?bved=NDI%3D&bvshr=Nzg2NDM%3D
 for Biden. And to mobilize vast reserves of cash waiting for
the opportunity, states and localities may need to get
friendlier http://www.breakingviews.com/considered-view/australia-hands-u-s-timely-infrastructure-example/?bved=NDI%3D&bvshr=Nzc0Mzc%3D
 with the private sector. Done right, infrastructure investment
does come with payback. (By Richard Beales)
    
    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% 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 Virginia’s Fairfax County, which
approved borrowing money to pay for transit improvements, and
California’s Sonoma County, which voted to maintain a sales tax
to make updates like expanding bus services. Biden is also an
evangelist for Amtrak trains https://www.huffpost.com/entry/why-america-needs-trains_b_412393,
 which he took almost daily between Delaware and Washington for
36 years.
    Is a boost for public transport bad for the private kind?
Not necessarily. Leading car companies, like $31 billion Ford
Motor  F.N  and $53 billion General Motors  GM.N , 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 the
rest of the country. And manufacturers should have fewer
concerns about material costs increasing from tariffs or
unpredictable trade policies disrupting supply chains. The
modernization of transit may now shift into a higher gear. (By
Anna Szymanski)

    ENERGY GOES GREENER
    Whether America’s government is red, blue or purple, its
energy is going to get greener. A change in administrations
won’t change that direction, but it will affect the speed. Biden
has called for a “transition” from oil and other fossil fuels –
but his plan https://joebiden.com/9-key-elements-of-joe-bidens-plan-for-a-clean-energy-revolution
 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.
    These 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 transit tomorrow. Just look at coal. Trump
promised to end “the war on coal” and rolled back environmental
regulations to encourage both production and use. Yet U.S. coal
production https://www.eia.gov/outlooks/steo/data/browser/#/?v=18&f=A&s=00085vvvv7g000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000g000000000000000000000000000004000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000&start=1997&end=2021&linechart=CLPRPUS_TON&maptype=0&ctype=linechart
 this year is expected to be about 30% lower than when he
entered office, as utilities shut uneconomic 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, from
utility NextEra Energy  NEE.N  to turbine-maker General Electric
 GE.N , are already on the right political track. And for
holdouts like Exxon Mobil  XOM.N , the writing is on the wall.
(By Robert Cyran)

    RESTART THE PRESS
    A Biden presidency will halt the war on media http://www.breakingviews.com/considered-view/free-press-needs-paywalls-more-than-editorials/?bved=NDI%3D&bvshr=MTIzODk3
 launched by his predecessor. That’s good for the likes of
CNN-owner AT&T  T.N , Comcast  CMCSA.O , ViacomCBS  VIACA.O ,
Walt Disney  DIS.N  and even Fox Corp  FOXA.O , the parent
companies of America’s top networks. A relentless four-year
assault http://www.breakingviews.com/considered-view/a-weakened-free-press-comes-at-a-price/?bved=NDI%3D&bvshr=NjI1ODk%3D
 by the White House to undermine credibility in the press –
branding journalists as “enemies of the people” – didn’t stop
news organizations from carefully and methodically reporting on
the chaotic 2020 presidential election. Even Fox News, Trump’s
favored network, invoked his ire by declaring early on that the
state of Arizona had turned Democratic, and stuck to its guns. 
    It’s not just the big organizations that will get an
additional boost from a cease-fire. The collapse of local news
should now get more attention. Since 2004, the United States has
lost 2,100 daily and weekly newspapers, according to the UNC
Hussman School of Journalism and Media. The country has paid a
steep price for that loss, with a flood of divisive
misinformation. Congress has taken note. Bipartisan bills
including one that gives news organization a safe harbor to
negotiate with tech platforms could finally pass  urn:newsml:reuters.com:*:nL2N2EY1A0.
Information carpetbaggers Twitter, Facebook and Alphabet-owned
YouTube, themselves scrambling to police a flood of fake news,
may now be called on to effectively provide local news with a
financial lifeline. (By Jennifer Saba)

    EAT, DRINK, BE MERRY    
    Consumer-goods firms will have their eye on one big – or
maybe small – prize: stimulus. The Covid-19 relief package
passed in the spring included $1,200 checks and extra
unemployment benefits. The results of that were clear. In April,
64% of adults said they could find $400 in cash to meet an
emergency, but that rose to 70% in July, according to the
Federal Reserve https://www.federalreserve.gov/publications/2020-update-economic-well-being-of-us-households-executive-summary.htm.
 Companies from Clorox  CLX.N  to Kraft Heinz  KHC.O  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 on how much
stimulus is needed, with numbers ranging 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, since he remains in office until
January. But all sides will recognize that the cost of doing
nothing is high. After the $600 weekly boost to unemployment
payments ended in July, consumer spending slowed  urn:newsml:reuters.com:*:nL1N2GC1OM.
(By Amanda Gomez)
    
    SMOKE RISES
    The legal cannabis industry laid down new roots in 2020.
Voters in New Jersey, Arizona, South Dakota and Montana approved
marijuana for recreational use. Yet without a clear Democratic
lead in the Senate, the prospects of a federal law giving 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 around one-quarter of cannabis sales happen out
of state. Companies like Curaleaf  CURA.CD , which already sells
medical ganja in the Garden State, are obvious beneficiaries.
That’s contingent, of course, on drawing up new laws and rules.
    The biggest listed cannabis stocks are still mostly wagers
on the Canadian market, since for now, transportation of weed
across U.S. state lines remains verboten. Canopy Growth
 WEED.TO ,  CGC.N , which has an option to buy U.S. rival
Acreage  ACRGau.CD , is the obvious exception. And 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 big
institutions want to own. Expect no big changes in the short
term. Further out, the smoke signals are clear. (By John Foley) 
  
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BREAKINGVIEWS-Big democratic dividend paid out in 2020 election 
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BREAKINGVIEWS-Next U.S. president inherits a dollar in decline  
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 (Editing by Rob Cox, Amanda Gomez and Karen Kwok)