Battleground businesses look for certainty after election
When Michael Kobylka, president of the local chamber of commerce in Racine, Wisconsin, thinks about today’s election, it is with a sense of relief.
His ideologically split state could be pivotal to the race between Barack Obama and Mitt Romney, but Mr Kobylka said executives in the manufacturing-heavy southwest corner of Wisconsin will be happy when it is over, no matter who wins.
“The business community is looking forward to getting this behind us,” said Mr Kobylka. “Policy is incredibly important but certainty is almost more important.”
Yet it is far from clear whether the end of the fight for the White House will deliver the degree of clarity about the direction of US policy – including its fiscal stance – that many are looking for across the US and around the world.
The first test will come tomorrow morning, when a mad dash will begin to avert the “fiscal cliff” – the big problem facing US policymakers once the winner of the presidency and the composition of Congress have been chosen by voters.
If Congress takes no action before January 1st, the US will be hit by about $600 billion in spending cuts and tax rises, a combination of measures that could tip the economy back into recession at the start of 2013.
The looming deadline has been known for months – but negotiations have been on ice during the campaign, aside from a few back-door bipartisan conversations that have yielded no breakthroughs.
Both Obama and Romney have said repeatedly during the past month of the race for the White House that they are keen to avoid the fiscal cliff, and that they would do their best to shape a bipartisan agreement if they are elected tomorrow.
However, pressures are mounting from the wings of both sides of the political spectrum for them to avoid any sort of big compromise on taxes and spending – even if they lose.
As of yesterday afternoon, the expectation in Washington was that Obama would maintain control of the White House – with Democrats continuing to retain control of the Senate, and Republicans in control of the House of Representatives.
If Obama wins he has indicated that he would quickly try to revive talks with House Republicans on a “grand bargain” to shrink long-term deficits and avoid the fiscal cliff. This would involve both long-term spending cuts and higher taxes for the rich.
But a coalition of labour and other liberal groups has been warning Obama – who they are trying hard to re-elect – not to betray them by accepting reductions in benefits to popular government health and pension schemes such as Medicare and social security. This could complicate his effort to maintain support within his own party.
Meanwhile, as long as they keep control of the House, Republican leaders are facing pressures of their own not to compromise – even if Romney, their nominee, is defeated.
Conservative activists want them to hold the line and not cave in to Obama’s demands for the Bush-era tax rates for the wealthy to lapse, a policy they see as damaging to the engines of job creation in the US.
“The president will think this was a presidential election, the guys who run the House think this is an election about who runs the House,” said Grover Norquist, an anti-tax activist who heads Americans for Tax Reform. If Romney wins, he would almost certainly push for all Bush-era tax cuts to be extended temporarily – which might well be opposed by Democrats and Obama’s White House, even if he is a “lame duck”. – (Copyright The Financial Times Limited 2012)