Democratic Scrutiny of Military Spending, Pharmaceutical Prices Is Expected

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

WASHINGTON — By handing Democrats control of the House, voters likely set in motion legislative efforts to lower the price of pharmaceuticals and rein in military spending.

But with the two parties stalemated in the Senate, where it usually takes 60 votes to pass major legislation, companies such as Merck & Co. and Lockheed Martin Corp. may find themselves beset more by unwelcome rhetoric in Congress than any hurtful changes in law.

To be sure, few major changes in corporate America are expected to result from Democrat-led initiatives over the next two years — with the exception, perhaps, of a proposed increase in the minimum wage that may get substantial Republican support.

The long-term outlook for companies in the biotechnology and homeland security businesses may benefit, analysts said, from anticipated Democratic efforts to promote stem-cell research and inspect more cargo containers at ports. But the heightened scrutiny of other sectors, ranging from drugs to defense to energy, could cast a shadow that darkens their prospects on Wall Street.

“The drug industry is on the top of the list of industries that would be uncomfortable if Democrats are successful in the elections,” an analyst at Washington Analysis, Ira Loss, said.

That’s because Rep. Nancy Pelosi, a Democrat of California, who is slated to become speaker of the House, has promised legislation that would allow the government to negotiate directly with drug companies to purchase medicines for Medicare. The drug industry equates the concept to price controls.

Shares of Pfizer Inc. fell 55 cents to $26.55 on the New York Stock Exchange, where Eli Lilly shares declined by about 41 cents to $56.57. Shares of Merck fell $1.55 to $44.35 partly because of Merck’s disclosure late Tuesday that liabilities from tax disputes could total $5.58 billion.

Ms. Pelosi has pledged that Democrats also would move to raise the minimum wage — a policy change that could affect fast-food restaurants such as McDonald’s Corp., as well as other retailers.

Ballot measures that mandate increases in existing state minimum wage laws passed in Arizona, Missouri, and Montana, among other states. Alaska voters, meanwhile, helped protect the pockets of Big Oil by shooting down a proposal to increase drillers’ taxes by $1 billion a year.

Generally speaking, Democrats have said they will differ from Republicans by being tougher watchdogs of corporate wrongdoing and government spending and bigger defenders of consumers and labor unions.

Still, “there are not going to be wholesale changes in economic policy” because neither party has an overwhelming majority in either the House or Senate, and this may explain the stock market’s recent strength, according to Wachovia Securities economist Mark Vitner.

Senior vice president of policy at the National Association of Manufacturers, Jay Timmons, said he does not expect the partisanship that defined recent campaigns to last very long.

Sure, the Democrats will want to distinguish themselves from the Republicans early on — by shifting the emphasis in energy policy from, say, increasing the supply of oil to reducing the demand for it. But Mr. Timmons said pragmatism — and an eye toward the 2008 presidential election — will naturally pull both parties closer to the center.

“Nancy Pelosi is very shrewd,” Mr. Timmons said. “She’s going to want to build a majority that lasts more than two years, and the way to do that is to reach out to nontraditional allies.”

That is not to say Democrats do not have plans to shake up business as usual after a dozen years in the minority.

“The debate will shift dramatically from the first day,” the legislative director of the AFL-CIO, Bill Samuel, said.

Rep. John Dingell, a Democrat of Michigan, who will take charge of the House Energy and Commerce Committee, said he would push for stiffer enforcement of environmental violations and tougher energy efficiency standards for home appliances. But he steered clear of a strong position on raising automobile fuel efficiency — an issue strongly opposed by Detroit automakers.

Rep. Barney Frank, a Democrat of Massachusetts, who will chair the Financial Services Committee, has said building more affordable housing is at the top of his agenda, and Wall Street seems to be listening. Companies in the government-sponsored mortgage space advanced Thursday. Shares of Fannie Mae climbed $1.26 to $61.14, while Freddie Mac gained 91 cents to $70.77.

With many political analysts viewing the Democrats’ win of the House as evidence of waning support for the war in Iraq, some investors are bracing for the possibility that military spending may gradually slow.


The New York Sun

© 2025 The New York Sun Company, LLC. All rights reserved.

Use of this site constitutes acceptance of our Terms of Use and Privacy Policy. The material on this site is protected by copyright law and may not be reproduced, distributed, transmitted, cached or otherwise used.

The New York Sun

Sign in or  Create a free account

or
By continuing you agree to our Privacy Policy and Terms of Use