What President Hillary Will Bring

So many unthinkables have become reality during the national nightmare that is the U.S. election campaign, that one more hardly seems to matter. But it matters mightily to many industries. Before the recent implosion of the Trump campaign it was widely assumed that the new president, whoever she might be, would likely be constrained by a Republican senate and definitely constrained by a Republican House of Representatives. No longer. So-called political risk has just risen for investors. A House takeover suddenly isn’t out of the question,” warns Greg Valliere, an analyst at Horizon Investments, LLC. The net loss of 29 GOP seats needed to flip control of the House to Democrats now seems a possibility—not a probability, but a reasonable possibility. The non-partisan Cook Political report estimates that 45 Republican-held House seats are “competitive”, compared with only eleven Democratic-held seats.

Paul Ryan, speaker of the House and holder of the highest elective office occupied by a Republican, has walked away from Trump after release of a video tape recording the Republican boasting of his obscene advances towards women who “succumbed to his improbable charms”, to borrow from Holman Jenkins, Jr., writing in The Wall Street Journal. Leading Republican politicians such as Arizona senator John McCain, Republican senate wannabe Joe Heck in Nevada and others followed Ryan to the side-lines. That has antagonized the self-proclaimed billionaire’s core supporters, some of whom threaten to vote for the Democrats’ down-ballot candidates, or stay home. Polls now suggest that President Clinton will quite possibly enjoy a senate led by New Yorker Chuck Schumer and even a House led by San Francisco’s Nancy Pelosi—Representative John Yarmuth, Democrat from Kentucky, says “Most people think the House could be in play.” Pelosi and Schumer are liberal democrats, both champing at the bit to help a Democratic president push through legislation that Obama could not get past a Republican congress, including a government-run health-care system to provide an alternative to Obamacare, staggering under the weight of its internal contradictions.

This is bad news not only for the “rich”: Clinton would raise personal taxes sufficiently to reduce the after-tax incomes of the top 0.1 percent by almost 11 percent and the top 1 percent by over 7 percent. It is also bad news for several industries. Start with Big Pharma, the makers of prescription drugs. Clinton estimates that 90 percent of seniors and about half of all Americans take prescription drugs, and that seniors spend more than $500 per year, on average, out of pocket, on such medications—much more for Americans with chronic or serious health conditions. Meanwhile, she complains that pharmaceutical companies rake in profits of $80-$90 billion per year, and spend more on marketing than on research.

Because the nanny ever-present in Clinton believes consumers are confused by direct-to-consumer advertising, Clinton would prevent drug companies from deducting those costs when computing their tax bills; set targets to increase R&D spending; require rebates if drug company profits or administrative costs account for an “excessive share of benefits actually paid out to consumers”; lower from 12 to 7 years patent protection for expensive biologic drugs used by sufferers from Crohn’s disease, multiple sclerosis, cancer, and other diseases; allow the government to negotiate some prices; and more. All of which would ravage after-tax profits of drug companies. No surprise that when recent polls showed that an all-Democratic government is a possibility, shares in Pfizer, Eli Lilly and Mallinckrodt sold off.

Tremors were not confined to Big Pharma. Wall Street also worries about an all-liberal (“progressive” is the new preferred term) government. Clinton, with the support of a Democratic House and Senate, would tighten Dodd-Frank regulations, a law Trump has pledged to repeal. She wants to prohibit banks from investing in hedge funds; extend regulations to the so-called “shadow banking system” of financial institutions not now covered; tax high-frequency trading and raise taxes on short-term capital gains; “hold executives accountable when they are responsible for their subordinates’ misconduct … and corporations accountable when they break the law.” This is red meat for Bernie Sanders’ disgruntled supporters, providing them with an incentive to vote for Clinton rather than sulk in their dormitories.

But unlike the pharmaceutical industry, Wall Street takes Clinton’s public attacks with a ton of salt. They know Clinton means it when, as WikiLeaks revealed, she says “you need both a public and private position” on issues. In public: “I believe strongly that we need to make sure that Wall Street never wrecks Main Street again. No bank is too big to fail, and no executive is too big to jail.” In private, speaking to Wall Streeters who cough up $250,000 for a short speech, Clinton complains of “a bias against people who have led successful … lives”; says it is an “oversimplification” and “politicizing what happened” to blame the 2008 financial crisis on the banking system. As the Clinton-supporting New York Times puts it, “The tone and language” of her paid speeches to business groups… “clash[es] with the fiery liberal approach” she uses in public.

Clinton’s views on corporate taxes are a bit clearer. She has no inclination to reduce the 35 percent rate at which profits are taxed. She excoriates and would levy an “exit tax” on firms that move their headquarters overseas to escape that rate, the highest in the industrialized world. She vows to close tax “loopholes”, especially those used by multinationals. She wants multinationals to bring home some of the $2.4 trillion in profits stashed away overseas, and will give them a one-time “really low rate”—5 percent is mooted—if they do so, but only if they invest part of those profits in an infrastructure bank which she could draw on for renewing an infrastructure that badly needs it, in the process stimulating the economy—or so such as Larry Summers and Paul Klugman claim.

The oil industry is another that might have difficulties with a Clinton-Schumer-Pelosi troika. In public Clinton sends shudders through the board rooms of Houston, threatening to extend her successful “war” on coal to the oil industry. “By the time we get through all my conditions, I do not think there will be many places in America where fracking will continue to take place.” Or there might be such places. In private speeches to the oil industry, she boasts, “I’ve promoted fracking [in the US and] in other parts of the world.” Look for a pitched battle between the green apocalypse-now crowd and climate-change sceptics for the soul of the Democratic party. A Democratic congress will support any regulatory restrictions Clinton proposes for the fossil fuel industry, and massive subsidies for uneconomic renewables, the latter having the added advantage of rewarding donors. Most Republicans will resist both. The differences might be resolved by passage of some legislation—cap-and-trade or a carbon tax—to reduce CO² emissions, promised in the Democratic platform and around which an environmentalist/oil industry consensus is forming.

No one doubts that if Pelosi is in charge, the House will back Clinton all the way. But senate majority leader Schumer will be more cautious. In 2018, 24 Democratic senators, will be up for re-election, compared with only eight Republicans. Many will need the votes of more than hard-core progressives.

It won’t be long before Americans learn which Hillary they have elected: the private, industry-friendly, paid speaker and fund-raiser, or the fiery progressive who seeks vengeance on malefactors of great wealth. She will give her first address to a joint session of congress late in January or early in February.