Newsmakers : Businesses Cheer Democrats’ Victory

United States

In the weeks leading up to the US midterm elections this year, business interests were bemoaning their fate should the Democrats take control of Congress. Now that the thinkable has happened, the stock market is setting new highs, and US businesses are cheering the fact that despite the substantial gains made by the Democrats, neither party has a big enough majority to pass sweeping changes that could threaten their interests. Businessmen, for the most part, feel safer when Congress is in gridlock (or not in session).

Still, there could be some very big losers in the business world now that the Democrats have won slight mathematical control of Congress. Pharmaceutical manufacturers, oil and gas companies and defense contractors seem to have the most to worry about. The Democrats want to lower the price of prescription drugs, restrict new offshore drilling for hydrocarbons and end the unpopular war in Iraq. Ultimately, they would like to reduce military spending.

From a macroeconomic point of view, the Democratic victory could bring progress on narrowing the budget deficit, not only through curbs on spending but also as a result of an emboldened attempt to block renewal of President Bush tax cuts. The Democrats also promise to do something about growing income inequality and likely will move quickly to raise the minimum wage. This is not good news for McDonald, but it is great news for the people on a tight budget who work in its fast-food restaurants.

Democratic control of Congress will mean a less business-friendly atmosphere and a greater propensity for protectionism. Russia could face difficulty joining the World Trade Organization due to the proclivity of Democrats to tie normal trade relations to human rights policies. The overall damage to free trade could be limited, however, by the president power to veto proposed new laws. Through the balance of powers in the US Constitution, the founding fathers made it difficult for major change to happen overnight.

Gordon Platt