INSIGHT: The real economy to dominate election

30 October 2008 17:25  [Source: ICIS news]

By Brian Ford

HOUSTON (ICIS news)--The state of the US economy and the upcoming presidential election was obviously on the mind of Airgas chairman and CEO Peter McCausland when he delivered his second-quarter earnings report last week.

Rather than immediately ploughing into the usual sales and revenue details, the head of the US industrial gases supplier instead took time to talk about the financial crisis and the contenders for president.

“A few weeks ago Senator [John] McCain was mocked by the media and Senator [Barack] Obama for saying that the US economy was fundamentally sound,” said McCausland.

He added that McCain (Republican-Arizona) was not talking about homebuilders or the “unfortunate people who were told they could afford new homes when in reality they could not”.

Nor was he talking about “the people on Wall Street, who had a major role in the formation of the credit bubble and who have been paid absurdly high salaries and bonuses for the last 15 years”.

McCausland maintained McCain was talking about “those places where real goods are produced and essential services are provided all across the country. He was talking about American manufacturers who survived the 1998, 2002 high dollar recession and which have become more competitive at home and abroad”.

Noting the loss of manufacturing jobs in the US during the past few decades, McCausland took a jab at Washington’s massive bailout packages for Wall Street, saying he did not “remember our government adding capital to the industrial sector like it's adding capital to the financial sector today”.

The US economy “clearly got top heavy with financial services, retail and residential buildings and legal services,” and the government needs to focus instead on “promoting the parts of the economy which produce real goods and provide essential services and which build necessary infrastructure to keep the US competitive”.

McCausland’s views may well reflect those of many chemical company leaders who, along with most US voters, have turned their attention to the tumultuous economic times prior to the 4 November elections.

In August, offshore drilling, fuel costs and other energy issues gained prominence as US election issues and helped McCain pull ahead of Democratic rival Obama of Illinois in the battle for independent voters, according a George Washington University Battleground Poll.

At that time, voters rated gasoline and energy prices as the most critical election issue behind general concern about the US economy and jobs, with the war in Iraq in third place, according to the poll conducted among likely voters nationwide by Republican polling firm Tarrance Group Inc and its Democrat counterpart Lake Research Partners.

Since then, voter priorities may have changed somewhat, according to the latest Battlefield tracking poll released on Thursday.

The economy and jobs remained well ahead as the most important issue among those polled, but gas and energy prices slipped to a distant eight in the priority list, behind terrorism/homeland security, the Iraq war, health care costs, the federal budget deficit, illegal immigration, and retirement security.

Obama seems to have pulled ahead of McCain among most polls but US chemicals manufacturers and oil and gas producers have traditionally supported Republican candidates as being more business friendly.

According to the non-partisan Center for Responsive Politics’ long-term contributions trends report for this year, 76% of the campaign contributions ($19.8m, €15.4m) from oil and gas producers has gone to Republican federal level candidates, while 24% ($6.2m) has gone to Democrats.

Manufacturers of chemicals and related business gave 63% of their contributions ($4.4m) to Democrats and 37% ($2.5m) to Republicans, according to the centre.

Petrochemical and refining interests have decried Obama’s plan to impose a windfall profits tax on energy firms, saying it would make the US more dependent on foreign oil. McCain opposes such a plan.

McCain supports permanently lifting the ban on offshore drilling in the US while Obama supports lifting the ban only as part of a compromise energy strategy, according to the US Chamber of Commerce.

In a September interview with Energy and Environment Publishing, American Chemistry Council (ACC) president Cal Dooley said his group was concerned with the government installing more incentives for the use of natural gas - a key chemicals feedstock in the US – for clean energy.

Natural gas prices had increased on average about 300% since 2000, he added.

Environmental regulations that result in utilities moving from coal-fired power generation to natural gas generation, incentives for natural gas-powered cars and other such measures would put US petrochemical makers at a disadvantage unless such actions are accompanied by increased supplies, Dooley said in the interview.

In contrast, labour unions have given 91% of their contributions ($53m) to Democrats and only 8% (4.8m) to Republicans.

The US Chamber of Commerce has rallied mostly behind Republican congressional candidates, focusing on its opposition to the Employee Free Choice Act, a labour-backed measure that would make it easier to organise workers inside companies, according to the Wall Street Journal.

Obama has promised to fight for passage of the Employee Free Choice Act.

Airgas’s McCausland said he will remain optimistic no matter who wins on 4 November.

“I don't agree with the geniuses who are predicting another depression, because these are the same general geniuses who got us into this mess by insisting that the markets would be self regulating, because people act in their self interest,” McCausland said.

“This might get worse before it gets better, but the silver lining is that the system will change and the US will adjust its priorities.”

($1 = €0.78)

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By: Brian Ford
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