How would Obama's administration effect health care and other business issues - Wall Street Journal's view
05 11 08 - 11:49
Business Braces for Cooler Climate
Some Industries Look for Silver Lining in Stimulus Package, Health and Energy ShiftsBy ELIZABETH WILLIAMSON
Rising Democratic power in Washington is likely to usher in a drive for tighter financial regulation, increased social spending and more labor-friendly policies amid a more challenging climate for business.
Business leaders and lobbyists were expressing hope that Democrats wouldn't raise taxes in the middle of an economic decline or erect significant new barriers to trade.
A broad swath of businesses is prepared for a long-anticipated revamp of the nation's health-care system. With Democrats committed to aggressive efforts to curb oil consumption and put the U.S. on track to reduce emissions of greenhouse gases, business hostility to proposals to cap emissions is giving way to efforts by industries -- ranging from power to information technology -- to profit from a green tilt in government policy.
General Electric Co., with substantial interests in a wide array of sectors, including financial services, energy technology, consumer electronics and health care, could be hurt by government efforts to exert more control over commerce. It also could be helped by more regulations.
"If you think we won't get more regulation in places other than financial services, you're nuts," GE Chief Executive Officer Jeffrey Immelt told students at Columbia Business School last month. "We'll get more regulation in health care, energy and other areas."
Mr. Immelt says the heightened regulation "could be a catalyst for positive change....It doesn't have to be a negative."
Above all, business leaders want Washington to take action to revive the economy. Big retailers, worried about a dreary Christmas season, are hoping for a new government stimulus package that will spur consumer spending.
Wal-Mart Stores Inc. executives told analysts recently that consumers used a big portion of the last round of federal rebate checks to pay down debt. With a new economic stimulus package, they're hoping consumers would be in a better position to spend the checks.
"We got a lift from the rebate checks," said Brad Shaw, senior vice president of corporate communications at Home Depot Inc., which has seen its sales pummeled by the housing downturn.
What appears to worry business interests most is the possibility that a Democratic Congress and a Democratic White House will shift the balance of power between employers and unions back in favor of unions, after two decades or more in which unions have been in retreat.
John Hammergren, the CEO of pharmaceutical and health-care information-technology provider McKesson Corp., said he is looking closely at labor legislation. McKesson's work force is partially unionized. A proposal to allow informal union votes, called "card checks," rather than traditional secret-ballot elections overseen by the National Labor Relations Board, is widely opposed by business interests. Workers, said Mr. Hammergren, "ought to have a right to privacy when they decide to join a union."
Among the potential losers from big Democratic gains in Washington are banks, private-equity funds and Big Oil.
Congress has vowed to undertake a complete restructuring of financial-services-industry regulation, potentially creating a financial "super-regulator."
Bankers want a new president to move quickly to name a Treasury secretary and other key regulators. That "will send a critical signal to the industry and to the markets. They are choices that more so than ever in recent memory will be critical," says Edward Yingling, chairman and chief executive of the American Bankers Association.
Bankers want to be sure that new rules "don't end up hitting the banking industry, the one sector capable of making loans," he said.
As the government looks for money to pay for the financial rescue and goals such as a health-care overhaul, the cash-rich oil industry could be an easy target.
Congress also is expected to push legislation to require businesses to pay for the right to emit carbon dioxide under a so-called cap-and-trade system. That is a concern to coal and oil companies, but a potential boon to many others.
Executives from German conglomerate Siemens AG, with $20 billion in U.S. revenue and 70,000 U.S. employees, said they hope to boost their power-generation, wind-power and nuclear-services businesses if the U.S. adopts carbon caps.
"We don't think it's off the table, because we are in an economy that needs job creation," said Alison Taylor, Siemens's director of government affairs, environment.
The prospect of universal health care -- or in the shorter term, an expansion of children's health care and changes in Medicare and Medicaid purchasing -- will create new winners and losers.
Democratic lawmakers have made it clear that payments to private insurers for Medicare plans are a big bull's eye in any health-care overhaul. Currently, private insurers receive more per beneficiary than the government would spend if it covered people directly.
But insurers could benefit from a health-system overhaul. Aetna Inc.'s chief executive, Ron Williams, supports requiring people to buy health insurance. Some of Aetna's rivals oppose that position, but Mr. Williams says that without such a requirement, healthy people would opt out of the collective insurance risk pool and costs would spiral.
"We're saying to policy makers, 'Tell us what you're trying to achieve, and we'll tell you from our experience what companion solutions work together,' " he says.
Reducing the number of uninsured people could help millions of additional Americans afford drugs, benefiting the pharmaceutical industry. But drug makers also face potential pressure from a Democratic Congress, which could push a plan to give the government power to negotiate the prices for drugs sold to Medicare recipients.
Billy Tauzin, president and CEO of the Pharmaceutical Research and Manufacturers of America, likes to remind politicians that the industry employs more than 500,000 people and spends nearly $60 billion a year on research and development. "There are things Congress could do to drive it out of the country," he says.
Another industry nervous about a Democratic Congress is the defense sector, where profits and sales are at or near peak levels. Future Pentagon spending is expected to come under pressure because of broad budget issues and the likely drawdown of troops in Iraq.
The industry is still fighting to raise the Pentagon's base budget to 4% of gross domestic product, from last year's 3.4%.
"What we've got to do is very efficiently and frequently go up there and make sure they understand what our case is," says Rockwell Collins Inc. CEO Clay Jones, who is the chairman of the board of governors of the Aerospace Industries Association.
The nation's technology industry is pinning its hopes on new green policies that could jump-start spending on clean technology. But some tech-industry executives are worried that Democrats could shift tax policies in ways that would damp investment.
At a recent meeting of 250 finance chiefs in Las Vegas, "it was clear that everyone is pulling back on investments," said Tom Berquist, chief financial officer of Ingres Corp., a closely held software maker based in Redwood City, Calif. He says businesses need a new investment tax credit -- which Democrats have historically avoided.
—Paul Glader, Ben Worthen, Russell Gold and Vanessa Fuhrmans contributed to this article.
Write to Elizabeth Williamson at elizabeth.williamson@wsj.com