Policy outlook with a Biden administration

Biden’s election could stimulate new investments across the US energy industry

During this election cycle, as the oil and gas sector copes with dampened demand for oil coupled with volatile prices, and while utilities deal with reduced demand from their industrial and commercial customers, the industry is clearly in a far more precarious spot than it was when Trump won four years ago. A Biden administration could usher in both risks and opportunities for the sector. For instance, Biden’s proposed $1.7 trillion green infrastructure initiative could promote a carbon neutral electricity sector through carbon-free energy production as well as increased investment in transportation and industrial electrification. Those initiatives could also stimulate growth in energy efficiency, mitigate growth in the oil and gas and thermal coal sectors, while potentially providing significant investment opportunities in the electricity transmission and distribution networks. About one-third (32%) of energy executives expect that, under a Biden administration, sustainability and energy transformation policies could potentially introduce risks to their businesses (compared to an 18% average across all sectors surveyed), according to a recent PwC survey. While Biden’s clean energy proposals may well present challenges to the fossil fuel industry, they may also present electric utilities with numerous opportunities. 

Energy executives also express concern over US corporate tax policy under a Biden administration term, with greater than half (55%) agreeing that such policies could potentially create risks for their companies (compared to 62% average of all industries surveyed). However, only a small minority (16%) see non-US taxation as potentially introducing risks to their businesses during a Biden term. The sectors may also be signaling a pullback in trade and/or investment activity in China under a Biden administration, with 29% of those surveyed saying they expect a net decrease in such activities. That differs markedly from expected net decreases they expect elsewhere (18% in the UK; 16% in USMCA; and 18% in the UK).

Tax policy in focus for financial services under a Biden administration

Democrat Joe Biden ran as a moderate, projecting an aura of predictability. As the policy pendulum begins to swing back toward the center, financial services (FS) executives are considering what might change, and by how much. With a fragile economy and an active pandemic, a Biden administration will almost certainly pursue growth through aggressive spending initiatives. Biden will also likely look to the tax code; in a recent PwC survey of FS leaders, more than two thirds (69%) of those we asked were concerned about new risks from corporate taxes in a potential Biden administration. They were reacting to Biden’s proposal to increase the corporate income tax rate to 28%. Biden has also hinted at adding fees on certain liabilities of financial institutions with more than $50 billion in assets. He may also seek to raise revenue by letting some provisions of 2017’s Tax Cuts and Jobs Act (TCJA) lapse while keeping some offsetting increases in effect. 

In many ways, a Biden administration’s policy options are limited. Many financial reforms of the past four years may now be accepted as the new normal, and Biden may not want to use political capital in this area, especially with so many other priorities to address. And without a strong supporting hand in Congress, he may find it hard to maneuver.

The country still faces deep political divisions, and a conservative-leaning Supreme Court may keep more dramatic moves in check. While Biden will choose Cabinet members to his liking, leadership posts at agencies from the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) to the Consumer Financial Protection Bureau (CFPB) and the US Federal Reserve will likely be held by Trump appointees through 2022.

A Biden administration will likely feel very different, with more immigration- and trade-friendly policies, reinforced by a less isolationist foreign policy. Similarly, we expect more rules focused on consumer protection, with a greater focus on diversity and climate change measures. But FS observers may find that, at least at first, the Biden administration represents stability.

Health industry leaders can expect more insured Americans under a Biden administration

Democrat Joe Biden has proposed a return to the Obama administration’s approach to healthcare, including building on the Affordable Care Act (ACA). Broadly, healthcare executives can expect an administration that sees a more active role for the federal government in ensuring access to care for Americans. A Biden administration is likely to seek patches to gaps in coverage (including the creation of a Medicare-like public option), greater scrutiny of industry mergers and acquisitions and a more active role for the federal government in addressing the pandemic. Executives also can expect a Biden administration to push for remedies in the event the ACA is struck down by the US Supreme Court in the spring, although it likely would need congressional support for significant measures. 

All healthcare organizations should prepare for the possibility that more Americans could gain insurance under Biden, and that many could, through richer federal subsidies, be able to afford more coverage. This could mean more subsidized customers for payers selling plans on the ACA exchanges and new Medicaid beneficiaries for managed care organizations. This also could mean fewer uninsured and underinsured patients for providers and additional covered customers for pharmaceutical and life sciences companies. 

Lawmakers in both parties have called for an end to so-called “surprise medical billing” and for an increase in transparency in the costs of care, especially drugs and medical services and procedures. Such measures would affect providers, payers and the pharmaceutical industry. The health system will continue its transformation into a more consumer-centric, digital, virtual, value-based and portable model that is open to more new entrants. 

Companies should adapt to the profound changes underway. This includes:

• Preparing for revitalized ACA exchanges and the likelihood that more Americans will be able to afford richer coverage. 
• Modernizing the supply chain with advanced analytics and cybersecurity capabilities to deliver on the promise of the right treatment at the right time in the right place.
• Planning strategically for an interoperable future. This will open new opportunities, but companies should think through evolving issues of consent and data privacy. 

Source: PwC’s in-depth review of Biden’s plans for US healthcare

Tax and trade policy in 2021 top of mind for industrial products leaders

As US manufacturers continue to look for paths toward an economic recovery, future growth and job creation, tax and trade policy under a Biden administration will be top of mind. Most manufacturing executives expect that corporate tax rates will likely increase in order to help offset the government’s COVID-19 relief expenditures regardless of which party controls Congress, according to a PwC Pulse survey in the weeks before the US election. They’re also concerned about taxes outside the US, with 68% of manufacturing leaders agreeing that growing international tax policy uncertainty in multiple jurisdictions is a greater risk to business than potential US tax policy changes. 

Trade policy, however, seems to stir less consternation among leaders in the sector. Just one in four respondents (26%) believe that new trade agreements under a Biden administration could potentially introduce new risks to their businesses, and a similar percentage (23%) agree that US-China relations would do so. US manufacturers may well continue reconsidering global footprints and trade strategies under a Biden administration, specifically rethinking entrenched single-sourcing in China. Biden’s plans to incentivize manufacturers to create US jobs and his proposed $2 trillion green infrastructure initiative could also benefit US manufacturers and contribute to a rebalancing of global supply and sourcing. A recent PwC survey found, for instance, less than one-third (30%) of industrial products respondents agreed that their investment and trade would experience a net increase in China under a Biden administration. Meanwhile, expectations for net increases are somewhat higher elsewhere: USMCA region (32%), EU (40%) and UK (39%). On the M&A front, nearly two-thirds of US manufacturers expect regulatory scrutiny surrounding deals to increase under a Biden administration, but most (69%) still plan to pursue an acquisition over the next year.

Under a Biden administration, US manufacturers will likely:

• Look for further cost-cutting and growth strategies to offset higher corporate tax rates

• Rethink global supply chain footprints to cut costs and add resiliency

• Position themselves to contribute to green infrastructure build-outs

• Pursue growth through M&A, despite possibly greater regulatory scrutiny

TMT companies anticipate more rigorous data and deals scrutiny under a Biden administration

Amid mounting scrutiny from consumers and policymakers, Democrat Joe Biden has called for more rigorous data standards, similar to the European Union’s General Data Protection Regulation (GDPR), which tech, media and telecommunications (TMT) companies are already anticipating. 

Biden has also indicated interest in reforming Section 230 of The Communications Decency Act to shift more responsibility to digital platforms for content moderation. His attorney general pick will signal the policy direction on antitrust, following the House Antitrust Subcommittee report that has laid out Democrats’ vision of a revamped antitrust policy. 

TMT leaders told us they anticipate an increase in the corporate rate regardless of the election outcome to offset the pandemic response. However, the new administration has indicated it will also invest in rural broadband infrastructure and provide incentives for tech innovation and re-shoring of  supply chains, while penalizing companies that move operations overseas. 

Biden has promised to expand the high-skilled visa program, a move TMT companies hail as vital to the workforce. Workers displaced by automation can expect support from a Biden administration for retraining via community colleges, which will be important to TMT leaders who plan to automate more business processes in the year ahead. A Biden White House is also expected to support measures to increase diversity and inclusion in the workplace while advocating for more protections for gig workers. 

While renewing economic and tech ties with China, Biden will likely also pursue a policy that seeks collaboration with allies to combat digital security issues and intellectual property rights, a move that draws deep support from TMT leaders. They are more likely to increase trade with China under a Biden presidency rather than decrease. 

What to expect:

• Increased scrutiny of data and privacy and interest in addressing concerns about misinformation.

• Incentives for reshoring supply chains. 

• Easing immigration for high-skilled workers.