Will Clinton Follow Obama’s Legacy in Taking On Big Business?
Policy + Politics

Will Clinton Follow Obama’s Legacy in Taking On Big Business?

REUTERS/Shannon Stapleton

Whether it is former Secretary of State Hillary Clinton or Vermont Sen. Bernie Sanders, the Democratic presidential nominee will have to contend with a perception that the party has become demonstrably less friendly to the business community over the past eight years. From administrative actions to toughen environmental rules to the establishment of the Consumer Financial Protection Bureau to the implementation of the Dodd-Frank Law, the Obama administration has amassed a long list of crackdowns on various industries.

As if in an effort to reinforce that perception, the Labor Department on Wednesday unveiled the final version of new rules that place investment advisors who manage Individual Retirement Accounts under a “fiduciary standard.” That means, essentially, that a financial advisor has a legal obligation to manage a client’s account with an eye to optimizing the outcome for the client — even if that results in smaller fees for the advisor.

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While it probably comes as a surprise to many that investment advisors weren’t already required to place their clients’ best interests above their own profits, the financial services industry nevertheless fought long and hard against the changes, which will not take effect for one year. One of the industry’s many complaints was that the new rule could be read as requiring advisors employed by one firm to direct clients to invest in a fund managed by a competitor rather than the firm’s in-house product.

The administration tweaked the law to allay some of the industry’s concerns, but in dueling statements to reporters, it was clear that plenty of animus remains.

Jeff Zients, the director of the White House National Economic Council told reporters that the rule’s aim was to crack down on an industry with “a business model [that] rests on bilking hard-working Americans out of their retirement money.”

By contrast, David Hirschmann, president and CEO of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said, “We will review the rule to determine if it disadvantages small businesses, limits access and choice to investment advice, or makes saving for retirement more expensive. Unless we see fundamental changes, this rule will remain unworkable and we will consider every approach to address our concerns.”

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The investment advisory community wasn’t the only one with reason to be unhappy with the Obama administration this week. On Monday, the Treasury Department released unexpectedly strict new rules designed to prevent U.S. companies from completing “corporate inversion” deals. These are essentially mergers engineered to move a U.S.-based company’s headquarters to another country with a lower business tax rate, often by merging with a smaller firm there.

The two-part rule changes the way the Treasury measures the relative sizes of the U.S. firm and its merger partner, making it more difficult for companies to evade U.S. taxes under current law. Possibly more important is that it also cracks down on “earnings stripping,” a process by which income earned in the U.S. is transferred overseas in the form of inter-company loans in order to avoid taxes.

Leaving no doubt that the changes came straight from the top, President Obama on Tuesday said inversion deals are among the “most insidious tax loopholes out there.”

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The move angered both the business community at large and the specialized Wall Street dealmakers who facilitate these maneuvers. The most immediate victim was U.S. pharmaceutical giant Pfizer, which said Wednesday that the new rules had forced it to walk away from a pending $150 billion deal to merge with Ireland-based Allergan.

Allergan’s irate CEO blasted the move as “un-American.”

The anger stirred up by the fiduciary rule and the crackdown on inversions mirrors that of the various other business sectors that feel as though the Obama administration has been unfriendly — even harsh — toward them.

The way the presidential primaries have progressed thus far, with New York billionaire Donald Trump sucking up most of the available oxygen, the inter-party fighting has been somewhat limited. But when the general election comes around, whoever the Democrats nominate will face laundry lists of complaints from the Republican side about how a continuation of the Obama agenda will be disastrous for the U.S. economy.

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For the Bernie Sanders campaign, being perceived as tough on business is the goal. Sanders has made his campaign all about injustice and income inequality, with the underlying assumption that the U.S. economy has been “rigged” by big business to benefit the wealthy at the expense of ordinary workers.

For Clinton though, the calculus is a little trickier. As a senator from New York, she literally represented Wall Street in Congress for years. And while she has been pushed to the left by Sanders and, prior to that, Massachusetts Sen. Elizabeth Warren, on issues like income inequality and reining in big business, the successful Clinton campaigns of years past have always had the strong backing of a significant segment of the business world, especially Wall Street. (That includes both Mrs. Clinton’s Senate elections and her husband’s presidential runs.)

Ironically, that may mean that Clinton, who remains the prospective nominee despite a recent Sanders surge, might prefer to face the only lifelong businessman in the race, Donald Trump.

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Putting questions of broader electability aside, Trump would appear to be a strong messenger for the GOP if the goal is to slam the Democratic Party for beating up on big business.

Trump, though, has been just as critical of corporate inversions as Clinton and Sanders, and has taken multiple other positions that are anathema to the broader business community — opposing the Trans-Pacific Partnership (like Clinton and Sanders), suggesting that he would blackmail Ford Motor Company into keeping factories in the U.S., and most recently, proposing a massive new regulatory burden on the financial services industry in a convoluted scheme to pay for his border wall.

To the many weird facts about the 2016 election, add this one: Trump, the only lifelong businessman in the presidential race, might be the Republican candidate best able to shield the eventual Democratic nominee from the charge of being anti-business.