CHANGE brings both threats and opportunities, and the changes proposed by President Clinton are no exception.
For the next four years, the United States will have a more activist government. The expansions of government will not be in the entitlements that bolster consumer purchasing power. Rather, the major initiatives will extend civilian government markets. This shift will create opportunities for industrial-oriented companies, such as construction firms, high-tech manufacturing industries, and consultants.
Let us run through the key elements of the Clinton program, looking for winners and losers.
The first out of the box is infrastructure, initially roads and bridges. But the big money will go for innovative projects such as a "clean automobile" powered by batteries or hydrogen, high speed mag lev (magnetic levitation) rail networks, and a national information "highway" to link computers all over the US. The obvious winners will be companies that win those contracts such as telecommunications equipment suppliers. But there also may be lots of losers, notably the companies the government will be c ompeting against.
On health-care reform, Mr. Clinton's initial target is the pharmaceutical companies, even though medicine is often the most cost-effective part of health care. These companies will be hurt by price controls. But they may benefit from the higher volume resulting from including drugs in the standard health-insurance coverage.
Dealing with the combination of rising costs and lack of coverage will be extremely difficult. Providing universal coverage raises costs. Most large and medium-size companies already provide health insurance. The small companies are the heart of the problem. That likely means government subsidy. Excise taxes are the initial financing sources. If they don't raise enough, a value-added tax is an alternative.
Slowing down the health-care cost escalator is the real challenge. Expanding health maintenance organizations (HMOs), with a yearly fee per patient set by government, supposedly will force them to control costs. It sounds like wishful thinking.
Government regulation in general will rise rapidly. A great deal of legislation is in the hopper, such as a new clean-water bill and an expansion of the endangered species law.
New legislation will generate business for environmental firms - but it will divert capital from economic expansion and erode industrial competitiveness.
We will also be hearing about education and training initiatives, housing, welfare, and aid to states and localities. Some of these may be mandates on business, such as required employee training. Others, like raising the minimum wage, will involve regulation.
Most of the new programs will require more federal spending, such as creating community development banks. Reminiscent of the savings and loan fiasco, it won't cost much - at first.
Our tax bills will be rising. Despite the charge that the rich do not pay their fair share, the top 5 percent of households pay 43 percent of the federal income tax, while the top 25 percent pay 78 percent. In contrast, the lowest 50 percent of households pay 6 percent, and the bottom 25 percent pay less than 1 percent.
Tax legislation brings out interest groups in full force. But business groups such as the American Petroleum Institute and the American Mining Congress are not the real powerhouses. If they were, they would have killed the proposed energy tax.
The real power is in the lobbies for spending: the American Association of Retired Persons on entitlements, the Farm Bureau on agricultural subsidies, the unions on job-safety regulation, the veterans groups on veterans benefits, and the environmental groups on Environmental Protection Agency issues. No business group can match their ability to influence government policy.
Clinton seems likely to enjoy an extended economic honeymoon. But this is only the second month of the Clinton presidency and surprises are in store.