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09/28/2016

The Only Certain Outcome of Election 2016 is Continued Uncertainty

Businesspeople have plenty of complaints about Washington and the way it operates—lack of fiscal responsibility, inability to compromise, and governing by crisis to name a few—but at their core these concerns boil down to one simple issue: unpredictability.

The government is too erratic and uncertain in the way it does business to allow for effective planning that builds in the legislative and regulatory changes that are likely over any given time period. Long-term strategic plans end up resembling those medieval globes that abruptly come to an end with the phrase “beyond this point, here be dragons.” For many companies, the government as unpredictable terra incognita is an all too apt metaphor.

Even by the standards of the last two decades, Election 2016 has brought with it a level of uncertainty that feels unprecedented. Ten months ago, no disinterested observer would have dared predict a Trump versus Clinton contest would emerge from the primaries. Yet in November, these two will face off at the polls in a battle of the two least popular presidential candidates of the modern era (that is the American public's opinion as evidenced by dozens of polls, not the author's). The outcome of this contest remains uncertain; so does what it will mean for business in the United States.

Donald Trump has never held public office and thus has no governing record that can be examined for hints at how he will wield power. His public positions on a number of issues provide clues to what he considers important, but he has shown a willingness to veer away from his publicly stated proposals in favor of ideas that are diametrically opposed. For instance, during the primary, Trump was asked about the minimum wage and responded that wages may actually already be too high. Two months later, he seemed to backtrack and expressed openness to raising the minimum wage to $10 an hour. What we are left with is how he conducted himself in business. Unfortunately, both the administrative and legislative branches are notorious for taking candidates who claim they want to run the government like a business and turn them into “business as usual” politicians.

Hillary Clinton has a long and clear governing record from her time as both a U.S. senator and secretary of state. However, her tough primary battle with Sen. Bernie Sanders pushed her into unfamiliar territory that makes it unclear how she will actually govern. One example of this is the issue of free trade; both her husband, former president Bill Clinton, and Hillary Clinton herself have been effective advocates of expanding trade through open markets and concrete agreements. Yet, during the primary, Clinton aggressively came out against the Trans-Pacific Partnership, a free trade agreement that she had previously praised as a model for future agreements. Will she be able to reconcile these two positions when she takes office?

Despite all the uncertainty surrounding how either a Trump or Clinton presidency will unfold, there are four things that business can use to guide their preparation for working with a new president.

1. Cabinet picks will provide a clue to how the president-elect might govern. Even the most active president faces a day that is only 24 hours long and must delegate significant responsibilities to cabinet members. For instance, while President Obama expressed an interest in the issue of food waste during his time in office, it was his secretary of agriculture Tom Vilsack's passion that drove progress and led to partnerships with the food and agriculture industry that have produced real results. Will Donald Trump look to counter his outsider status by appointing experienced Washington hands who know how to work within the system, or will he stick with outsiders who he believes can shake things up? Will Hillary Clinton appoint cabinet secretaries from the progressive wing of the Democratic Party or will she go with the more moderate model of Bill Clinton's administration? The president-elect's choices will likely provide several clues for how his/her administration will move forward.

2. Congressional gridlock will almost certainly continue. Most pundits expect that the House will remain in Republican hands, while the Senate remains an even-money bet to flip control to Democrats. Even if we do see this shift in power in the Senate, it is unlikely that the majority will have anything close to the 60 votes needed to end a filibuster. Considering that each party actively despises the other party's candidate for president, it seems unlikely that a spirit of reconciliation and compromise is likely to emerge from the November results. So expect to see continued gridlock and governing by crisis in Congress.

3. The president-elect will use his/her regulatory authority to accomplish what can't be done legislatively. Late in his first term, as Congress became more and more gridlocked, President Obama became significantly more active in the use of regulations and executive orders to try and accomplish an agenda that was stalled legislatively. This trend will almost certainly carry over into the new administration; both candidates have, in fact, indicated in interviews that they are planning on using this authority to achieve as much of their agenda as possible. The legislative process can seem confusing and opaque even to the most experienced observers, but it is positively transparent when compared to the regulatory process. Business should steel itself to fight more of its public policy battles in this arena.

4. In the absence of federal action, states and localities will fill this vacuum. Again, this is a trend we have seen play out for much of the Obama administration, and there is no reason to think it will change with a Trump or Clinton administration. States have been active over the past few years on dozens of issues that Congress has debated but failed to reach agreement on—including food waste, date labeling, sales tax fairness, patent reform and data breach notification requirements. If Congress remains stalled, governors and legislators in dozens of states have indicated that they will gladly fill this void.

These four ideas provide a framework for the environment we're likely to face regardless of who wins the election, but how they interact remains very much an open question. Business needs certainty to make sound decisions about investments and job creation, and looks to government not to make that process any harder. A new presidential administration brings with it a new Congress and fresh opportunities to put aside the squabbles of the past in favor of a more effective process. We can all hope this proves to be the case; but this hope needs to be leavened with the realization that the only thing that will remain certain in 2017 is likely to be more uncertainty.