US 2012 Presidential Election: The Economic And Business Implications

As US voters elect a president, we highlight the implications for the economy, foreign policy, and selected industries. What follows below are excerpts from key articles we have published in Business Monitor Online recently. In these articles, we take into account both an Obama victory and a Romney victory.

US Domestic Politics

‘Post-Election Brinksmanship Looms Large’, October 9, 2012:

‘Though the November 6 elections are likely to be very close, President Barack Obama is likely to win re-election, with our interpretation of opinion polls suggesting that he has a significant lead over his challenger, Mitt Romney. Our core congressional scenario of the Democratic Party retaining the Senate despite the loss of some seats, and the Republican Party retaining control of the House of Representatives, still holds. If we are correct in our assumptions, then it should be a fairly heated post-election ‘lame duck’ session until the new congressional term begins and the president is inaugurated in January.’

US Macroeconomic Outlook

‘Fiscal Cliff The Biggest Risk’, July 13, 2012:

‘We do not believe all of the fiscal cliff will be implemented, due to expedient political reasons, as well as fear over its effect on growth. The midpoint economic effect of tightening under our core scenario is 2.1% of GDP. Were the multipliers to prove understated, then the tightening effect could be much larger (3.2% of GDP), or much lower (1.0%). This is only a very rough estimate of course, and does not capture other potentially negative effects such as uncertainty ahead of the tightening. It also means that if the entire raft of fiscal measures were to be implemented, then US output would shrink substantially, with a contraction very likely in the first half of the year.’

US Foreign Policy

‘Foreign Policy Challenges For The Next President’, October 8, 2012:

The next US president will find America’s room for manoeuvre on the global stage increasingly limited by the need to tackle domestic economic issues and the weariness after fighting a decade-long war in Afghanistan. Washington’s top priorities will remain containing Iran’s nuclear programme and managing the balance of power in the Asia-Pacific region. Regardless of any president’s stated policy, sudden changes of circumstances could force a different course of action.’

Mining Sector

‘Implications Of A Second Obama Term’, October 31, 2012:

‘Should Obama win re-election, he is likely to move ahead with a regulatory agenda at the EPA [Environmental Protection Agency] and other federal agencies that favour stricter environmental standards, as well as less carbon-intensive energy sources, including renewables…. If Mitt Romney is elected, his administration is likely to do more to encourage domestic coal production, as well as oil and gas exploration and drilling to encourage energy independence.’

Pharmaceuticals & Healthcare Sector

‘Romney Would Keep Parts Of Obamacare’, September 10, 2012, and ‘Drugmakers To Benefit From Romney Presidency’, August 9, 2012:

A victory for Mitt Romney in the US presidential election in November 2012 would be a positive outcome for innovative pharmaceutical companies and medical device manufacturers. He has expressed support for the industry in the past and the Republican Party has traditionally aligned itself with the free-pricing model preferred by drugmakers. We caution that the composition of Congress is the key risk to this outlook. A Romney victory could be accompanied by a Democrat-dominated Senate, which could inhibit any pro-industry legislation. It is also important to note that re-election of Barack Obama would not be negative for pharmaceutical companies and medical device manufacturers, primarily because we expect continuation of existing policies that have generally been favourable.’

Oil & Gas Industry

‘Policy Will Remain Supportive Of E&P’, November 5, 2012

We expect that whichever presidential candidate wins the US 2012 election, policy towards hydrocarbons exploration and production will remain broadly supportive, as both candidates have pledged to produce more fossil fuels and reduce imports. This will be most pertinent in relation to drilling in the Gulf of Mexico, in addition to policy on unconventionals, especially shale gas and liquids production. Energy production in the US has progressed significantly in the past five years, and it is highly unlikely that the next administration will not want to continue this. Therefore, we expect that a supportive policy environment towards E&P will help keep a lid on West Texas Intermediate prices, as new supplies will continue entering the market in the years to come.’