Election results dash business hopes for large-scale stimulus

Hopes for another round of large-scale federal spending to revive the US economy suffered a blow as election results suggested that a continuation of divided government appeared more likely than Democrats winning both the presidency and the Senate. 

Business leaders, economists and investors had been increasingly counting on Joe Biden winning the White House, with Democrats regaining control of the Senate as well as adding seats in the House of Representatives. 

Mr Biden had laid out a plan to rapidly inject billions of dollars of short-term stimulus into the economy and then raise taxes on the wealthy and large companies to fund further investments in public goods from education to green energy and infrastructure.

While Mr Biden may capture the presidency if he maintains his small lead in key swing states, he could be severely impaired in passing his economic agenda by Republicans who are on track to keep their Senate majority and have been very sceptical of additional spending.

“Without control of the Senate, the Democrats’ ambitious legislative agenda will be scrapped, making a large stimulus package difficult,” Beacon Policy Advisers said in a note on Wednesday, adding that other “top progressive priorities” could also become casualties. 

Before the vote, Nancy Pelosi, the House speaker, and Steven Mnuchin, the US Treasury secretary, had been negotiating a nearly $2tn package of measures to prop up the economy. But they never reached a deal and it is unclear whether those talks could be revived before the end of the year.

Mitch McConnell, the Senate majority leader who was just re-elected to a new six-year term in Kentucky, called for a limited package of measures to be approved before the end of the year.

“We need another rescue package. The Senate goes back into session next Monday. Hopefully the partisan passions that prevented us from doing another rescue package will subside with the election. And I think we need to do it, and I think we need to do it before the end of the year,” Mr McConnell said.

Some in business will welcome a Republican Senate as a check to prevent a possible Biden administration from veering too far to the left — and lobbyists and business leaders are expected to keep pressing for compromise. 

The US Chamber of Commerce, said on Monday it would put “maximum pressure on our leaders to pass an aid package as quickly as possible”.

Tom Donohue, the chamber’s chief executive, said on Wednesday that Washington’s largest corporate lobby group had “worked hard to maintain a pro-business Senate” and was “very well positioned to break through the gridlock” to make progress on issues from healthcare and economic revitalisation.

Business leaders have also expressed frustration with the failure of both the Trump and Obama administrations to pass promised infrastructure spending bills. And their hopes for bipartisan consensus on reforming policy around skilled immigration have faded as Mr Trump has restricted visas on which many companies rely. 

Jay Timmons, chief executive of the National Association of Manufacturers, signalled industry’s desire for a policy agenda that veers to neither party’s extreme. “Voters have proven that our country is deep purple — not red, not blue,” he said in a tweet on Wednesday. 

The chamber, other industry lobbies and individual chief executives have also called for patience until all votes are counted, making clear that Mr Trump would find little support from business should he attempt to resist any widely accepted conclusion that he has lost. 

Polls have shown that concern about potential unrest should election results be contested has outweighed the fears many chief executives have of higher corporate taxes under a Biden administration. Retailers and banks boarded up outlets in big cities in anticipation of possible election violence.

One of the few chief executives to comment on the election on Wednesday morning was Jamie Dimon, chairman and chief executive of JPMorgan Chase, who urged the bank’s staff to have faith in the country’s electoral and judicial systems and to muster the “patience and fortitude” to wait for final results.

“It is the responsibility of each of us to respect the democratic process, and ultimately, the outcome,” he said.

Shares in America’s biggest banks fell on Wednesday, which experts said was because bank shares tend to move inversely to the price of US government debt, not because banks faced a tougher policy or regulatory outlook. 

“There’s actually something kind of nice about this election,” said Jeff Harte, analyst at Piper Sandler. “Neither candidate is really targeting banks or the economy. Neither one seems like a horrible outcome. Either side is going to be focused on the economy.”

Glenn Schorr, analyst at Evercore ISI, added that brokerages like Morgan Stanley and Goldman Sachs, which have already enjoyed a six-month trading boom, would benefit from continued volatility.

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