Mass. effect: Workers, key state industries could benefit from Obama's proposals, but some are wary

November 6, 2008

President-elect Barack Obama has pledged to invest in clean energy, defense, research, manufacturing, and other industries vital to Massachusetts. He has also backed proposals to help workers that some industry groups say could raise the cost of doing business, hurt corporate profits, and ultimately spur companies to reduce hiring.

But it's unclear how many of Obama's plans will become law. From the start, he will face a recession, soaring budget deficit, and lingering wars in Iraq and Afghanistan that will compete for his attention and limit federal spending. He will also need help from Congress.

Specifically, Obama has proposed an array of measures to help workers - including boosting the federal minimum wage to $9.50 by 2011, requiring that employers provide seven paid sick days per year, expanding the Family Medical Leave Act to cover more companies, and legislation to ensure women earn equal pay - which are likely to draw opposition from business groups.

Still, Greater Boston Chamber of Commerce president Paul Guzzi noted that Obama campaigned on a platform of reviving the economy and creating jobs, suggesting he will avoid pushing any rules that are too onerous. And Guzzi noted that many Massachusetts industries, such as biotech and clean energy, could directly benefit from Obama's promise to boost scientific research and reduce the nation's reliance on fossil fuels.

"My sense is [his policies] will produce economic growth," Guzzi said.

Obama has also suggested "eliminating special interest loopholes and deductions, such as those for the oil and gas industry," leaving some business leaders to wonder if he will wind up raising broader taxes on companies.

"An immediate tax increase would be disastrous at this time. The economy is very soft," said Bob Reynolds, the chief executive of Putnam Investments, a Boston mutual fund company.

In addition, Obama supports the Patriot Employer Act of 2007, which provides tax credits to companies that maintain or increase the number of full-time workers in the United States, maintain their headquarters in the United States, offer good wages and benefits, and support employees who serve in the military.

Many of Obama's proposals could also affect key business sectors in Massachusetts:

Healthcare

Finding a way to cut healthcare costs and provide universal health coverage were familiar messages during the campaign. Last year, Massachusetts implemented a groundbreaking plan to insure every resident, and its major teaching hospitals are known worldwide.

Lynn Nicholas, the chief executive of the Massachusetts Hospital Association, said Obama's healthcare plan would be good for local hospitals' mission to improve health.

"Insurance coverage is the key that opens the lock to comprehensive healthcare for people, as opposed to episodic care through emergency rooms," said Nicholas. "Hospitals don't want to see people just in emergency rooms. They want patients to be involved in continuity of care."

Philip Johnston, a former Massachusetts secretary of health and human services who now heads a consulting and lobbying firm specializing in healthcare, said Obama's plan would be similar to the state's healthcare reform.

Johnston said Obama's plan could provide a big boost for community health centers - local clinics that are often government funded and typically serve the primary care needs of poor communities.

"The community health centers will be key because they're the low-cost option for primary care and they're central to the entire healthcare safety net," he said.

But healthcare may not be a priority for the next president because of more pressing matters. Financial analysts at JPMorgan Chase & Co. predicted last month that Obama may only be able to pass more modest healthcare reforms until 2011 and 2012 because of the economic downturn and steep cost of expanding healthcare coverage.

Biotechnology

The incoming president has supported several measures to lower drug prices, including importing cheaper drugs from other countries and allowing the federal government to negotiate better prices for treatments for Medicare recipients. He also wants to let makers of generic drugs sell less costly versions of biotech drugs. But drug industry officials warn that if Obama goes too far to rein in prices, it could hurt revenue and limit the development of cutting-edge therapies. But he has also supported expanding funding for stem cell research and the National Institutes of Health, which supports medical research.

"The biotech industry sees this as an opportunity to promote more research and development," said Robert Coughlin, the president of the Massachusetts Biotechnology Council, a trade group. While Coughlin is concerned about Obama's proposals to reduce drug prices, he said he believes biotech companies will have a chance to persuade him that such policies could hurt the industry and patients. "It's important that we educate folks," Coughlin said.

Financial Services

As the biggest financial crisis since the Great Depression plays out, most analysts expect the new administration to push for tougher regulations on mortgage-related securities and other sophisticated financial instruments that led to the financial meltdown. Obama has also proposed cracking down on brokers and lenders that engage in fraud or predatory lending practices by increasing funding for enforcement, creating stiffer penalties, and requiring the industry to report suspicious activity. Obama also proposed a "Credit Card Bill of Rights" for consumers.

Boston University law professor Cornelius Hurley said he also expects that the new administration and congressional Democrats will press for more transparency from hedge funds and private equity firms, many of which are based in Boston. But other changes won't likely affect many local financial players, he said, and in fact could strengthen local financial companies like banks and mutual fund firms that already operate under stricter rules than financial sectors in rival cities.

"We have a lot going for us on the bookkeeping and processing side of things, and to the extent the industry is brought under a more coherent system of regulations, that's a good thing," Hurley said. "London and New York could be brought down several pegs, and Boston and New England would still have an opportunity to prove itself."

Manufacturing

A number of Obama ideas might help manufacturing, including a proposal to set up a fund to invest in "the most compelling advanced manufacturing strategies." He wants to double funding for the Manufacturing Extension Partnership, which works with manufacturers to become more efficient and deploy new technology. (By contrast, the Bush administration has tried to curtail funding for the program.)

Fair trade is also a critical issue of manufacturers. Obama said he supports free trade and wants the World Trade Organization to help enforce existing trade agreements to stop "unfair government subsidies" and other barriers to trade. But he also opposes pacts, such as the Central American Free Trade Agreement, that he says don't maintain sound labor and environmental standards.

Brian Gilmore, executive vice president of Associated Industries of Massachusetts, said Obama's support for enforcing free trade agreements and investing in the Manufacturing Extension Partnership are both welcome news for manufacturers in Massachusetts. "It's a step in the right direction," he said.

Labor unions

Obama has embraced efforts to support labor unions, which have seen steady declines in membership. Only about 8 percent of US workers at private companies are now union members. But Obama has said he will overturn the National Labor Relations Board decision that classified hundreds of thousands of professions as managers, eliminating their right to union representation. Obama also said he wants to ban companies from permanently replacing striking workers, and he supports legislation that would increase the penalties for violating labor laws. As a result, union officials are eager for him to take office.

"The Bush administration was the most antiunion administration in the history of this country," said Massachusetts AFL-CIO president Robert J. Haynes. "If we can get back to giving people the fair opportunity to join a union, you will see millions of people will join unions and the standard of living will go up."

But business groups complain that Obama's proposals go too far. For example, they say he supports "card check" legislation that would force the federal government to recognize a union if a majority of a firm's workers sign membership cards (instead of requiring workers to vote by secret ballot).

"We are very concerned about the elimination of the secret ballot during union elections," said AIM's Gilmore. "It opens the doors for employees to be threatened or cajoled into signing a card."

Construction

Over the next 10 years, Obama wants to invest $60 billion in highways and other public projects, which could help spur development and construction. That's good news to Paul Hewins, an executive vice president for Skanska USA Building Inc., based in Stockholm, but has worked on projects at Logan Airport in Boston and TF Green Airport in Rhode Island.

"There will be more of an investment in infrastructure and homeland investments," said Hewins. "McCain's investment in the war led you to believe he was going to take more money away from those things."

Defense

Obama has promised to end the war in Iraq, cut "tens of billions of dollars of wasteful spending" and curtail investment in unproven missile defense technology. But his platform also calls for stepping up investment in advanced defense technology, such as unmanned aerial vehicles and electronic warfare capabilities, and replacing outdated naval vehicles, which could benefit Massachusetts defense companies like Raytheon Co., based in Waltham.

"We're better positioned than many states because we've moved into systems development instead of banging hardware and building ships," said William H. Guenther, the president and founder of Mass Insight Corp., a Boston research firm. "The broader concerns are that defense budgets are going to face significant pressure for cuts because of what's happening in the economy."

Technology

Obama has proposed making a research and development tax credit permanent. He has also pledged to expand broadband to every community in the country, which would likely increase demand for equipment and software made by Massachusetts' technology and telecommunications industries. In addition, he promised to help entrepreneurs by eliminating capital gains taxes on start-ups and small businesses, and by investing $250 million annually to expand the size and number of business incubators, which provide space and other support to new companies.

"Everyone feels there's not enough capital for start-ups and small companies," said Mark Horan, executive director of the Massachusetts Network Communications Council, which represents telecommunications and networking companies. "Anything he does to loosen the flow of money to start-ups is important."

Erin Ailworth, Ross Kerber, Jeffrey Krasner, Casey Ross, and Robert Weisman of the Globe staff contributed to this report Todd Wallack can be reached at twallack@globe.com.

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