The US presidential election is fast approaching – and it is unique in many new ways: with votes cast during a pandemic, largely through a contested postal system, and a president who has repeatedly refused to commit to a peaceful transition of power.
For powerful American sectors the outcome of this election is critical. Yet companies cannot directly fund political campaigns – although internal employee-led political action committees (PAC) can. Individual donations also reflect how a company leans – indeed, their aggregate donations can be heftier than those scraped together by committees*
Below, we break down four sectors whose playersare most active in political donations: banks and financial services; pharmaceuticals; oil and gas; and technology. Looking beyond the issue of corporate tax rates, which are likely to be more severe under a Biden presidency, US companies still have more to lose – or gain – depending on whether the horse they back makes it to the Oval Office.
Political healthcare
Have politics and America’s healthcare industry ever been more entangled? As we write, President Trump is attempting to push through a coronavirus vaccine ahead of 3 November – seemingly believing that this will guarantee his re-election. Such enthusiasm comes despite concerns that drugmakers need more time – not to mention apparent discord between the White House and the federal medicines agency.
While we cannot know if or when an inoculationwill be approved, one thing is clear: ‘big pharma’ remains at the forefront of the war against the pandemic. And, arguably, its tireless work to resolve the ongoing crisis has painted this much-scrutinised industry in a more positive light – making it difficult to introduce harsh legislation.
But the threat of stricter drug pricing controls still looms large – having dominated Washington’s agenda for years. And Covid-19 has drawn greater attention to the importance of affordable healthcare. Small wonder, perhaps, that health-connected individuals and PACs have made large cash injections into this year’s election.
Most of that money has gone to the Democrats. Indeed, the Republicans have received just a fifth of the health sector’s donations so far – constituting a far wider gap than the 55:44 Dem-Rep ratio seen in 2016. Candidate Joe Biden has garnered $25.3m (£19.5m) of the sector’s contributions, versus $14.5m for Donald Trump. The two most generous sub-sectors are healthcare professionals and pharmaceuticals – giving Mr Biden $9.9 and $5.9m, respectively.
True, last election cycle Hillary Clinton attracted a less impressive $12.4m in pharma contributions. But at the time, donors were girding their loins for a leader who had emphatically pledged to clamp down on drug price hikes.
Mr Biden has not shied away from that fight. Heaims to “stand up to abuse of power by prescription drug corporations”, limiting launch prices and allowing consumers to import medicine from overseas. He also seeks to expand Barack Obama’s Affordable Care Act (ACA), which President Trump has sought to reverse.
But as brokerage Jefferies notes, Mr Biden needs Democratic control of the Republican-held Senate to “have any chance of advancing a significant healthcare agenda”. And a conservative replacement for the late Supreme Court Justice Ruth Bader Ginsburg could spell the end of the ACA anyway. Thus, Mr Biden’s bigger ideas may ultimately be blunted – perhaps rendering him a safer bet in the eyes of the sector.
President Trump, meanwhile, has outlined his own health strategy and a ‘most-favoured-nation’ plan to index certain drug prices against other countries. And while the latter idea has been poorly received by pharma giants – with Pfizer’s (US:PFE) boss labelling it “radical” and the Pharmaceutical Research and Manufacturers of America (PhRMA) body calling it “an irresponsible and unworkable policy” – uncertainty prevails once more. Who knows how far the unpredictable president would actually follow through with his intentions?
Whatever happens, the health sector will continue to try to influence policy in America, in and out of election cycles. Last year alone, PhRMA spent $29.3m on lobbying activity. Time will tell whether such disbursement helps big pharma and Washington to compromise on the key issues at stake. HC
Banks/financial services
As is now standard practice in a US presidential election cycle, Wall Street has spent more than any other sector to date. It is also backing Joe Biden. As of 21 September, individuals employed in the loosely defined finance, real estate and insurance sector have committed a total of $86.7m to the Democratic candidate, according to data collated by the Center for Responsive Politics.
This support is reflected across the sector’s two largest sub-groups. Donors from the world of hedge funds and private equity have so far coughed up $34.1m for Mr Biden’s campaign, while individuals employed in securities and investment banking have put in $51.1m.
That compares with contributions to the Trump campaign of $5.8m and $10.5m, respectively, although these figures mask the $28.4m spent on support for Republican politicians including Mr Trump since 2019 by Stephen Schwarzmann, chief executive of the giant private equity group Blackstone and the largest single active Wall Street donor.
The disclosures may seem counterintuitive for a sector long associated with support for corporate tax breaks and deregulation. The view that finance tends to support any policy that is pro-market is also backed up by recent history. After Barack Obama pushed through legislation aimed at curbing the banking excesses that led to the global financial crisis, finance contributions to his re-election bid in 2012 slumped to $21.1m. Four years before, Wall Street had thrown its full weight behind the Democratic party, spending a then-record $78.3m – 21 per cent more than the Republicans.
Sector contributions to the Democrats’ electoral push are now ahead of Republicans’ for the first time since Mr Obama’s inaugural victory, although Hillary Clinton’s bid remains the single most Wall-Street-funded run to date.
The 2016 Democratic candidate, who served as New York senator from 2001 to 2009, received $117m from finance, insurance and real estate backers. By contrast, Trump – whose first term has brought corporate and high income tax cuts, as well as pushbacks on financial reform – received just $37.9m in 2016, in part because of a wide Republican nominee field. Judged purely on dollar campaign contributions, financiers’ early preference had been for Jeb Bush.
In a similar sense, Wall Street’s support for Mr Biden can partially be understood for who he is not. Bernie Sanders and Elizabeth Warren, early contenders in the race for the Democratic nomination, were both expected to take more combative stances against finance and corporate America.
Then again, although financial regulation has fallen off the election agenda, Biden does not appear the closest of allies to the industry. His fiscal proposals – including higher payroll taxes, a 28 per cent corporate tax rate and doubling levies on US companies’ income on overseas intangible assets – could knock 8 per cent from earnings for the S&P 500 Index, say analysts at UBS. Sector contributions this year may be a clearer sign of individual political preference than naked self-interest after all. AN
Oil and gas
Joe Biden will not take oil and gas donations. In any case, his Green New Deal and plan to end drilling on federal land would have made him an unlikely targetfor fossil fuel cash.
Meanwhile, President Trump has proudly cut environmental restrictions, permitting hurdles and the Obama Clean Power Plan, ensuring much affection from the oil and gas industry.
Earlier in September, Bureau of Land Management documents uncovered by Accountable.US, a centre-left advocacy group, showed the administration had also cut royalties from some projects on federal land from 12.5 per cent to 0.5 per cent in reaction to the oil price crash in March.
According to the Center for Responsive Politics, the oil and gas industry has donated $12.7m to the Trump campaign and groups supporting it, and less than $1m to the Biden campaign.
Mr Biden has positioned himself as a green alternative, jumping on board the Green New Deal launched by Congresswoman Alexandria Ocasio-Cortez and Senator Ed Markey last year. The Democratic nominee said he would sign the US up to the Paris Agreement again, bring in a net zero carbon emissions by 2050 target, and put $1.7 trillion into green infrastructure in the next decade. Fossil fuel companies will be most concerned about how Mr Biden will pay for this: raising corporation taxes and cutting fossil fuel subsidies.
The industry is also worried about the plan to ban drilling on federal land. The American Petroleum Institute (API) said it would result in 350,000 jobs disappearing by 2022, with Texas seeing the biggest impact. The API even claims coal use will go up if gas supply falls from the policy and chip away at the country’s energy independence.
The industry is not getting every single thing it wants from President Trump. In early September, he extended an Obama-era ban on drilling in waters off the coast of Florida, according to the Associated Press. Mr Biden has also said he would ban offshore drilling.
This is a high stakes game for the oil and gas industry. Extractives companies could not have hoped for a better friend in the White House and will fight hard to keep him there. AH
Technology
The tech sector has driven much of the US stock rally that President Trump has so often celebrated on his Twitter (US:TWTR) account. But internet companies such as Twitter have also found themselves at the heart of the electoral discourse, as they grapple with fake news and hate speech on their platforms – as well as national security threats from foreign disinformation campaigns. With reports that bots had meddled with the outcome of the last election, companies such as Twitter, Facebook (US:FB) and Google parent Alphabet (US:GOOGL) have been forced to take action to protect the health of American democracy.
President Trump has a volatile relationship with the Big Tech group: Twitter even blocked some of his tweets earlier in the year, on the grounds that they “glorified violence”. With Mark Zuckerberg identifying Silicon Valley as “an extremely left-leaning place”, it is perhaps little wonder that the majority in the internet industry have chosen to back the ostensibly more liberal Mr Biden – with 97 per cent of $13m-worth of donations fed to the Democrats.
But this could be to their detriment. This past summer there has been much commotion on Capitol Hill about antitrust behaviour in the industry: the chief executives of Facebook, Apple (US:AAPL), Amazon (US:AMZN) and Alphabet were all called to testify at a Congressional hearing in August. Democrats typically come down harder on antitrust issues than Republicans. Yet individuals at Amazon, the company with the second-largest market value in the group, have pumped $0.7m into Mr Biden’s campaign, seven times the amount that they have contributed to Mr Trump’s. Indeed, the Bezos-owned Washington Post has officially endorsed the ex-vice-president for the 2020 election.
And it’s not just internet companies – individualdonations from Microsoft (US:MSFT) to the Biden campaign have surpassed $0.8m. Perhaps it is not a coincidence that Mr Biden has so far refrained from joining the call to break up Big Tech firms, saying it would be premature to make a judgement without a formal investigation. It seems that the industry is betting that Mr Biden will take his cue from the legacy of Mr Obama’s more Silicon Valley-friendly approach. LA
Contested election
A contested US election was the biggest investment worry for 2020 in a poll carried out by deVere Group. It was the most pressing concern for 72 per cent of respondents, with worries of a second wave of coronavirus trailing behind at just 18 per cent.
A contested election will take a while to clarify – complicated by coronavirus restrictions and the complex processes of mass postal voting. It will “almost inevitably send the stock markets into a temporary tailspin – and this is weighing on investors’ minds”, says deVere chief executive Nigel Green.
Current polls suggest that Mr Biden maintains the lead. For many, Mr Trump has been a divisive, and certainly volatile, president. But there has rarely been – if ever – a political leader that connects the success of the market so closely with the economic health of the nation. Yet many of the biggest sectors do not seem to be backing him. Still, it is worth remembering that big campaign budgets and favourable polls do not always create a clear path to the White House. LA
*All donations are recorded by the Federal Election Commission and are publicly available on its website
