How Obama victory could affect areas of US economy

Upper-income Americans may face a tax increase. Auto fuel economy standards might be raised. Stocks of construction and engineering companies could benefit.
Associated Press
Nov 8, 2012

America's decision to re-elect President Barack Obama over Mitt Romney will affect all that and other elements of the U.S. economy and financial system — from the health care law to the overhaul of financial rules.

At the same time, a gridlocked Congress will limit Obama's influence. Tuesday's election kept Republicans in control of the House. Democrats still control the Senate, but without a commanding majority.

Here's how Obama's re-election could affect key sectors:

— ECONOMY:

Obama has laid out some key themes for rejuvenating the economy: Extend Bush-era tax cuts for low- and middle-income Americans. Spend more to build and repair roads, bridges and other public structures. Provide targeted tax breaks to businesses.

Most immediately, Obama needs to persuade congressional Republicans and Democrats to reach a budget agreement to prevent the economy from falling off a "fiscal cliff." Without a deal, deep spending cuts and tax increases will start to kick in next year.

The combination of those measures could send the economy back into recession and drive the unemployment rate back up to 9 percent next year, according to estimates by the Congressional Budget Office. The rate is now 7.9 percent.

Analysts warn that Congress must break its stalemate for the economy to sustain its recovery.

"There will be a lot of brinksmanship, and that will hurt the economy and likely upset the financial markets," Mark Zandi, chief economist at Moody's Analytics, said Wednesday.

Still, the urgency of the crisis could "generate the political will necessary to get the deal done," Zandi said. And that could mean "much, much stronger growth" by 2014.

Others caution that even if the fiscal cliff is averted, the economy may continue to be hampered by slow growth, stagnant pay and modest job gains.

"Obama's re-election does not change the bigger economic or fiscal picture," Paul Ashworth, an economist at Capital Economics, said in a research note. "Over the next couple of years, the U.S. economy will remain saddled with an uncomfortably high unemployment rate and will struggle to grow by more than 2 percent a year."

The president has pledged to cut projected deficits by $4 trillion over 10 years. He says he'd do so in part by raising the tax on investment gains. He would also raise income tax rates for individuals who earn more than $200,000 and married couples who earn more than $250,000. And a minimum 30 percent tax would be imposed on incomes above $1 million.

— STOCKS:

Stock prices plunged Wednesday in the aftermath of the election. Investors appeared rattled by the impending U.S. tax increases and spending cuts and Europe's deepening recession.

Over the long run, though, the stocks of construction and engineering companies might get a lift during Obama's second term. The president has said more spending on roads, bridges and public buildings will boost the economy. If Obama's victory helps Democrats gain seats in Congress, he'll have more support for such spending.

Other categories of stock might stumble. Financial companies had hoped to weaken rules imposed after the 2008 financial crisis. Obama's victory may ensure that the rules will remain intact. Companies will have to keep spending to make sure they comply with them.

Obama also wants to tax dividends at a higher rate. That could make financial stocks, which often pay high dividends, less appealing to investors.

Defense stocks might suffer because Obama wants to limit the growth of military spending. And some energy companies may fall because some investors think his administration will tighten pollution regulations that affect energy extraction and coal-burning power plants.

— AUTO INDUSTRY:

Obama will likely seek to further boost fuel economy standards. He's already raised the standards twice. This year, he required automakers to double their vehicles' average fuel economy to 54.5 miles a gallon by 2025.

Obama set an ambitious goal in 2011 to put 1 million electric vehicles on the road by 2015. Fewer than 30,000 electric cars have been sold in the United States this year. He wants to raise a $7,500 tax credit for electric cars to $10,000.

The president has asked the World Trade Organization to rule on Chinese subsidies for autos and auto parts and its import duties on U.S. autos. He's awaiting a decision.

— ENERGY:

The boom in U.S. oil and gas production during the president's first term will likely continue, thanks largely to new drilling techniques. But drilling could slow if the Environmental Protection Agency toughens rules governing a controversial technique called hydraulic fracturing.

Obama backs the idea of a federal clean-energy standard that would require the country to use more low-carbon energy sources, such as wind and solar for electricity and advanced biofuels and batteries in cars.

But Republican opposition is so strong it's doubtful Obama could muster enough support in Congress for it. There would be bipartisan opposition to any administration effort to regulate emissions of carbon dioxide and other gases that scientists say contribute to climate change.

— HEALTH CARE:

Obama's victory preserves his health care overhaul, which aims to cover millions of uninsured Americans. The law requires everyone, with certain exceptions, to have health insurance or pay a penalty. It calls for the expansion of Medicaid. And it requires online exchanges where people can shop for coverage.

Health insurers that have struggled to increase enrollment in a tough economy will gain millions of new customers through the overhaul's coverage expansions. But the industry pays for that growth. Insurers will have to cover annual fees totaling $8 billion in 2014 and topping $14 billion by 2018. Those fees will go to the government to help cover the cost of expanded health care.

Among other restrictions, the law also limits how much insurers can vary pricing based on age and health.

Drug makers and money-losing hospitals may also get a boost. Hospitals typically provide charity care to uninsured people and are reimbursed for only part of it. Now, they'll be paid through insurance for more people. And drug makers will benefit from the law because starting in 2014, millions more will gain prescription coverage.

But the industry also faces new costs. Drug makers will have to give the government rebates on drugs bought through Medicaid. And they must give discounts to the elderly that will rise over time.

"In the past, it was relatively easy to just absorb increases in health care costs and pass them through to customers via higher premiums," said Matthew Coffina, a Morningstar analyst who covers health insurers. "That equation is sort of breaking down now, which is forcing them to be more careful on the cost side, to try to contain costs in whatever way they can."

— FINANCIAL REGULATION:

The 2010 overhaul of financial rules marked a victory for Obama. Officials who are still carrying out the details of the law may now be more likely to take a tough stance.

One example is an oversight plan for derivatives — complex investments that speculators use to make bets and companies use to hedge against risk. Financial companies have fought for looser rules and exceptions for derivatives used by farmers who want to lock in prices before a harvest.

Obama's victory means financial companies, which mostly backed Romney, might lose influence in these negotiations. His re-election also figures to embolden the Consumer Financial Protection Bureau. The bureau aims to protect people from hidden fees and other unfair practices by financial companies.

Republicans want to give Congress authority over the bureau's budget. But without the presidency or a stronger majority in either chamber of Congress, they won't likely be able to slow the bureau's crackdown on banks, payday lenders and others.

— TECHNOLOGY:

Obama signed into law the America Invents Act to streamline the U.S. patent process. The idea was that inventors and entrepreneurs could turn their ideas into products more quickly and create inexpensive ways to resolve disputes.

Despite the law, major technology companies such as Apple, Google and Microsoft are locked in battles over the scope of their patents, particularly for smartphones and tablet computers. Tech companies and entrepreneurs say further patent reform is needed.

The president so far has resisted pressure to lower or temporarily waive corporate income taxes on the more than $1 trillion U.S. companies have piled up in overseas accounts from sales there. Many are tech companies that are keeping most of their cash offshore.

Some of the biggest hoards of foreign cash are held by Apple ($82.6 billion), Microsoft Corp. ($58 billion), Cisco ($42.5 billion) and Google ($29.1 billion). All favor a tax holiday so they could return the money to the United States without paying a huge bill to the government.

Obama hasn't ruled out a tax holiday. But he's indicated he'd consider it only as part of a broad tax overhaul.

 

Comments

Contango

@ John Harville:

So you're obviously OK with the NDAA and the Patriot Act?

Didn't Mr. Obama campaign on eliminating or amending them? What happened?

4shizzle

@ contango

"Didn't Mr. Obama campaign on eliminating or amending them?"
Show links, evidence, anything.

Contango

@ 4shizzle:

So your OK with Mr. Obama supporting the indefinite military detention of those deemed terrorists without trial or right to counsel?

We already know that he supports the killing of Americans that he's ruled as terrorists without trial.

http://www.aclu.org/blog/nationa...

http://www.nytimes.com/2012/07/1...

http://www.huffingtonpost.com/ea...

We are involved in the "Endless War." It helps to keep funding going to the military industrial complex by always seeking new enemies to kill.

Mr. Obama's foreign policy is little different from Mr. Bush's.

4shizzle

@ contango

So you are using the Huffington Post as evidence?

[quoting you]
Fri, 11/02/2012 - 3:52pm
"@ 4shizzle:
The Huffington Post; that's your news source?
After AOL bought 'em, they cut writers salaries and all the good ones left.
Garbage reporting."

So now you are ok with Huffington Post, Mr. Romney, oops, Contango?

Randy_Marsh

So the ACLU sues the presidents admin and you are still fine with it? God the hypocrits abound here.

4shizzle

You can say that again, there are a lot of hypocrites.

The ACLU likes to sue against: prayer,10 commandments,nativity scenes,crosses,anything that has God in it or on it.

Sounds like a Communist organization to me. (Where's Contango?)

So what, comrade? Are they your boys?

Randy_Marsh

4shizzle
Im not a comrade at all, BUT I can see that when a left organization sues the admin over things that they have overstepped. I do not care about the mention of God in our courts or wherever, I do care that the Government reserves the right to shoot its citizens on the steps of the courthouse. Anything for Obama huh? And you wonder why we think you have no brains, Fanatics are a dime a dozen, Get back in your carton.

4shizzle

.

4shizzle

Moderators have removed this comment because it contained Personal attacks (including: name calling, presumption of guilt or guilt by association, insensitivity, or picking fights).

Darwin's choice

Moderators have removed this comment because it contained Personal attacks (including: name calling, presumption of guilt or guilt by association, insensitivity, or picking fights).

Darwin's choice

Harville, again, show me anything camparing me or my posts to hitler, azzhat! So, what is your answer, register?

queenjhb

obama won re-election, he took ohio. people voted, he won. Yes, we were afraid of womens issues and rights disappearing , of no health care, of big business busting up unions, Romney outsourced to China, planned parenthood gone, middleclass reduced to overtaxed class, bordering on lowerclass. Obama is not perfect, uphill battle ahead for him. Romney was scary, creepy and dangerous for those making under $30,000 to $50,000 ayear.

Darwin's choice

How about this harville.......These are possibly the 5 best sentences you'll ever read
1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Darwin's choice

Or this, harville, tell us these are not correct......Top 10 Obamacare taxes

--------------------------------------------------------------------------------

1. Individual mandate
Every American will have to purchase health insurance and those who don’t will face an IRS-enforced tax that totals 2.5 percent of adjusted growth income in 2016.

2. Employer mandate
Companies with more than 50 employees will have to pay a tax of $3,000 per employee

3. Investment income surtax
If you make more than $200,000 ($250,000 if married)Obamacare will levy a new 3.8 percent surtax on investment income

4. Limit raised on medical tax deductions
Currently people who have high medical expenses can get a tax break on the amount over 7.5 percent of their adjusted gross income when they itemize deductions. Obamacare will raise the threshold to 10 percent

5. Tax on charitable hospitals
Obamacare levies a $50,000 excise tax on charitable hospitals that fail to meet an array of Health and Human Services regulations

6. Capping Flexible Spending Accounts
By capping the amount of money that can be used in a flexible spending account, Obamacare essentially levies a tax on families with ‘special -needs children.

7. Tax on Cadillac plans
“Cadillac” health plans will be hit with a 40 percent tax hike

8. Medical device tax
Obamacare adds a 2.3 percent excise tax on manufacturers of medical-devices

9. Medicare payroll tax
The “rich” will get hit with yet another tax hike—a Medicare payroll tax increase of 0.9 percent of income above $200,000 ($250,000 if married)

10. Over-the-counter tax
Obamacare will no longer allow money from health savings or flexible spending accounts to purchase non-prescription, over-the counter drugs

kURTje

Hey mikel prior to Obama the 1rst time, MTD in Willard hires through a temp service. Won't keep them very long either. (Use M then get rid of them, & hire more temps) Does Walmart have most of their help at full time? This has been happening alot. Have manufacturers lowered their prices too? He won fair & square. Deal with it.

The Big Dog's back

Bonkers, simply bonkers. The right wingers are off the reservation, rogue.

Darwin's choice

More of the "illustrious" democrats...big dog, you sure are proud of your "clan"....http://detroit.cbslocal.com/2012...

bored reader

http://lasvegas.cbslocal.com/201...

Exactly what I'd be doing as well.

Darwin's choice

more to come.....

wiredmama222

The elections are over and the majority of people have spoken. They said they wanted four more years of Obama and still the battle is raging on in these pages like the vote was coming up. Its OVER people.....OVER.

Obama won and the Republican party needs to pick up their game pieces and learn a real lesson here....they missed the boat. You know WHY they missed the boat? They are out of touch with what America IS, not what it has BECOME, what it IS.

American isn't what our grandfather's had, nor our dad's. They died. They left it to us. Most of us are in our 60's now and it's ours. Face facts. America has CHANGED people and we made it into something entirely different. We encouraged change with the sixties and the seventies. Then we grew up, raised families and voile, we became the very establishment we railed and screamed against during our college years.

Now our kids are the establishment and they have a different view of life then even WE had. Guess what, it isn't the same America our grandparent's had, or even good old Dad or US. It changed, it grew, it shrank, it moved on. But the GOP didn't. The Democrats did, the GOP didn't. That's why they lost on Tuesday.

The Democrats knew something early on that the Republican's didn't.....America is different and will be even more different in four more years. It will change again. If you can't change with it, you will not win.

So stop bellyaching about people who take advantage of social services (they have always been with us), and of people who don't work (they have always been with us), and of unemployment (it has always been with us) and start dealing in reality. Start thinking of ways to make things a little better for yourself and then for the next guy. Because that is the only way each of us is going to survive.

I don't need statistics, charts and a website to tell me that. I have always known it. You know how? I learned it from my grandfather and my dad....that's how they did it! They lived to be very old people. If it worked for them, then it should work for me, too. They used to say: "Either you are part of the problem or part of the solution". I want to be part of the solution.

You live longer.

Randy_Marsh

Of course youll live longer. When you have a admin that justifies droning its own citizens its always a good idea to keep quiet except when they run out of targets and they start targeting you.

4shizzle

@ marsh

http://www.nytimes.com/2011/10/0...

American citizens huh?

kURTje

Shizzle - true dat.

Kimo

re: "Does Walmart have most of their help at full time? "

Part time... on food stamp money that they spend at Walmart, how cool is that?

Corp welfare???

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