Business expectations

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More on topic de jour; corporate expectations. From my perspective, why should businesses be exempt from participation in democracy? Participation means: abiding by laws, being a good neighbor, blah blah blah. Corporate welfare is much more expensive to the U.S. bottom line than any so-called welfare mother could ever hope to be.

What Business Should Expect In Next Congress - WSJ.com : Democrats' election victory Tuesday ended a six-year partnership between a business-friendly White House and Congress that enacted free-trade agreements, cut taxes on corporations and investors and -- with the significant exception of the Sarbanes-Oxley corporate-reform bill -- avoided new regulations.

The party has yet to spell out its entire legislative agenda, but its leaders are talking about quickly boosting the minimum wage, seeking to curb executive pay and pushing for higher taxes on business, particularly oil companies. Many stocks, especially health-care shares, took a hit early yesterday as investors weighed the new political uncertainties, but the market went on to finish higher

another pet peeve: claiming that some topic in yesterday's news has relevance to Wall Street. Of course there are exceptions - War in the Middle East, for instance, but mostly journalists fall into cliche territory when writing: because x happened, the market did y.

Anyway, here's the WSJ analysis of the upcoming agenda of Congress:

Rep. Charles Rangel, the New York Democrat who is expected to become chairman of the tax-writing House Ways and Means Committee, cites “ending tax shelters for companies that move American jobs overseas” as one of his main objectives. He is also expected to complicate the White House's efforts to further liberalize trade by demanding strong protections for labor in any trade deals.

California Rep. Nancy Pelosi, the probable new speaker of the House, has already called for ending “tax giveaways” to oil companies, negotiating with pharmaceutical companies for better drug prices for federal health programs and rolling back tax cuts for the wealthiest Americans.

Many political observers, however, doubt the Democrats can gain traction on more than a few of these issues, especially with business groups and their political allies keen to avoid losing any ground on trade and taxes.

Raising the minimum wage is one fight the Democrats are expected to win. That would be a victory for organized labor, which has pushed for an increase for years, but a defeat for the restaurant and retail industries and small-business owners, who argue it would hurt the economy by forcing them to hire fewer workers.

Mrs. Pelosi has promised to bring legislation to the floor within the first 24 hours of the new Congress to boost the minimum wage to $7.25 an hour from the current $5.15. The idea is popular with voters: Six states overwhelmingly passed ballot initiatives Tuesday to raise the minimum wage and tie future increases to inflation. Republicans may feel hard-pressed to oppose the move.

sounds pretty terrible, huh? but wait, there's more for worried, overpaid executives:

... The Democrat takeover of the House is expected to put outsize executive pay back in the spotlight, with a push toward giving shareholders a vote to approve pay packages. Massachusetts Democrat Barney Frank, who is expected to head the House Financial Services Committee, says he will hold hearings on executive pay and plans to move forward on a bill he introduced last year.

...

Democrats are expected to support some tax sweeteners for business, such as the research and development tax credit. Mr. Rangel also said one of his priorities is to ease the burden of the so-called alternative minimum tax, which is designed to keep wealthy taxpayers from taking so many deductions and credits they escape taxes altogether. Easing the burden of the AMT, which has begun to ensnare many middle-class families, could cost the government $1 trillion over 10 years, and many policy watchers expect Democrats to rescind tax breaks for corporations and the wealthy to help offset any tax cuts or new spending.

At the same time, Democrats have vowed to force pharmaceutical companies to charge less for drugs sold to Medicare beneficiaries -- an idea strongly opposed by the drug industry. Mrs. Pelosi is expected to push a bill to allow direct price negotiations between the government and the drug industry. Though such a measure might not clear the Senate or the White House, it could give Democrats traction to advance other ways of driving down drug prices, such as widening the availability of imported drugs.

Drug prices are also likely to be a major focus for investigations, reports and hearings by the new Democratic House committee chairmen, particularly California Rep. Henry Waxman, who will head the House Government Reform Committee. A favorite drug-industry benefit -- six months of exclusive marketing of medications in return for studies on their effects in children -- is up for renewal and likely to draw scrutiny from Mr. Waxman and others. In an interview, Mr. Waxman says his priorities will include “reducing the price of prescription drugs.”

Similarly, investors who own stock in student-loan providers like Sallie Mae worry about Democratic campaign promises to significantly reduce student-loan interest rates and speculation that they'll promote the William D. Ford Federal Direct Loan Program, in which students borrow directly from the federal government, rather than banks. That direct-lending program competes with the other federal student-loan program, Federal Family Education Loan Program, in which students borrow through a middleman such as Sallie Mae. In 4 p.m. New York Stock Exchange composite trading, shares of SLM Corp. -- better known as Sallie Mae -- were down 4.8% at $47.21.

...
Another industry that could both benefit and suffer from the Democratic takeover of the House is the auto industry. Democrats are likely to push for greater use of alternative fuels, which could hurt or help Detroit depending on how legislation is structured. The industry is sharply opposed to tougher fuel economy standards supported by Democrats. But domestic auto makers are bullish on the potential for ethanol to partly replace oil as a transportation fuel and would support efforts to build the ethanol infrastructure and production capacity.

More perilous for the industry is Democratic interest in addressing climate change by limiting carbon dioxide emissions. Automobiles are among the worst offenders, and car companies could be hurt by new taxes or regulations aimed at limiting carbon emissions.

Oh my, lions, tigers and bears!!

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1 Comment

The Dems will need to really think about some of these plans. The idea that only wealthy people own stocks and other investments is woefully outdated. The middle class and younger people have increased ownership of financial assetts significantly in the last 10-20 years and changing the laws regarding the dividend and cg rates will hurt many of the people who put them bk in power. Add the changing pension situation to the mix and US citizens will need all the help they can get without being incrementally taxed.

Restricting oversize payouts to CEOS is a better use of their power...the gap between the highest and lowest comped individuals in companies has gotten way out of hand. Japan offers a far more reasonable model.

Fixing the pharma business to better help consumers also warrants focus. Currently US consumers subsidize the rest of the world via high prices which essentially pay for drug co r & d efforts. This is also essentially a subsidy of the drug company bottom lines because they are forced to operate more efficiently and simply make less profit. Why should the same drug be $25 in Canada and $125 in the US? The market is not working correctly in that regard. I believe in profit but there is also a greater responsibility to society which much be recognized.

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This page contains a single entry by swanksalot published on November 9, 2006 10:27 AM.

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