Businesses React With Hope, Fear : Outlook: Companies big and small wonder which Bill Clinton will emerge: aggressively liberal or conservatively cooperative.
Business executives are awaiting the new Administration with nervous anticipation and ambivalence, wondering which Bill Clinton will become President.
Companies big and small alike expressed fear Wednesday that an aggressive Clinton and a Democratic Congress, knowing that there is no spare money for expanded social programs because of the budget deficit, will decide instead to impose costly new mandates on business for such things as universal health care.
At the same time, business yearns for a kinder and gentler Clinton, a different kind of Democrat, sympathetic and schooled in the lessons of cooperation with corporations after 12 successful years as governor of Arkansas.
No one can know which Bill Clinton--aggressively liberal or conservatively cooperative--will dominate government policy-making until early next year, or maybe even well into the four-year term. The business community is worried and hopeful, all at the same time.
Clinton has promised a lot, vowing to slash the federal budget deficit in half, spend more for roads and bridges, expand job training and impose higher taxes on just two groups, those making over $200,000 a year and foreign corporations.
For the optimists, Bruce Karatz, president and chief executive of Kaufman & Broad Home Corp. of Los Angeles, a major builder, said: “The most immediate impact of a Clinton Administration will be improving consumer confidence. I think that this might be the first boost to lead us out of the recession. Whether it’s sustained or not, only time will tell.”
Also in Clinton’s corner is James R. Jones, chairman and chief executive of the American Stock Exchange, who predicted that the President-elect “will surprise a lot of people and take a very severe whack at the deficit” and propose a mild stimulus package. “If he does that, I think, the markets will respond favorably,” he said.
But skeptics in the business community can make a strong gloomy argument about the new Administration.
“Clinton is a net negative,” said Kermit Baker, director of economics at Cahners Publishing, a Cambridge, Mass., consulting firm. “Businesses are not real excited about him; upper-income people are not excited about him, and foreign corporations and importers are certainly not excited either. There’s a concern he’ll get involved in more government spending.”
Another pessimist is Gene Grabowski, a spokesman for the American Council of Life Insurance. He said the industry is “on guard and preparing for a tax fight.” The industry still bears the scars of an $8-billion tax hike during the Bush Administration.
“We see ourselves as a likely target for revenue raising,” Grabowski said. “There will be pressure to look for money from all places, and we are one of the few prosperous areas of the economy.”
The pharmaceutical industry views itself as another likely victim because Clinton supports a bill to take some tax benefits away from drug companies that raise their prices faster than the rate of inflation. The loss of tax benefits would “hinder the industry’s ability to generate profits to pay for research and development,” said Jeff Trewhitt, spokesman for the Pharmaceutical Manufacturers Assn.
The owners and operators of small businesses are among the most fearful of the impact of a Clinton presidency. While big corporations have the profits, the staff and the expertise to manage new regulations and government mandates, small companies claim that they are already caught in a dangerous squeeze.
“Bush vetoed 30 bills that Clinton probably would sign,” said William C. Dunkelberg, chief economist for the National Federation of Independent Business, which represents more than 500,000 small firms. “I’m afraid we will have four years with a regulatory mandate raining down.”
While Bush vetoed a bill requiring companies to allow employees to take up to 12 weeks of unpaid leave after the birth or adoption of a child, or to help care for a sick family member, Clinton is certain to sign the measure if Congress passes it again, Dunkelberg said.
Despite all these perceived threats, a veteran Washington hand, U.S. Chamber of Commerce President Richard Lesher, said one has to discount the sometimes fervent oratory of a hard-fought election.
“You have to sort out the campaign rhetoric from the reality,” he said. “A lot of things aren’t going to happen because Clinton is too smart for that. This talk of heavy new taxes on foreign companies just ain’t going to happen. That would upset all sorts of trade agreements, and Bill Clinton will not be a protectionist.”
Lesher is sure that Clinton will push for both an investment tax credit to spur spending on new factories and equipment, and a capital gains tax reduction. At a recent regional meeting of the chamber, members from Arkansas offered reassurance. “They said Clinton is accessible and listens and wants to do things for business,” Lesher said.
A Clinton-backed investment tax credit would “really get things rolling again,” said a key banking industry lobbyist. “The best thing he could do for the banks would be to get the economy going.” An investment tax credit would prompt small- and medium-sized businesses to step up their borrowing, according to the banker.
Clinton’s promises to divert defense research dollars to civilian programs should stimulate the high-technology business, said Edward R. McCracken, president and chief executive of Silicon Graphics Inc.
The new President’s “policy will create more jobs in America’s high-technology sector and will ensure that American companies remain competitive,” said McCracken, whose Mountain View firm produces computer graphic workstations.
McCracken, a Republican who is part of a group of well-known Silicon Valley executives who backed Clinton, said that it is difficult to predict the actions of politicians.
But, he said, “Clinton and Gore have done their homework on technology and seem very willing to help business become more competitive. His (Clinton’s) feeling is that government and business need to work together.”
Until the President-elect picks his top officials, and promulgates the details of his economic and regulatory programs, it will be impossible for business executives to decide if they admire or fear the nation’s new leader.
“Gov. Clinton has been agreeing with people in business, agreeing with people from consumer groups, agreeing with the middle class, agreeing with the poor,” said George Hatsopoulos, chief executive of Thermo Electron Corp. of Waltham, Mass., a producer of diverse high-tech products.
“Because he’s agreeing with so many people, it’s anybody’s guess what he is going to do.”
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