Big businesses' corporate paradise may be coming to an end
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Illustration: Aïda Amer/Axios
If Trump's presidency is about to end, an unprecedented golden era for big businesses could end with it.
Why it matters: Thanks to support from the president, Congress, the Supreme Court and the Federal Reserve reaching levels not seen in recent history — if ever — large companies have done a lot of winning.
What we're hearing: Trump's policies have "created a favorable business environment," U.S. Chamber of Commerce president Suzanne Clark tells Axios in an email.
- "We’ve seen some promising economic and fiscal policy developments over the last few years."
Between the lines: Businesses have benefited most from the people Trump put in charge.
The Fed: The success of big corporations is perhaps best evidenced by the stratospheric level of U.S. companies' stock value relative to GDP, and that's been thanks in large part to Trump's handpicked Federal Reserve chairman Jerome Powell.
- The market capitalization of U.S. publicly traded companies has grown from around 200% of U.S. GDP in 2016 to a record high 266% of GDP this year — meaning corporations are worth roughly two-and-a-half times the value of everything produced and consumed by the U.S. in a year.
- In 1995, the number was about 80% of GDP.
"Big businesses are outperforming the broader economy," Julia Coronado, president of MacroPolicy Perspectives, tells Axios.
- "One of the things that's interesting is that market capitalization didn't get knocked on its ass in the current recession. It's at an all-time high."
- "That's mainly the Fed right there."
The Supreme Court: With Trump's first Supreme Court nominee, Neil Gorsuch, in place the Chamber of Commerce went 9-1 in cases where it supported business interests in the 2017-2018 term, its most lopsided record in six years.
- With Brett Kavanaugh on the Court in the 2018-2019 and 2019-2020 terms, the Chamber's victory rate declined to around 65% but included a historically high number of cases involving big business and many more where businesses had lost in the lower court.
- "Only twice did the Court agree to review decisions favoring business interests—and in both cases the Court affirmed those pro-business rulings," notes the Constitutional Accountability Center, in reference to the 2018-2019 period.
- The Court's recent pro-business rulings included pushing employees into arbitration over job complaints, making it harder for employees to join class action lawsuits, limiting protections for whistleblowers and striking down the ban against sports gambling.
Don't forget: The 2017 Tax Cut and Jobs Act passed by a GOP-led Senate and House reduced corporate taxes from 35% to 21%, but it also eliminated the graduated corporate tax rate schedule and the corporate alternative minimum tax, disproportionately benefiting big companies which downsized their tax bills to record low levels.
- Trump also cut funding for the IRS by $239 million in 2017 — the combination led to business taxes in 2019 accounting for the lowest portion of federal revenue on record, dating back to 1929.
- Business tax revenue as a proportion of GDP dropped by the most of any industrialized country in 2018, reaching just 1.1%.
State of play: Trump's trade wars and tariffs have hurt small businesses and manufacturers but big companies managed to largely pass the costs of tariffs onto smaller suppliers.
- And since the coronavirus pandemic hit, large U.S. companies have boosted their cash holdings and many have increased their market share as smaller competitors have fallen by the wayside.
Even some of the companies specifically targeted by Trump have seen their fortunes rise.
- Amazon CEO Jeff Bezos has seen his personal fortune swell by $121 billion since Trump became president, despite a divorce.
- Chinese tech companies have seen their valuations surge on public markets and Trump's most recent target, TikTok owner ByteDance, is reportedly in fundraising talks that will value it at $180 billion, up $102 billion from its last funding round in 2018.
The bottom line: Joe Biden could potentially turn the whole place over in a first term.
- He can replace Powell in 2022 and nominate at least three more Fed governors, add more Supreme Court justices by expanding the size of the court (perhaps after the 2022 midterms) and refang the IRS and Consumer Financial Protection Bureau to boost the government's revenue collection and business regulation without changing tax law.
