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How business could fare in Obama administration

LI experts say it will depend on how much money is available for government spending, and the industry -- alternative fuels could do well, nuclear energy, maybe

BY JAMES BERNSTEIN | james.bernstein@newsday.com

November 6, 2008

Wracked by the global financial meltdown, American businesses, unable to borrow because of the credit crunch and watching helplessly as their stock prices plummet, have been anxiously awaiting a change in administrations - either Barack Obama or John McCain.

On Tuesday they got the Democrat, Obama. Is this good or bad for businesses? Economists and business experts, judging by what Obama said during the campaign, said Wednesday that the answer largely depends on the industry a particular company happens to be in.

And, said Pearl Kamer, an economist for the Long Island Association, the answer also depends on how much money Obama will have available to spend for new, big programs, given the state of the economy.

But companies that could do well under Obama's administration include those in the alternative-energy industry. He has proposed spending $150 billion over 10 years to speed the development of plug-in hybrid cars and "commercial-scale" renewable energy. The nuclear energy industry, however, might not fare so well under Obama.

Big Oil is not likely to fare well either, experts said. Exxon Mobil Corp. and Chevron Corp. may face higher taxes under Obama, who supports a windfall profit tax. The big oil companies have posted record profit gains in recent quarters, which is unlikely to help their case with Obama.

Labor unions are expected to benefit from Obama and a stronger Democratic majority in Congress. Experts said unions could achieve one of their prime goals: passage of legislation to require companies to recognize unions once a majority of employees sign cards supporting them. The AFL-CIO's Web site Wednesday cheered Obama's victory.

"Barack Obama brings new hope to America's working families, and our increased majority in the Senate means we can translate that hope into reality," the Web site said.

However, the U.S. Chamber of Commerce opposes any such measure, saying it would prefer a vote on union representation.

If money is available, experts said, some of it will be used to boost the health care industry, in particular research into the use of stem cells and the creation of more generic drugs.

But defense contractors may struggle as Obama seeks a way out of the Iraq conflict and attempts to make more money available to fix this country's roads, bridges and public transit systems.

"There's going to be pressure on him to get out of Iraq and save money" on costly weapons systems, said Don Selkin, chief market strategist for National Securities Corp., investment advisers in Manhattan. The Bush administration is spending about $10 billion a month on the war in Iraq.

Hedge funds, which played a major role in the buildup to the financial crisis, will face regulation, experts said. Financial companies and banks also may be more regulated.

There may also be more help for the battered auto industry. Obama expressed support recently for doubling a loan program for automakers to develop fuel-saving technology to $50 billion from $25 billion. Experts said automakers may receive some kind of government aid to protect millions of jobs, which could be in danger if General Motors buys Chrysler.

Marvin Goodfriend, an economics professor at Carnegie Mellon University in Pittsburgh, said that Obama may try to apply the brakes on America's rapidly growing deficit, which the Bush administration in July forecast would hit a record $482 billion, excluding costs associated with the financial crisis.

Kamer said that the process of emerging from the global financial crisis could take two or three years or more, and that money would be tight until the financial clouds lift.

"The major constraint [on Obama] will be the scarcity of resources," Kamer said. "That's going to hurt Long Island, because we're a small-business economy," and borrowing has been extremely difficult.

Stock markets, however, may be healthier, Selkin said. Since 1900, the Dow Jones industrial average has risen an average of 9.8 percent in the 12 months after the Democrats gained the White House. Under Republicans, the Dow has risen only 2.5 percent in the same time period.