BY GINA CHON

If President Joe Biden’s stock falls in 2022, that of America’s corporate bosses is likely to rise. Midterm elections in November are likely to punish the governing Democratic Party and will probably hand rival Republicans at least one chamber of Congress. With Washington in gridlock, companies will get a reprieve from the commander-in-chief’s more aggressive ideas.

Biden handed company executives a good year in 2021. He pushed a $2 trillion stimulus package in March, which boosted consumer demand and corporate profit. The S&P 500 Index gained around 40% between Biden’s inauguration in January and early December. America’s richest 1% slightly increased its share of national wealth in 2021, according to the Federal Reserve.

In so far as companies and wealthy individuals benefited from all of this, the carrot was supposed to be followed by a stick. Take regulation, for example. Corporate mergers, which often enrich executives but result in job cuts, are meeting more opposition from a newly staffed Federal Trade Commission. Wall Street is bracing for a harsher head of supervision at the Federal Reserve than the outgoing Randal Quarles. 

The midterm elections, though, are likely to put a stop on further action. Republicans control about 60% of the country’s state legislatures. They need to flip only five seats held by Democrats in the 435-member U.S. House of Representatives to gain control in the lower chamber; they flipped 15 in 2020. Even without a majority, Republicans – plus a couple of moderate Democrats – hollowed out Biden’s plan to raise taxes on investment and jack up the levy on corporate income.

A Republican-led House would likely target Democrats rather than companies – including possibly investigating the Biden administration’s handling of the withdrawal from Afghanistan. If Democrats retain the Senate, they can summon chief executives to hearings, but those tend to cause only temporary discomfort. More substantive changes in antitrust law, like requiring big technology firms to divest of certain businesses, would probably get stuck; tax increases will be off the menu.

Even without Congress behind him, the president can throw grit into corporate wheels. Regulators he appoints, or at least those who obtain Senate approval like FTC Chair Lina Khan and Environmental Protection Agency Administrator Michael Regan, will still be in place. But companies gained from Biden’s first-year actions, and they’ll gain more from the forced inaction that follows.

First published December 2021