Video: Obama's effect on the economy

updated 11/5/2008 12:02:19 PM ET 2008-11-05T17:02:19

Barack Obama’s victory in the presidential race will give labor unions and the embattled U.S. auto industry a strong ally in the White House, and likely will put pressure on oil and gas producers and pharmaceutical companies.

His election Tuesday also makes congressional approval of a fresh economic stimulus package — perhaps as large as $150 billion — more likely, economists said.

“There is a general consensus that some kind of stimulus plan is called for,” said Ken Mayland, president of ClearView Economics.

The new president’s biggest challenge will be to turn around an economy that many analysts already believe is in recession. A stubborn housing slump led to the worst U.S. financial crisis in 70 years, which has caused banks to reduce lending and consumers and businesses to sharply cut back their spending.

The economic slowdown, plus a ballooning budget deficit that by some estimates could near $1 trillion in the budget year that began Oct. 1, will restrict Obama’s ability to make good on some of his more ambitious promises, such as expanding health care coverage and subsidizing alternative energy.

The Illinois senator has pledged to offset some expenditures by raising corporate tax rates and income taxes on families making more than $250,000.

Obama is expected to move quickly to put his stamp on the huge $700 billion financial bailout Congress approved last month, analysts said.

Anil Kashyap, an economics professor at the University of Chicago’s Graduate School of Business, said Tuesday that naming the next Treasury Secretary and his top deputies — who will oversee the bailout plan — should be the new president’s top economic priority.

In return for the rescue plan, banks, insurance companies, hedge funds and the rest of the financial sector will almost certainly face a regulatory overhaul effort by the Democratic Congress next year.

Obama’s reputation as a conciliator, meanwhile, will be sorely tested by the labor-backed Employee Free Choice Act, which would allow workers to form unions by getting a majority of employees to sign a card in support of a union, rather than through a secret ballot election.

Business groups such as the U.S. Chamber of Commerce fiercely oppose the measure because they say the elimination of the secret ballot would open up workers to intimidation and harassment.

The measure, supported by Obama and most Democrats in Congress, was approved in the House last year but stalled in the Senate.

Meanwhile, Obama has promised to help Ford Motor Co., General Motors Corp. and Chrysler LLC by doubling a recently approved loan program to $50 billion to help the auto industry develop more fuel-efficient cars.

Oil and gas companies such as Exxon Mobil Corp. and Chevron Corp., however, could face a windfall profits tax, which Obama has promised to impose to pay for a $1,000 “emergency energy rebate” for families.

Also on energy, Obama proposes spending $150 billion over 10 years to speed the development of plug-in hybrid cars and “commercial-scale” renewables, such as wind and solar.

Under an Obama administration, pharmaceutical companies will struggle to defend the lucrative Medicare drug benefit, which pays for medications taken by 47 million elderly people. Obama has pledged to allow the government to negotiate drug prices under the program directly with the pharmaceutical companies, saying it could save $30 billion.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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