Debate Over

It is clear jobcreating Business leaders chose McCain over Obama largely because his policies are seen as progrowth, whereas Obama’s policies are viewed as redistributive and anti-growth.

October 8 2008 by Ed Kopko


For some months during this Presidential election year, Chief Executive has conducted specialized polling of CEOs’ attitudes on issues affecting national policy and the economy. In CE‘s most recent poll in September, 751 respondents, more than double the usual number of business leaders, made their voices heard on their Presidential choice. By a four-to-one margin CEOs support Senator John McCain over his rival, Senator Barack Obama. More to the point, a thundering 74 percent majority say they fear the consequences of an Obama presidency, compared to only 19 percent who fear a McCain presidency. 

During this period CE also asked the people who create jobs what it will take to get our engine of job creation going strong. We first asked CEOs what policies and approaches would work best for business, energy policy and job creation. Subsequently, we asked CEOs which Presidential candidate’s policies were best aligned with these prescriptions for growth.

In August a significant majority of CEOs rated John McCain’s policies over Barack Obama’s. But their support came with reservations. They graded his overall policies a B-. McCain received strong marks for defense and foreign policy but only a gentleman’s C+ on energy, environment and education. Barack Obama, on the other hand, was given a barely passing C- on his policy prescriptions, with half of the eight policy areas polled getting almost failing D grades. Neither candidate received an A grade.

 

Obama

McCain

Energy Policy

C-

C+

Economic/Fiscal Policy

D+

B-

Foreign Policy

D+

B

Defense

D+

B+

Environmental Policy

C+

C+

Educational Policy

C+

C+

Tax Policy

D

B-

Healthcare

C-

C+

Overall GPA

C-

B-

What Do Job Creators Want?

In June we asked CEOs what is needed to create high-paying jobs. While politicians and economists will opine on what gets the job engine going, rarely is it reported what the job creators themselves really want. (It would be even more novel to follow their prescription.) When looked at from the lens of a businessperson who must meet payroll, satisfy customers and earn an adequate return to pay for its capital, the choices for policy seem obvious: Reduce red tape so business can introduce new products faster, eliminate non-productive regulatory costs, decrease taxation so that business has the capital to expand, improve the workforce through better education and increase opportunities to sell products and services through trade. In previous polling, business leaders have told us the top reasons they add to their workforces. (Hint: Regardless of who wins, the outcome of the Presidential election is not a strong reason to hire.)

What does the U.S need to create the most high-paying jobs?

 

Increase

Decrease

Taxation

4.8%

95.2%

Regulation

8.9%

91.1%

 

Regulate

Privatize

Education

25.0%

75.0%

 

Strengthen

Loosen

Trade Restrictions

29.7%

70.3%

Top Reasons CEOs Create Jobs

Sales Growth

22%

Expected Profitability

16.8%

Outlook for Economy

13.7%

 

 

 

CEO comments reflect McCain as the better of two less than ideal choices. One CEO said, “I’m not terribly excited about McCain being president, but I’m sure that Obama, if elected, will have a negative impact on business and the economy.” Another stated, “Obama has shown his inexperience in many of his ideas. Some of his planned programs would bankrupt the country within three years if implemented.”

For example, Obama says that he wants to increase the capital gains tax. Many small business owners have from time to time reaped a substantial capital gain from the sale of a business or a vacation home. If they receive a couple of hundred thousand dollars or more from the capital gain, they appear to be “rich” in that year, according to Obama’s definition, even though they may have an average yearly income of less than $100,000 and net assets of less than a half-million dollars. They will not only be taxed at a higher rate, but if the asset has been held for many years and has grown in value no faster than inflation, they will be taxed on imaginary income, and may well suffer a real loss. Many politicians, it is felt, confuse wealth with taxable income. A wealth tax mainly taxes productive capital, thus reducing job and productivity growth, and it also encourages people to move their wealth to other countries and/or engage in other non-growth oriented expenditures. 

Energy Policy: Drill and Do More

CE also recently asked CEOs their attitudes towards energy. The preferred broad policy approaches were clear. Drill more. Develop more nuclear. Utilize wind, solar and other renewables. Use all approaches aggressively.

When CEOs are asked to assess the energy policies of the two contenders, it quickly becomes apparent that John McCain’s policies are preferred. Some may be perplexed as to the Arizona senator continues to hold ANWR off limits to even the most respectful of exploration, but the message from Obama seems to be don’t drill, consume less and tax the oil industry’s profits at higher levels. He barely mentions nuclear energy, for example, something that business leaders believe is integral to any attempt to reduce reliance on fossil fuels. Obama’s positions on drilling for fossil fuels and nuclear power, for example, are counter to CEOs’ attitudes. CEOs support renewables but not a renewables-only policy. They support going after more fossil fuels by a 6 to 1 ratio for now. For example, Michael J. Leib, president of Hazleton Casting Co., summed up the general attitude of CEOs. “I am a strong proponent of a comprehensive energy policy, which includes drilling in all U.S. territories as well as harvesting oil from U.S. shale deposits he said. The backbone of our industrial economy is cost effective energy resources.” Similarly, many support a “do everything” approach. “Pursue an all-of-the- above approach as suggested by John McCain,” said John K. Farr II, president and CEO of Adhesive Films, Inc. 

Defense and Foreign Policy

CEOs have very mixed views of the Iraq conflict and U.S. role abroad. They have grave concerns on the costs the U.S. is bearing overseas. They are in favor of international trade as evidenced by the 70.3 percent that would like to see trade restrictions loosened. Obama is viewed as particularly inexperienced when it comes to trade policy and understanding the links between free trade and growth, something President Bill Clinton knew well. McCain gets a solid B+ his highest grade on defense, and a B on foreign policy. Obama gets an almost failing D+ for each a grade that would not keep one in any school or employed very long at any business.  

Top 3 Issues for Presidential Election

1. Iraq, War on Terror, Home-land Security

2. Energy Policy and coat reduction

3. Tax policy for corporations, business incentives

Attitudes Towards the Future

While CEOs support McCain, it should be noted that many are very concerned about the U.S.‘s future and its ability to compete in the global market. Neither candidate’s healthcare policy, for example, is rated highly, and most CEOs express dismay at the lack of solutions offered on this and many other important areas. While this inadequacy gives them cause for low confidence, they also believe U.S. success is rooted in the enterprising spirit of the American people, despite what they believe are high governmental obstructions. Many look to John McCain and hope that this self-described political maverick may yet shake up established thinking and not give into the tired policies of the past.