Thought Leadership on Lending presented by Gibraltar Business Capital.
Election day is fast approaching, and with it the inherent concerns over which candidate will prove more advantageous to the business community and U.S. economy in general. This is a question that’s top of mind for any size business, and across all industry sectors. With a new president and administration, investors and business leaders can expect potential major changes. Without the benefit of a crystal ball, business owners and executives must rationally assess what the potential impact may be of a Hillary Clinton presidency versus a Donald Trump presidency — and carefully adjust their strategy accordingly.
Taking them at their word
On the surface, based on individual public remarks and policy plans, a clear and divergent picture is painted of each candidate’s approach to the economy.
The economic vision of Democratic nominee Hillary Clinton is multifaceted, yet somewhat modest. Her tax proposals could raise $1 trillion in new revenue over a 10-year period, supporting infrastructure, clean energy, education and other areas of need. On the corporate front, Clinton would impose a tax on companies that attempt to relocate outside U.S. borders, make inversion much harder and limit the deductibility of interest as a tool to lower tax bills.
She has also espoused a reworking of the Trans-Pacific Partnership (TPP) trade agreement, and maintaining strict regulations and capital standards for the finance sector. Clinton believes the 2010 Dodd-Frank legislation should be strengthened, and give regulators more power to influence high-risk banks to downsize or be dismantled, and calls for reinforcing antitrust laws to ensure a more level playing field for smaller companies.
On the polar opposite side of the spectrum is the Trump plan. Trump’s economic plan is expansive and broad, even bold in nature. It includes a broad-based tax cut with an eye on reducing federal revenue by over $9 trillion over a 10-year period. On the business front, Trump has proposed a reduction in the top corporate tax bracket from 35% to 15%, and the elimination of a variety of business deductions.
Internationally, his rhetoric is even more aggressive, including a desire to drop the TPP, do away with the North American Free Trade Agreement, and introduce large tariffs on key trading partners like Mexico and China. Arguably, his proposed plan for economic growth could be washed out through his strident anti-trade stance – a damaging prospect to U.S. multinational companies that depend on global connectivity.
Taken in whole from an industry perspective, one can argue that both candidates may positively and negatively impact the economy overall, the stock market, financial sector, and aerospace and defense industries. Alternatively, a Clinton victory may prove a boon for the healthcare sector and trade.
Assess what is viable
Given the unfamiliar territory that lies ahead of us, we at GBC, and likely many other companies our size, are taking a hard but measured look at each candidate’s plan. The plans reveals starkly contrasting visions of the country’s commercial future – and thus a great impact on our clients’ business outlook and subsequently our own business endeavors.
What do we take into consideration?
We are carefully comparing the candidate positions on the most relevant issues: corporate taxes, financial legislation, global trade, healthcare, immigration and the regulatory environment, among others. Each has pros and cons that we evaluate sector-by-sector to gain more insight on its impact on fiscal policy and economic strength, and what that may mean for our internal and external strategies moving forward.
We consider the viability of each candidate in reaching their individually stated goals. Historically, candidates shoot for the moon with ambitious programs, but realizing policy agenda is a reach – typically less than half is likely to be enacted.
Further, we assess the candidates’ proposals in line with their respective parties. The Democratic platform is a bit more aggressive than Clinton’s stated agenda (e.g. taxes; national minimum wage), while Trump’s plans run contra to traditional Republican policies around free trade and the role of government in the economy.
Also, it’s important to note that Congress has a significant role to play regardless of which candidate wins. All tax and spending policies have to be approved by Congress. The Republican hold of the Senate and the House of Representatives is up for grabs, but projections foreshadow the prospect of a potential status quo.
We recognize our view is only one perspective. When considering the probability of a policy measure seeing the light of day, we also thoughtfully pay attention to economic and analyst reports, key resources and data, as well as seek out the opinion of Washington insiders and those of our business partners and associates.
Perhaps not unlike many other observers, we view the 2016 U.S. election as a source of uncertainty. The key is realizing that long-term strategic decision-making hinges on clearly understanding short-term events, which may not always alter lasting trends that we, and many of our clients, depend on. We will continue to conduct careful analysis and make calculations to ensure that our projection of which direction our next president takes the country and our economy is aligned with our clients’ realities.
In the end, while our ongoing analysis – pre- and post-election doesn’t necessarily mean a significant strategic change to our business platform (regardless of who prevails), what it does demonstrate is that we must always stay focused, yet flexible. With so many external changes and societal influences constantly shifting, we as a business community must be adaptable to the changes in practices and policies that will reflect the commercial environment.
By Scott Winicour, Founder and President, Gibraltar Business Capital