Obama Presidency Could Be Tough On Tech Companies

Posted by Paul McDougall on November 5, 2008 01:36 PM

If you're an investor, now might be a good time to short stocks in the big tech companies. The Obama administration could make things rough on them.

President-elect Barack Obama has said he's committed to free trade, as long as it's "fair." But there's lots of evidence that Obama and the Democratic Congress are poised to usher in a wave of protectionism that could limit American tech companies' ability to invest in the world's hottest IT markets and compete internationally.

"Barack Obama and Joe Biden believe that companies should not get billions of dollars in tax deductions for moving their operations overseas," Obama states on his Web site. Obama also said he wants a tax credit for companies that increase the number of workers they employ in the U.S. relative to overseas.

Obama also wants companies to set up "flexible education accounts" for "workers in sectors of the economy vulnerable to dislocation before they lose their jobs." Those sectors undoubtedly would include IT, an industry in which multinational players like IBM, HP and Microsoft are growing their foreign workforces faster than domestic hiring.

Like most of Obama's campaign rhetoric, the pledges are purposely vague. But their populist, anti-business undertones are not.

Obama believes that Big Government, led by himself, is better able to decide how companies should spend investment capital and allocate labor than CEOs and CIOs. Obama believes that politicians, most of whom have never run a business larger than a lemonade stand, should decide how multibillion dollar outfits in state-of-the-art industries like IT ought to respond to a global economy that demands prescience and agility on an international scale.

Take Obama's plan to punish firms that ramp up jobs in emerging markets like India and China (you know, the places where all the growth is). Using taxpayer money to try and coerce companies into adding staff in the sluggish U.S. market, at the expense of investment in red-hot BRIC nations, is just bad economics.

It's hard to see how forcing American companies to waste capital will be good for American workers in the long run.

Still, there may be hope. In his acceptance speech Tuesday, Obama said he might not be able to accomplish everything he wants to do in one term (has the hedging on promises started already?). If, four years from now, America's crucial IT industry is lagging behind foreign competitors, he might not get a second term.