Andy Fishburn 2017-01-20 03:53:11
IN WASHINGTON, D.C. , the Election of 2016 is slowly sinking in. The Washington establishment woke up on Nov. 8 fully thinking that Hillary Clinton would be elected President, and that there was a good chance that the Democrats would control the Senate. Well, when the sun rose on Nov. 9, Donald Trump was President-Elect and Republicans had maintained their Senate majority, only losing a few seats.
The best explanation for what happened has nothing to do with polling errors—and there were many—but rather with something a statistician would call autocorrelation. The theory was that Hillary Clinton couldn’t lose because Democrats had won a collection of states in the past six presidential elections that totaled to 242 electoral votes. These states included the so-called blue-wall states of Michigan, Wisconsin and Pennsylvania, where public polling showed Hillary Clinton leading throughout the fall. All she had to do was cobble together a few other states and her campaign would easily exceed the 270 electoral votes needed to claim the presidency— she could even lose a blue-wall state and still win easily.
The glaring problem with this theory is that Michigan, Wisconsin and Pennsylvania, while diff erent in many regards, are basically the same state from an electoral perspective as a state like, say, Ohio. Th us, it was quite improbable that Donald Trump was leading consistently in Ohio, but trailing consistently in Michigan, Wisconsin and Pennsylvania. All of these states have proud manufacturing heritages, and as those manufacturing jobs moved away for whatever reason, many aff ected residents believed that the free-trade espousing Washington establishment was to blame, for either letting those jobs go in the first place, or not providing a suitable replacement once those jobs left.
Enter Donald Trump, who for whatever his faults as a candidate, had a very clear message on trade: We’re going to tear up those bad agreements and put American workers first. This message clearly resonated along the blue wall. And thus, the problem with the theory was that if Donald Trump won one blue-wall state, he would probably win them all, and he did. Political professionals should have seen a logical error in polls that consistently showed Trump up in Ohio, but down in Michigan, Wisconsin and Pennsylvania, but they didn’t.
So what do the election results mean for 2017? Republicans are still trying to sort that out, and so are the Democrats. On the campaign trail, candidate Trump talked about immigration reform, healthcare reform, tax reform, trade reform, regulatory reform and infrastructure spending, among many other policy areas.
Two of those areas have the potential to dramatically affect the equipment leasing and finance industry: tax reform and regulatory reform in the financial services arena.
On tax reform, many are saying that 2017 is the best shot since 1986 at true comprehensive tax reform. As of December 2016, the President-Elect and House Republicans have both put out plans that have many similarities, most notably significantly lowering the top-line corporate tax-rate. Of potential concern, both plans also propose to curtail or eliminate the ability of businesses to deduct business interest as a normal and ordinary business expense on a net basis, meaning interest expenses would not be deductible if they exceed interest income—we hope this is not the case for most financial services companies.
ELFA is already busy analyzing how these proposals could have an impact on our industry, and it is important to remember that while interest could become less deductible or nondeductible, lease payments will likely remain deductible, at least what could be called the principal portion of the payment. This has the potential to make leasing more attractive in this new environment for many of your customers. Rest assured that ELFA will be active in the coming months, advocating for the best interests (pardon the pun) of our industry.
On the financial services regulatory reform front, Republicans have long desired either to repeal or make wholesale changes to the Dodd-Frank Act. While full repeal is unlikely, there is a real possibility that major changes could be made in 2017 and 2018 that could affect our industry.
The first would be changes to the way the Consumer Financial Protection Bureau (CFPB) is structured. Many Republicans believe that the CFPB should have a five-person board, similar to the Securities and Exchange Commission, rather than a single director. Th is is now a real possibility.
The other potential change is that there is now a real chance that Section 1071 of Dodd-Frank could be repealed. Th is provision, if ever put into eff ect, would add significant regulatory burden to commercial credit markets by greatly increasing information collection requirements, and could dramatically reduce access to credit. Prior to Nov. 8, repeal of Section 1071 was a dream; now it is a real possibility. Once again, ELFA is already active on these issues and will remain so in the coming year.
If these issues are important to you, it is critical that your voice be heard in Washington. If you would like to do that, contact the Federal Government Relations Team at ELFA. We can provide assistance at many levels, from facilitating a meeting with your elected representatives to providing background materials that will help focus your message. We stand ready to help and we stand ready for 2017.
For more information, contact Andy Fishburn, ELFA Vice President of Federal Government Relations, at afishburn@elfaonline.org.
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