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November 9, 2012

Werner Braun: Politics as usual

It’s “politics as usual” in Washington, D.C. Another contentious election cycle has come and gone.

As with all elections, there are those who are deeply disappointed, those who feel victorious, and a sprinkling, apparently quite large this year, of folks who wish they’d had another viable choice or two.

It’s virtually impossible for everyone to agree on one candidate as being the best suited to govern any nation, especially a nation that is as independent and increasingly diverse as ours is becoming.

But I think we might agree that in Washington today, gridlock and an unwillingness to “walk across the aisle” seem to be the order of the day. Our nation’s capital might best be described as a “caldron of dysfunction.”

I think most of us would also agree that our re-elected president and Congress, where Republican to Democrat ratios remain pretty much the same, will have to roll up their sleeves and deal with some pretty meaty issues over the next few years.

There’s no doubt that this election will have an impact on the economy far and wide and on our own industry right at home.

At the Carpet and Rug Institute (CRI), we’re very concerned about what happens in “our own back yard,” so to speak, so we’ve been taking a close look at just what we might expect during the next four years.

Here are some of the potential outcomes that we see as the positives and the negatives of the direction our elected officials will likely take us.

On the plus side, Obama’s tax plan is not expected to eliminate the mortgage interest deduction for individuals who are financing their homes. This is good for the housing industry, because for many Americans, the mortgage interest deduction is one of the biggest deductions they can take on their itemized tax returns. And what’s good for the housing economy is good for the carpet industry.

Had Romney been elected, he would have pushed to eliminate certain tax loopholes, possibly including the mortgage interest loophole, which might have put a damper on new home purchases and home construction starts.

Where we have some concerns, however, are with issues surrounding the additional regulations imposed on manufacturing and other industries that we expect to see as the result of the increased authority of the Environmental Protection Agency (EPA) during the Obama administration’s second term.

We expect to see the following:

• The EPA will continue its campaign to regulate greenhouse gases (GHG).

• President Obama’s EPA is expected to quickly expand regulation of GHG (which currently only applies to new power plants) to older power facilities, oil refineries and, possibly, large industrial carbon emitters.

• President Obama’s EPA is expected to quickly expand regulations in general.

This concerns us because as with most manufacturing, carpet production uses a tremendous amount of energy and relies heavily on energy produced by coal.

If there continues to be increased regulations imposed on power plants, we can expect to see higher prices for oil, gasoline and other fuels which will result in increased costs for electricity and for the transportation of goods. This will result in higher prices all around.

The increased cost to the industries will then be passed down the line to the consumer, driving down competition in the United States while making us less attractive in the global marketplace at the same time.

Some of our other concerns have to do with this administration’s “comprehensive energy policy.” We expect, for example, that:

• The president will continue to walk a fine line on natural gas exploration and the “fracking” policy as his administration will be receptive to environmental concerns to increased drilling — particularly on federally-owned lands — which could potentially slow production of both natural gas and oil.

• These policies, along with environmental regulations that will disincentivize coal use and efforts to remove tax incentives for oil and gas exploration, could push energy and transportation prices higher.

We hope that the president and members of Congress will indeed follow what Obama is calling his “balanced approach” and will consider what’s best for American business with respect to increasing regulations that may well jeopardize many American industries.

The health of our economy and our future as a powerful nation is at stake.

Werner Braun is president of the Dalton-based Carpet and Rug Institute.

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