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Tech Industry Braces For Washington Assault; Stimulus Talks Still Alive

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Insights and Market Perspectives

Tech Industry Braces For Washington Assault; Stimulus Talks Still Alive

Author: Greg Valliere

July 28, 2020

A PUBLIC FLOGGING is likely tomorrow for America’s leading tech companies — Apple, Google, Amazon, and Facebook — whose CEOs will testify remotely before House members who unabashedly say they want to break up the industry.

TECH COMPANIES HAVE LOUD CRITICS on both sides of the aisle who believe tomorrow’s hearing will produce damaging evidence. We agree that “headline risk” for the industry has increased, but a break-up is unlikely. The real risk for the tech giants is higher taxes.

THESE FOUR COMPANIES, and others in the tech industry, have made millions of shareholders very wealthy. Like all enormously successful firms, they frequently suffer from self-inflicted wounds: privacy issues, squashing small competitors, paying little or no taxes, etc. These companies are difficult to love.

BUT THEY CONTRIBUTE LAVISHLY to political campaigns, and they have very effective and well-funded lobbyists in Washington who point out — correctly — that this is perhaps the most successful and innovative industry in American history.

IT’S DIFFICULT TO ENVISION these companies would be broken up; we think a more imminent threat to the industry is an aggressive new minimum tax that could be enacted within a year if Joe Biden wins the presidency; that’s the real threat,
not an antitrust assault that could take years to produce results.

AMAZON PAID NO TAXES — the firm got a $129 million rebate — in 2018, when it
reported $11 billion in profits. That’s the industry’s Achilles’ heel; the tech
companies — as well as Wall Street — may soon face a steep minimum tax from Democrats who need money to pay for their activist agenda.
* * * * *
MORE BUDGET TALKS TODAY: Key Democrats and White House officials will resume their talks today on a budget deal. The good news is that initial negotiations didn’t break down last night, and to take an optimistic view they have only two major issues to resolve — the dollar amount of unemployment benefits and level of state and local government aid.

BUT THOSE TWO ISSUES are huge, and have divided both parties. Yet a compromise seems possible by early August — a cut in federal unemployment benefits to something like $300 weekly, falling from $600 now, on a sliding scale in the next few months — perhaps combined with a signing bonus for people who return to work.

AS FOR STATE AND LOCAL GOVERNMENTS, the GOP proposal would expand the availability of money already appropriated for other uses; that’s a start, but any final bill will have to include at least $400 billion for the reeling state and local governments, down from Nancy Pelosi’s demand for $1 trillion.

THESE TWO FIXES PROBABLY WOULD ADD $500 BILLION to the final price tag, bringing it up to about $1.5 trillion. That’s an unacceptable amount for GOP deficit hawks, which means Mitch McConnell — ironically — would have to beg at least a dozen Democrats to support the final measure. We’re still at 70-30 that there will be a deal enacted in August.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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©2023 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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