Friday, April 18, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

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.

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 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, which have struggled to increase enrollment in a tough economy, will gain new customers. But the industry pays for that growth. Insurers will have to cover 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 care.

The law also limits how much insurers can vary pricing based on age and health.

“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.”

Drugmakers and hospitals may 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 drugmakers will benefit from the law because starting in 2014, millions more will gain prescription coverage.

Still, drugmakers 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.

Obama’s re-election also likely means medical device makers will start paying a 2.3 percent tax. They vowed to continue lobbying Congress to try to head off the tax.

“There may be an opportunity to address the tax before it goes into effect on Jan. 1,” said J.C. Scott, chief lobbyist for AdvaMed, the industry’s main trade group.

— 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.

The Associated Press

The Associated Press

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

‘Same Time, Next Year’ opens in Benicia

By Amy Maginnis-Honey | From Page: B1

 
Man to stand trial in rural Vacaville killing

By Jess Sullivan | From Page: A1, 11 Comments | Gallery

‘We Got Next’ Comedy Tour stops at Dimitri’s

By Amy Maginnis-Honey | From Page: B1

 
Puppies to take part in Vallejo dog show

By Adrienne Harris | From Page: A1 | Gallery

 
Afisivalu announces run for Fairfield council

By Ryan McCarthy | From Page: A3, 1 Comment | Gallery

 
Tonnesen seeks Fairfield City Council seat

By Ryan McCarthy | From Page: A3 | Gallery

Family matriarch celebrates 100th birthday

By Ian Thompson | From Page: A3, 1 Comment | Gallery

 
Barbecue brings big crowd, progress to Parkway Gardens

By Ryan McCarthy | From Page: A3, 16 Comments | Gallery

Assist-A-Grad wraps up interviews

By Barry Eberling | From Page: A4 | Gallery

 
Napa County bridge to close for work

By Barry Eberling | From Page: A4

 
Town hall on crime set in Fairfield

By Ryan McCarthy | From Page: A4, 8 Comments

 
Crash shuts I-80 offramp to Highway 12

By Barry Eberling | From Page: A5, 4 Comments | Gallery

Suisun City police log: April 16, 2014

By Susan Hiland | From Page: A12

 
Fairfield police log: April 16, 2014

By Susan Hiland | From Page: A12

Weather for April 18, 2014

By Daily Republic staff | From Page: B12

 
.

US / World

Who gained, and what, at Ukraine talks

By The Associated Press | From Page: A1

 
Ukrainian unity on display with peaceful rallies

By The Associated Press | From Page: A1

Deal reached on calming Ukraine tensions – for now

By The Associated Press | From Page: A1

 
Putin’s choice of words shed light on Ukraine

By The Associated Press | From Page: A1

Salmon released in California river restoration

By The Associated Press | From Page: A4

 
Jury convicts husband in Iraqi woman’s death

By The Associated Press | From Page: A5

1 dead, 1 injured in California boating accident

By The Associated Press | From Page: A5

 
BART fined $210,000 for worker deaths

By The Associated Press | From Page: A5, 1 Comment

Military shell prompted evacuation of hundreds

By The Associated Press | From Page: A5

 
Astronomers spot most Earth-like planet yet

By The Associated Press | From Page: A5

California health care sign-ups exceed projections

By The Associated Press | From Page: A6

 
Obama: 8 million signed up for health care

By The Associated Press | From Page: A6, 3 Comments

Dirty creek, old purse solve four-decade mystery

By The Associated Press | From Page: A7

 
Man said to be homesick for prison gets 3 1/2 years

By The Associated Press | From Page: A8

Chelsea Clinton expecting first child this fall

By The Associated Press | From Page: A8

 
Holder: Hate crimes ‘an affront to who we are’

By The Associated Press | From Page: A8, 4 Comments

Nigeria: Fate of 115 abducted girls unknown

By The Associated Press | From Page: A10

 
Spate of Mideast virus infections raises concerns

By The Associated Press | From Page: A10

Samples collected from oil slick not from plane

By The Associated Press | From Page: A10, 1 Comment

 
S. Sudan: 12 die after mob attacks UN base

By The Associated Press | From Page: A10

Peru volcano prompts evacuation of 4,000

By The Associated Press | From Page: A10

 
Tiny power plants hold promise for nuclear energy

By The Associated Press | From Page: A13

Confused, chaotic scene described on sinking ferry

By The Associated Press | From Page: A13

 
.

Opinion

Food brings back fond memories

By Bud Stevenson | From Page: A11, 1 Comment

 
Internationally out of touch

By Letter to the Editor | From Page: A11, 4 Comments

 
Watch out for grandson scam

By Letter to the Editor | From Page: A11, 15 Comments

Why so much spent to find a plane?

By Letter to the Editor | From Page: A11, 2 Comments

 
Editorial Cartoon for April 18, 2014

By Daily Republic Syndicated Content | From Page: A11

.

Living

Community Calendar: April 18, 2014

By Susan Hiland | From Page: A2

 
Today in History for April 18, 2014

By The Associated Press | From Page: A2

My husband tells our sons that they don’t need to listen to me

By Kathy Mitchell and Marcy Sugar | From Page: B13

 
Horoscopes for April 18, 2014

By Holiday Mathis | From Page: B13

.

Entertainment

 
Week in preview April 18-24, 2014

By Amy Maginnis-Honey | From Page: B1

Review: ‘Heaven Is for Real’ heartfelt but dull

By The Associated Press | From Page: B2

 
Lost radio program featuring Hank Williams found

By The Associated Press | From Page: B3

 
‘Real Housewives’ TV star faces battery charge

By The Associated Press | From Page: B3

Ill, hospitalized Miley Cyrus postpones more shows

By The Associated Press | From Page: B3

 
Garcia Marquez, Nobel laureate, dies at 87

By The Associated Press | From Page: B3

Entertainment calendar April 18, 2014

By Susan Hiland | From Page: B4

 
TVGrid

By Daily Republic Syndicated Content | From Page: B6

.

Sports

Dodgers get to Bumgarner early for win over Giants

By The Associated Press | From Page: B7 | Gallery

 
Badminton update: Rodriguez, Armijo head toward post season

By Brian Arnold | From Page: B7 | Gallery

MEL boys roll to easy win over SCAC

By Paul Farmer | From Page: B7 | Gallery

 
Short-handed SCAC girls ‘gut out’ all-star win over MEL

By Paul Farmer | From Page: B7 | Gallery

Sharks beat Kings 6-3 in Game 1

By The Associated Press | From Page: B7 | Gallery

 
Miguel Angel Jimenez set for Champions Tour debut

By The Associated Press | From Page: B8 | Gallery

Sponsorship woes put Swan Racing future in doubt

By The Associated Press | From Page: B8

 
Ex-quarterback McNabb spends day in Arizona jail

By The Associated Press | From Page: B8

 
Season wrapup: Sacramento Kings’ ‘new era’ off to slow start

By The Associated Press | From Page: B8 | Gallery

Clippers-Warriors series billed as must-see TV

By The Associated Press | From Page: B8

 
Kuchar builds on Masters momentum, shares Heritage lead

By The Associated Press | From Page: B8 | Gallery

War of words in Northwestern-athletes’ union fight

By The Associated Press | From Page: B8

 
Shumenov gets big chance in ring against ageless Hopkins

By The Associated Press | From Page: B8

Montreal team sign Chad Johnson to 2-year contract

By The Associated Press | From Page: B8

 
Seattle 1B Choi banned 50 games for positive test

By The Associated Press | From Page: B8

Dodgers’ Puig focuses on baseball despite issues

By The Associated Press | From Page: B8

 
Stanford takes lead at LPGA LOTTE tournament

By The Associated Press | From Page: B9

Boston Marathon makes room for more runners

By The Associated Press | From Page: B9

 
Vanden clinches at least share of SCAC boys tennis title

By Daily Republic staff | From Page: B10

 
.

Business

Toyota Camry gets a top-to-bottom makeover

By The Associated Press | From Page: C1

 
Hot models at this year’s New York Auto Show

By The Associated Press | From Page: C2

Judge won’t order recalled GM cars to be parked

By The Associated Press | From Page: B6

 
Cyber cops: Target hackers may take years to find

By The Associated Press | From Page: B6

Walmart jumps into the money transfer biz, loudly

By The Associated Press | From Page: B6

 
.

Obituaries

.

Comics

Blondie

By Daily Republic Syndicated Content | From Page: B12

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B12

Baby Blues

By Daily Republic Syndicated Content | From Page: B12

 
Dilbert

By Daily Republic Syndicated Content | From Page: B12

Peanuts

By Daily Republic Syndicated Content | From Page: B12

 
Zits

By Daily Republic Syndicated Content | From Page: B12

Frank and Ernest

By Daily Republic Syndicated Content | From Page: B12

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: B12

Garfield

By Daily Republic Syndicated Content | From Page: B12

 
Sally Forth

By Daily Republic Syndicated Content | From Page: B12

Baldo

By Daily Republic Syndicated Content | From Page: B12

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: B12

B.C.

By Daily Republic Syndicated Content | From Page: B12

 
Rose is Rose

By Daily Republic Syndicated Content | From Page: B12

Pickles

By Daily Republic Syndicated Content | From Page: B12

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: B12

Crossword

By Daily Republic Syndicated Content | From Page: B13

 
Cryptoquote

By Daily Republic Syndicated Content | From Page: B13

Sudoku

By Daily Republic Syndicated Content | From Page: B13

 
Bridge

By Daily Republic Syndicated Content | From Page: B13

Word Sleuth

By Daily Republic Syndicated Content | From Page: B13