Who's buying the next president?

The pharmaceutical industry may be similarly indifferent because its problems aren't regulatory right now. Lapsing patents and empty product pipelines are the dangers. The industry handily beat back the last big threat, using its lobbying muscle to turn the government's plan to negotiate drug prices for seniors from a threat into a huge new market opportunity at very attractive prices.

In contrast, I sense a worry in the numbers from the investment industry. Usually, the industry very carefully hedges its bets, giving almost equal amounts to the two parties in the last two election cycles. So far, though, in this presidential cycle the industry's preference tilts Republican. Hillary Clinton, who represents New York in the U.S. Senate, should have a hometown Wall Street edge but comes in third in investment-industry contributions, trailing Romney by more than 10%. Democrats, led by Clinton's New York colleague Sen. Charles Schumer, have been relatively vocal about the need for some kind of reform in the mortgage industry as more and more overextended homeowners feel the pain. Democrats have been at the forefront of talk -- and so far, that's all it is -- about ending the tax breaks that now go to the partners in hedge funds.

Watch the law firms

If you follow this logic another step, you'd have to conclude from campaign giving patterns so far that, of all the sectors tracked to date by the Center for Responsive Politics, lawyers and law firms believe they have the most at stake in the 2008 election. It's not surprising that lawyers go heavily Democratic in their campaign giving, since Republicans have made the trial lawyers bar one of the major villains in recent campaigns. In the 2004 campaign, with former trial lawyer Edwards as the Democratic vice-presidential candidate, Republican rhetoric about overregulation, abusive class-action suits and ruinous jury judgments for plaintiffs rose to a new level.

According to the Center for Responsive Politics, lawyers and law firms came in No. 2 that year among all contributing sectors, trailing only retirement organizations -- and 66% of those contributions went to Democratic candidate John Kerry.

So far in 2008, the slant toward Democratic candidates for the nomination is even more extreme. Through March 30, 77% of contributions by lawyers and law firms have gone to Democratic candidates Edwards, Clinton and Obama.

A message for investors

It's not hard to see why lawyers are so motivated and so Democratically inclined right now. Recent Supreme Court decisions restricting the scope of class-action lawsuits and raising the bar for deciding who has standing to bring a lawsuit have made it clear that the Bush administration has finally managed to put together a court that will deliver on its promise to discourage "frivolous" lawsuits. Reversing that trend would be hard enough with a Democrat in the White House. Another four or eight years of Republican control would harden current restrictions into stone.

One person's "frivolous" lawsuit is another's "only deterrent to corporate misconduct," but whatever side of this divide you come down on, the level of contributions from lawyers and investment companies carries a larger message to investors.

The government's role in the economy cycles between periods of more and less regulation. We are now in the midst of a period of very restrained regulation. Whether that's a good or bad thing, I leave to you. But it is clearly a very profitable period for business. Inspections for workplace safety and environmental violations are down. After a brief flirtation with the rhetoric of shareholder "justice," securities regulation again is moving toward limiting the legal recourse of investors. An understaffed Food and Drug Administration leaves food safety largely in the hands of food producers.

Regulation's a key issue

I think the swing toward the less-regulated end of the spectrum is one reason for strong corporate profits and for the historically high share of the national income going to corporate profits.

The cycle can still move further toward less regulation. Or it could start to reverse, but not overnight. If it did, the reversal would impose higher costs on many businesses and industries -- while aiding others that are already cleaner, safer and more consumer friendly than regulations require. Investors might have to judge companies on their ability to keep down costs for worker injuries, for environmental pollution and for consumer protection as well as on their ability to cut jobs and move work to lower-wage platforms, eh, excuse me, I mean countries.

The question of whether we should continue down the current path or reverse the trend is one of the key issues in the 2008 election. Even though they are on different sides in the debate, the investment industry and lawyers both understand that there is a debate going on, their contributions to the 2008 primary campaigns say.

I wonder if a truncated primary season followed by a cash-heavy general election will give regular voters a chance to weigh in on one side or the other before the hoopla is over for another four years.

Continued: Updates on previous columns

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