CFOs weigh policy scenarios after the midterm election

National debt reached 100% of GDP for the first time since 1946

Chief financial officers generally steer clear of politics, but the midterm vote put election outcomes inside a familiar corporate planning process. For many companies, Election Day fell in the middle of annual-planning season, when CFOs and their staffs estimated next year’s revenue using assumptions about the economy, inflation, taxes and other economic variables. Scenario planning turned the vote into one of several inputs for those budgets.

The previous night’s results came in what The Wall Street Journal called “a rebuke of President Trump’s policies.” Corporate advisers said the results could add the prospect of legislative gridlock to companies’ outlooks for the year ahead. The prospect was potentially significant for companies that rely on government spending.

Congressional battles over spending priorities have led to government shutdowns in recent years. One shutdown lasted 43 days last year over expiring healthcare subsidies.

Rohit Kumar, co-leader of the national tax office at PricewaterhouseCoopers, said handling the expected need to raise the U.S. debt limit will be a key policy battle in the year ahead. The debt ceiling has served as a tool for policymakers to negotiate other priorities, although it was unclear which priorities would come into play. “What’s the price?” Kumar said.

The national debt topped $40 trillion in the summer. For the fiscal year ended Sept. 30, it reached 100% of gross domestic product for the first time since 1946. The larger debt load makes the country more sensitive to rising interest rates.

Concerns about rising deficits and the U.S. debt were largely absent from the campaign trail this year. “My sense is business leaders feel more a sense of urgency than do lawmakers,” Kumar said.

The newsletter’s economic calendar listed the ADP National Employment Report for October and the Institute for Supply Management’s Services Purchasing Managers’ Index for October.

Separate corporate-finance developments included CVS Health’s decision to split in two, reversing a signature deal that defined an era of large, integrated health-care companies. One company would house insurer Aetna and pharmacy-benefit manager Caremark, while the other would contain 9,000 retail pharmacies. The breakup is planned for early 2028, a decade after the nearly $70 billion merger that brought Aetna and CVS together.

Apple paid the U.S. government an amount that accounted for nearly 5% of corporate tax collections in its latest fiscal year.

Sysco, the Houston-based food-distribution company, named Brandon Sewell permanent CFO, removing the interim title he had held since March. Sewell previously was finance chief of Sysco’s U.S. food-service division. He succeeds Kenny Cheung, who left to become CFO of drug wholesaler McKesson.

Pfizer, the New York-based pharmaceutical company, named Cecile Guegan permanent CFO after she had served as interim finance chief since August. Guegan previously was senior vice president of finance in Pfizer’s global biopharmaceutical business. She succeeds David Denton, who left to take the same CFO role at Nike.