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Who will be better for US companies, Obama or Romney?

Dan Ryan's Profile

I do not want to get into a "political" discussion with right vs. left. In fact, I know that Proformative will kill those comments straight away. However, as a CFO I have some thoughts on the matter with regard to how their policies will impact my company. But I feel more ignorant than anything. It's hard to tell who will have a more positive impact on businesses and the economy given that the rhetoric is so thick on both sides.

So I'm wondering about things like economic stimulus, personal and corp tax rates, "Obamacare", etc.. What do the finance (and related) leaders on Proformative think will happen under either President and will it be good or bad for business domestically and globally. And again, no political opinions, please, just professional feedback. Thanks.

Answers

Anonymous
(Consulting CFO and Business Operations Advisor) |

Dan,

Kind of hard to say, since they've been a bit floppy about actual policies.
It also depends on your industry, your norms and the norms of your competition.

I would also argue that it would depend far more on the makeup of congress...I don't know that the Republicans would act in the same manner as a majority as they do as a minority. So, no reasoned opinion.

The first thought is Obamacare; Romney gets why this works, but I think he is sincere that he'd want to push that back to the states. That should be a net negative because the larger pools, portability, pre-existing conditions, and interstate factors all point to *potential* overall economic efficiency with Obamacare. Additionally if you're in a state that does have it already (Mass), it would level the playing field. If you don't provide health care and don't want to, Romney could be a net-positive, especially if you compete against players who provide health care in some manner.

MilAero hasn't done too badly under Obama, with some outliers. Boeing is a glaring example of something that might not happen under Romney. It seems from the surface that Romney would also be more inclined to invest in the MilAero sector, but it isn't clear how possible that is (budget realities).

Economic growth is an interesting one; Obama has had what appears to be mediocre performance, so perhaps other initiatives would be good. The potential problem with Romney's proposals on the taxation side is that they seem to be targeted at the "job creators". While the wealthy 1% play a role in job creation, I believe that consumers play a larger one. Greater concentration of wealth could create more ready capital (although that doesn't seem to be our problem at the moment), it seems likely to be paid for in reduced demand. B-B firms may benefit, but B-C firms should suffer.

in Energy, investment in clean/green may suffer under Romney; that would mean fewer startups in that space, and the ones that are out there would be sitting ducks. Coal/Oil/Gas should therefore do relatively well (keeping their tax breaks, which is more material than the competition from "clean" energy). I think in either case the macro shift to fracked gas should continue, which seems the most significant macro development at the moment.

Anonymous
(Chief Financial Officer) |

See recent Economist magazine article reporting research by Barclay's Capital analyzing Wall Street returns under Democratic & Republican presidents since 1929
http://www.economist.com/node/21564256

Equities
Democratic presidents 7% real price gain (10.8% nominal)
Republican presidents 0% (2.7% nominal)
Bonds:
Democratic presidents (1%) nominal loss
Republican presidents 1.9% nominal gain

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Neither.

Based on the last several years, since our two political parties are all about rhetoric and grandstanding and less about getting down to business and looking at reality nothing has been greatly accomplished.

Their behavior on important economic issues (the debt ceiling, the budget, the S&P downgrade) was along these lines and just pushed us as a country to the brink.

I've seen no proof that the Democrats or Republicans are able or willing to change that behavior pattern.

Bryan Frey
Title: VP Finance/Corp Controller
Company:
(VP Finance/Corp Controller, ) |

Looking at the current gridlock and policies, Obamacare either happens at the fed level or at the state level (via Obama and Romney, respectively) and whichever way it goes, it will still cover most of the same things (pre-existing conditions, coverage of family up to 25, etc.) b/c those core items are so popular across the spectrum. So no matter who wins, this stays roughly the same and there is too much inertia and gridlock to have any significant changes here.

Economically, unless consumer spending increases, nothing will change. Everyone knows that corps are sitting on record cash and generating earnings, but they are not spending and I don't see what they can spend their $ on at this point beyond "the usual". How many new factories will be built? Not many in any case. How much M&A? Not much more than is currently happening, etc. I just don't see business spending cranking up under either president.

Consumer spending is a wild card but that has never been based on tax rates. In the late 90's taxes were (relative to now) very high and consumer spending was through the roof. And studies conclusively show that the wealthy don't spend their income and savings anywhere near the rate of the less monied folks, so anything that drives more $ to that segment will not have an impact. So I don't think either side has anything that will act as a significant catalyst.

Finally, the right will block any tax increase of any kind, so increasing revenue seems unlikely, and i don't see anyone on either side discussing real spending cuts. Thus the debt beat goes on.

Yup, same old same old. Which begs the question: what is that gets people, 99% type people, spending again? Is it "confidence"? What is that? How do we create that? Gridlock hasn't been the answer, but what? Seems the country needs something to rally around and make us feel good, like a new industry or a new growth driver that's really ours. But we've missed the boat on green and I don't see anything else out there that will drive sentiment or create tons of new jobs.

Chris Holtzer
Title: Senior Manager - Strategic Analysis
Company: Sargento
(Senior Manager - Strategic Analysis, Sargento) |

I have to side with most so far that believe nothing changes either way. There is an old saying "government can't help the economy, they can only hurt it". I have yet to see a politician who truly impacted a large scale economy shift. Sure, there are always politicians in office when the shift happens, but by and large, most economists will agree that the politicians have little to do with any economic successes.

I think trade policies will have a much bigger impact than "Obamacare" or "Romneycare". One factor that is largely ignored in the political arena, but critical to our economy is the costs of global sourcing (labor and materials).

10 years ago you moved manufacturing out of the USA or you lost significant market share because of price cuts from the competition. Over that decade, the wages in the Asian arena have grown at double digit increases year over year, and freight costs have climbed at an unprecedented rate too. As a result, on paper, it isn't a slam dunk decision to move/keep manufacturing overseas any more. In fact, for many companies, there is a virtual break even now. Slight changes in tariffs and other import/export costs make a big difference in the decision to invest in domestically or not. Neither candidate has really said what they will do, or would try to do in this arena. Romney says he will crack down on cheaters like China...What does that really mean? Higher tariffs? Sanctions? Who knows. Obama thus far has been soft in the economic trades arena. Will that change? Who knows.

Another factor that is regularly ignored is the political opinions of those in the board rooms. Right or wrong, they are making the big investment decisions that eventually affect the economy. So regardless of actual policy shifts, there is economic cost/benefit to simply changing the political comfort of those in the decision making roles.

One thing to remember is that presidential candidates all promise far more than they can deliver. This is true on both sides of the isle, and it has been the case my entire life. The president can't push a magic "fix the economy" button, and the fact is most of the meaningful decisions will come from the legislative branch, not the executive.

Alfredo Alvarado
Title: Director of Business Development
Company: DataBank Imx
(Director of Business Development, DataBank Imx) |

Its hard to say at this point but "it seems" as if our repeblican party rep will be the safest way to go. After all he does state time and time again on how he has owned/ran companies and how he has the "business/ecomony oriented mind set". Standard Taxes, bringing jobs states side, and slowing the increase of government jobs, all "reds" ideas. As for global? Conservitives like to mind to their own problems for the most part. Then again, as far as promises, and official statements go, its all politics.

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