An old piece of conventional wisdom resurfaced in US corporate circles as Tuesday’s midterm elections approached: divided government is good for business, because a lack of total control prevents either party from doing anything too extreme.
With several tight races still left to call, leaving the shape of the House and Senate unresolved, business leaders let themselves hope that a more narrowly divided government than polls had suggested would be even better.
The latest signs of the electorate’s deep splits made it more important than ever for officials “to address our nation’s challenges by bridging divides and forging durable solutions”, said Suzanne Clarke, chief executive of the US Chamber of Commerce, the leading Washington lobby group.
Gary Shapiro, chief executive of the Consumer Technology Association, echoed that sentiment, sharing on Twitter a colleague’s verdict that Americans had shown they wanted serious policymakers, not “bomb-throwers”.
If Republicans claim a small House majority as forecast, the risk is that firebrands from the party’s Freedom Caucus could hold its leadership hostage. Business groups hope instead that congressional mathematics will push moderates in both parties to reach across the aisle.
“There’s huge opportunity for bipartisan collaboration,” said Jeffrey Sonnenfeld, a Yale School of Management professor with strong chief executive connections.
Clarke voiced optimism that the new House majority would concentrate on fighting inflation, reining in regulation and holding agencies accountable. The Chamber has accused the Biden administration of regulatory over-reach, suing several agencies this year.
One area for bipartisan action could be technology. “It’s inevitable there’s going to be some regulatory backlash against Big Tech,” said Columbia Business School professor Bruce Kogut, noting support for such efforts in both parties. And this week’s crisis at FTX, the cryptocurrency exchange, could similarly trigger bipartisan crypto legislation, Sonnenfeld added.
Frank Macchiarola, head of policy for the American Petroleum Institute, the Big Oil lobby group, expressed hope that both parties could still work together on energy, including permitting reform that would speed installation of new infrastructure, from pipelines to electricity transmission lines.
Some lobbyists privately expressed relief that moderate, “pro-business” candidates had fared better than populists, saying it should send a signal to both parties about who to field for the 2024 general election.
Executives have been alarmed to see companies being pulled into “culture war” fights over issues from abortion to education, however. Some business champions noted the wide margin of victory for Florida governor Ron DeSantis, who has clashed with Disney over gay rights and with cruise ship companies over Covid-19 vaccinations.
“He is the epitome of the new sharp divide between the interests of business and the grandstanding Maga spirit,” said Sonnenfeld, citing former president Donald Trump’s “Make America great again” slogan.
If Republicans take control of either the House or the Senate, finance industry leaders such as BlackRock’s Larry Fink could find themselves dragged into hostile hearings in front of Republican-led committees — particularly on environmental, social and governance investing.
“I can’t see a pathway where this is not discussed in a major way, specifically in the House,” said John Miller, an analyst at Cowen. Many companies would become less vocal about their environmental and social stances in response, Kogut predicted: “It’s going to be a more adversarial time to be too woke.”
A bigger concern is that Democrats’ loss of unified control of Congress will herald another showdown over the debt ceiling, the federal borrowing limit that has become a high-stakes tool of political leverage.
Failing to raise it would risk an unprecedented…
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