Incumbents historically have had the best odds of a win. Since 1900 only five incumbents have lost a second-term bid.
Economic downturns were afflicting the nation in all five of these political upsets, including that of Gerald Ford, who was never elected but became president after Richard Nixon’s resignation.
During this election cycle, America is dealing with the sudden and grand-scale trauma to its economy from a 100-year event sweeping the country — the coronavirus pandemic.
According to the National Bureau of Economic Research, monthly economic activity in the United States peaked in February, marking the end of the longest economic expansion since the end of World War II.
Worse news came in late July when the U.S. Bureau of Economic Analysis reported an advance estimate that real gross GDP nosedived at an annual rate of 32.9% in the second quarter of 2020. That ranks as the worst economic contraction on record, an unprecedented event for boards of directors to confront.
In past U.S. elections, the incumbent was less of an unknown quantity to a corporate board of directors than the challenger because directors already had four years of experience with his administration.
The Trump administration took many actions that benefited corporate America. Tax reform in 2017 gave business the biggest cut in the top corporate tax rate in U.S. history, from 35% to 21%. Trump reversed or rolled back dozens of environmental rules and regulations. Enforcement actions by government regulators such as the U.S. Securities and Exchange declined strikingly, according to Jacob S. Hacker and Paul Pierson in Let them Eat Tweets: How the Right Rules in an Age of Extreme. Compared with the annual average under the Obama administration, monetary penalties on the 100 largest public companies plummeted by 90%, according to the book. Audits by the Internal Revenue Service of America’s largest companies also plunged.
“Honestly, Trump hasn’t really laid out a second-term agenda,” says Hacker, who is director of the Institution for Social and Policy Studies and a professor of political science at Yale University. “But I think corporate backers of the president expect more gutting of health, safety and environmental regulations, deep-sixing of any attempts to undo the tax cuts, and at least one more pro-business justice on the Supreme Court.”
That seemed to be backed up by Trump at his June Tulsa rally when he promised to “appoint more judges to interpret the Constitution as written.”
He said his second term would include the enactment of “new trade deals that result in more products proudly stamped with that beautiful phrase, ‘made in the USA.’” Other plans include making the country “the world’s premier pharmacy, drugstore and medical manufacturer” and the launch of “a new age of American ambition in space” with the United States the first to land on Mars.
In mid-July, Thomas Donohue, CEO of the powerful U.S. Chamber of Commerce, applauded the administration and Congress for steps they took in the spring to mitigate the economic effects of the coronavirus in a letter to Trump, Speaker of the House Nancy Pelosi and Senate Majority Leader Mitch McConnell.
The Chamber urged policymakers to enact five “targeted and temporary measures,” including liability protection for business against lawsuits related to COVID-19. Republicans quickly proposed legislation to protect employers from the “risk of a tidal wave of lawsuits accusing them of exposing employees, customers, students and worshipers to coronavirus.”
Yet big business, through its trade associations, also made it clear where it stands with Trump policies it doesn’t like. In July, the Chamber, the National Association of Manufacturers, the National Retail Federation, TechNet and the International Training and Exchange took the exceptional step of filing a lawsuit against the administration in an attempt to reverse the suspension of temporary work visas for foreign workers through the end of the year, including H-1B and H-2B visas.
“Our lawsuit seeks to overturn these sweeping and unlawful immigration restrictions that are an unequivocal ‘not welcome’ sign to the engineers, executives, IT experts, doctors, nurses and other critical workers who help drive the American economy. Left in place, these restrictions will push investment abroad, inhibit economic growth, and reduce job creation,” Donohue said in a statement.
In addition, Trump’s order that companies delay the collection of payroll taxes for employees making less than about $104,000 annually until 2021 has resulted in businesses being put in a bind. If companies pass the money on to employees in terms of bigger paychecks, they could “put themselves or their employees at risk of a big end-of-year bill from the IRS,” according to Accounting Today. And companies had just weeks to determine their legal responsibility and reprogram payroll systems, the article says.
Such actions impacting corporate operations by the Trump administration illustrate the shifting ground in the boardroom as directors try to mitigate risk and seize opportunities post-election.
“The interesting thing here is that Trump himself has been so hard to predict, and so willing to defy governing norms, that in some ways, the effects of an incumbent win may be much harder to predict than the effects of a Biden win,” says Ann Lipton, an associate professor of business law and entrepreneurship at Tulane University Law School.