Six months into President Obama’s second term, a handful of sectors and related industries feel the effects of new policies, reform and refocusing
rss
30

5 Sectors on the Forefront in Obama’s Second Term

second term industriesThe Obama administration is only a few months into its second term, and while the Great Recession is in the past, the economy is still a central concern. Looking ahead to his second term, President Obama proposed several new policies in his State of the Union address that would directly benefit four sectors in particular: healthcare, alternative energy, construction and education.

The President’s proposed policies could now be threatened by sequestration. On March 1, 2013, spending cuts outlined by the Budget Control Act of 2011 and aimed at avoiding the debt ceiling officially took effect; the exact timing and ramifications of the cuts are still being determined. In addition, more spending cuts could result from new debt ceiling negotiations expected to begin in late summer.

As a result, the Obama administration may be unable to implement the policies put forth in the State of the Union address. Budget cuts and a divided House and Senate may prevent funding from being approved. As a result, IBISWorld has individually examined each of the four sectors mentioned in President Obama’s address to see how his proposals may influence the sectors’ performance during the next three years.

second term

Healthcare

The healthcare sector spans many industries, but President Obama has focused on a number of aspects of the sector. Specifically, in his State of the Union address, he pointed to prescription drug companies, saying “We’ll reduce taxpayer subsidies to prescription drug companies.” These subsidy declines have the potential to cut profit for pharmaceutical companies.

However, the negative effects will largely be offset by the 2010 Affordable Care Act’s benefits, which will expand the number of people covered by health insurance. With a greater number of people insured, more people will be better able to afford prescription drugs, increasing revenue for pharmaceutical companies.

Because some reforms in the Affordable Care Act are aimed at making generic drugs more affordable, the $44.7-billion Generic Pharmaceutical Manufacturing industry (IBISWorld report 32541b) is expected to particularly benefit, growing at an average annual rate of 5.0% in the three years to 2015 based on the already enacted healthcare reform. And as revenue grows, the industry will expand its workforce; the number of employees is expected to grow an annualized 5.3% over the next three years. The Brand Name Pharmaceutical Manufacturing industry (32541a), however, is expected to grow at a slower rate since there are no new reforms that will provide an extra boost to its performance (beyond expanded insurance coverage).

Funding probability: Because the Affordable Care Act has already been passed, funding for this sector is expected to remain steady.

Alternative energy

Funding for alternative energy has been a central part of the Obama administration’s effort to achieve energy independence. “Four years ago, other countries dominated the clean-energy market and the jobs that came with it,” the President said. “Last year, wind energy added nearly half of all new power capacity in America. So let’s generate more. Solar energy gets cheaper by the year. Let’s drive down costs even further.”

The two industries President Obama points to, Wind Power and Solar Power, have grown rapidly due to government aid. The Wind Power industry (IBISWorld report 22111d) receives subsidies in the form of production tax credits (PTCs). Originally enacted in 1992, PTCs were expanded enormously with the American Recovery and Reinvestment Act of 2009 (ARRA). PTCs were extended once more with the American Taxpayer Relief Act of 2012, though this last extension is only effective through the end of 2013. IBISWorld projects that the Wind Power industry’s revenue will grow an annualized 9.5% in the three years to 2015 if subsidies are extended.

In recent years, the Solar Power industry (22111e) has grown due to Bureau of Land Management policies aimed at speeding up the development of solar energy projects on public land. To date, 10 large solar projects have been approved, with a combined potential to generate enough power for 1.2 million US households. As a result of construction and deployment of those projects, both revenue and employment for the Solar Power industry are expected to grow at an average annual rate of 7.9% in the three years to 2015.

Funding probability: moderate. Alternative energy is not a vital resource for the US economy, but forms of funding for alternative energy projects have been extended many times, creating a precedent for funding in the near future. Also, to prevent a jarring removal of government aid, the American Wind Energy Association has proposed a program to phase out PTCs entirely by 2019, a compromise that could preserve funding in the near term. Funding would remain over the next few years, albeit slightly lower, but the plan would also set an expectation for alternative energy industries to wean themselves from government aid in the next decade.

Construction

A significant portion of US transportation infrastructure is old and worn, a problem which the President touched on in his State of the Union address: “Tonight, I propose a ‘Fix-It-First’ program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most.”

The Bridge and Tunnel Construction industry (IBISWorld report 23412), which includes the most at-risk parts of the nation’s infrastructure, has already been receiving federal aid. The 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act – A Legacy for Users (SAFETEA-LU) allocated the bulk of its funding to highway programs, which include bridges and tunnels. In 2009, the ARRA stimulus package also kicked in, adding funding to the construction sector. And the current Moving Ahead for Progress in the 21st Century Act (MAP-21) guarantees funding through fiscal 2014. As such, IBISWorld expects Bridge and Tunnel Construction industry revenue to grow an annualized 5.2% in the three years to 2015 due in part to expected continued funding.

Much of the funding for bridge infrastructure construction will be directed toward renovating and replacing structurally deficient (SD) and functionally obsolete (FO) bridges. The Federal Highway Authority monitors the numbers of SD and FO bridges and prioritizes funds for these projects. In 2012, more than 10.0% were SD bridges and almost 25.0% were FO bridges, figures that federal and state governments are working to reduce.

Funding probability: high. Transportation programs paid for by the Highway Trust Fund are exempt from sequester cuts, and implementing a nationwide private-public partnership that the President proposed would put no additional strain on federal budgets. Another funding package is likely to be passed once MAP-21 expires.

Education

The last sector that President Obama called out was education: “Tonight, I propose working with states to make high-quality preschool available to every single child in America.” Preschool instructional programs make up about 27.9% of the Day Care industry’s revenue (IBISWorld report 62441). Additional federal or state funding to preschools would be a large boon to the segment.

As for higher education, the President restated his goal to make colleges and universities more affordable. “Through tax credits, grants and better loans, we’ve made college more affordable for millions of students,” he said. “But colleges must do their part to keep costs down. So tonight, I ask Congress to change the Higher Education Act so that affordability and value are included in determining which colleges receive certain types of federal aid.” Lower-cost universities will likely benefit as they become eligible for more federal grants, but schools with higher tuition will likely experience a decrease in federal aid, forcing them to cut costs or hike tuition even further. In addition, subsidized loan repayment options like “Pay as You Earn” have already made the cost of a college education less of a burden for many students. As a result, the overall impact of any reforms on higher education will be neutral. The Colleges and Universities industry’s (61131a) revenue is expected to increase an annualized 2.6% in the next three years.

Funding probability: low. With regard to preschool, the segment is already seeing cuts and is unlikely to receive new funding. Sequestration-related cuts to Title I funding will result in an estimated 70,000 students losing funding to Head Start, a program aimed at three- to five-year-olds.

And revenue for the College and Universities industry will face additional headwinds. College access programs, including TRIO and GEAR UP, are examples of programs expected to face cuts due to the sequester. TRIO and GEAR UP are college-prep and financial-aid programs to help disadvantaged students, including first-generation college students, individuals from low-income families and individuals with disabilities, prepare for college. Funding will also be cut for federal Pell grants, and the sequester also mandates an increase in the interest rate for federal Stafford and PLUS loans, increasing the cost of college education for the disadvantaged.

Manufacturing

Although no specific programs were mentioned in the State of the Union address, President Obama stressed the importance of bringing manufacturing back to the United States. “Our first priority is making America a magnet for new jobs and manufacturing,” he said. “After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing back jobs from Mexico. And this year, Apple will start making Macs in America again.”

The Car and Automobile Manufacturing industry (IBISWorld report 33611a) rebounded after almost folding during the recession. Growth in the market for hybrid and fuel-efficient cars will help industry revenue grow an estimated 6.3% per year on average in the three years to 2015. Tax credits for fuel efficiency will further contribute to growth. As a result, employment in this manufacturing industry is expected to increase an annualized 3.3% over the next three years.

In addition to advancements in the automotive industries, President Obama mentioned 3D printing as another innovation that he would like to see flourish in the United States. He pointed to a manufacturing innovation institute in Youngstown, OH, where “a once-shuttered warehouse is now a state-of-the-art lab where new workers are mastering 3D printing that has the potential to revolutionize the way we make almost everything,” he said. “There’s no reason this can’t happen in other towns.”

In fact, 3D printing industries are brand new and growing rapidly. The 3D Printer Manufacturing industry’s (OD4428) revenue is set to increase at an average annual rate of 15.4% in the three years to 2015, while 3D Printing and Rapid Prototyping Services industry (OD4581) revenue is expected to increase an annualized 15.6%. Demand for mass customization will be a key driver for the growth of 3D printing and the related industries. Product changes are all done with software, meaning manufacturers have the ability to create custom products for each customer. With any success, this new model for manufacturing could even bring about a change in manufacturer’s business models, product lines and marketing strategies.

Funding probability: N/A

Looking ahead

With regard to improving the US economy, President Obama proposed policy changes and new spending programs in his State of the Union address that stand to benefit four particular sectors if implemented: healthcare, alternative energy, construction and education. The President maintained that increasing spending in these areas will contribute to building a stronger economy.

Still, the effects of the sequester that officially began on March 1 might sidetrack these proposals. Some of the President’s proposals might require additional funding that could be difficult to pass; others still are threatened by cuts that may kick in, removing not only future funding but current funding as well. Over the course of the next few months, specific impacts of the sequester cuts will begin to emerge, revealing with more clarity the extent to which the President’s State of the Union proposals will be affected.

For a printable PDF of 5 Sectors on the Forefront in Obama’s Second Term, click here

Comments (30)

Trackback URL | Comments RSS Feed

  1. jacque says:

    Although the article is few years old, it is quite comprehensive and detailed. And really, governance hasn’t changed too much in the past 10 for ECMS. The author makes some good points. One key addition is that the user roles need a governing body. For example, a call center rep needs a governing body that understands inbound call requirements, not necessarily someone from Sales and Marketing.

  2. Brice Ernest says:

    I might also like to state that most of those that find themselves with out health insurance can be students, self-employed and those that are without a job. More than half with the uninsured are under the age of 35. They do not come to feel they are needing health insurance because they’re young along with healthy. Its income is generally spent on housing, food, plus entertainment. Many individuals that do work either whole or part-time are not provided insurance via their jobs so they go without as a result of rising valuation on health insurance in the United States. Thanks for the concepts you reveal through your blog.

    • HCG says:

      Join in the Vancouver HCG Weight Loss diet program with Drlederman and live a
      healthier and beautiful life. Some doctors will tell you not to exercise at all while taking it.
      Now, the HCG excess weight damage approach is achieving several followers in this country.

    • Knowing the requirements and the choices you will have to make will give you a head start prior to enrolling in your certificate program.
      Becoming a Certified Nurse Aide, or CNA as it is commonly known, is
      a rewarding career choice that will provide unlimited
      experiences to you in the health career field. Phlebotomists can work at hospitals, plasma centers, blood labs and doctor’s offices.

    • Hello there! I could have sworn I’ve been to this site before but after browsing through some of the post I realized
      it’s new to me. Nonetheless, I’m definitely glad I found it and I’ll be book-marking and checking back
      frequently!

  3. Blasphemy! LOL Just kidding. Ive read through related stuff on other blogs. Ill get your term because of it. Remain strong! your pal.

  4. I don’t even know how I ended up here, but I thought this post was
    great. I do not know who you are but certainly you’re going to a famous blogger
    if you are not already ;) Cheers!

  5. 20 yrs old Tennis Coach Laverne Billa from St-Lazare, usually spends time with hobbies and interests like gardening, solution call center and ballet. Intends to retire and take the family to numerous great heritage listed destinations on the planet including Iguazu National Park.

  6. Going over these recent events, remembering her past, learning more about who she is, and realizing the different types of songs she has out today will not only honor who she is but
    be able to enjoy and respect the accomplishments she
    has made. You can watch live tv news on Zenga TV and other channels as and when desired.
    Of course, as soon as there is the slightest danger -avian flu or otherwise -our government jumps
    into high gear to infect every one of us, if possible,
    with its antiviral drug program against the slightest hint of avian flu.

    Here is my web site; us news and world report best hospitals

  7. There are numerous advantages off wholesale real estate investing.
    These house finders are affectionately termed “bird dogs. This is an easy way to get started—take one marketing strategy, learn and hone it.

    Feel free to visit my site small business admjinistration loans

  8. Milla says:

    Sweet blog! I found it while surfing around
    on Yahoo News. Do you have any suggestions on how to get listed in Yahoo
    News? I’ve been trying for a while but I never seem to get there!

    Thank you

    My site – clash of clans gemme gratis (Milla)

  9. Local PHA’s aree funded by thhe US Federal Government – under HUD.
    If all the amenities are lready there, making an investment can be a wise
    decision. You are able to help the Byers by letting them rent to own the
    house.

    my site – small buskness digest – http://wavesdirk75.artician.com/portfolio/Essential-Guidelines-In-Small-company-Startup/ -

  10. life app says:

    I was curious if you ever considered changing the structure of your blog?
    Its very well written; I love what youve got to say. But maybe you could a little more in the way of
    content so people could connect with it better. Youve got an awful lot of text
    for only having one or two images. Maybe you could space it
    out better?

    Check out my web page life app

  11. chamilia says:

    The event, held at LES lounge Beauty and Essex, allowed guests to experience the beauty of PANDORA Jewelry and
    enjoy a meet and greet with the couple. The shapes and fashions you
    can get this stuff are simply just overwhelming. Unfortunately,
    the site has been blocked from use outside of the United States and its territories except for the Japanese version.

  12. For example, if your home office is 100 square feet and your home is
    a total of 2000 square feet, then your percentage is 5%.
    If you have received IRS tax notice, you need not to be panic.
    You would possibly make an sum of cash similar to a consequence of the Regional group.

    My page – Boca Raton CPAt test

  13. What iis the maon advantage of your product or service and why should somebody buy
    it insstead of one from somebody else. Your internet marketing efforts are heaavily dependent on the words you select when you’re crafting your sales
    copy. Wanting to get rich by running your business is really a good thing so ong as you do nnot allow anything to detract you from your
    goal.

    Look at myy blog post: boca Raton seo experts

  14. With havin so much content do you ever run into any issues of plagorism or copyright violation?
    My website has a lot of unique content I’ve either authored myself or outsourced
    but it seems a lot of it is popping it up all over the internet
    without my agreement. Do you know any techniques to help
    prevent content from being stolen? I’d truly appreciate
    it.

  15. Good article! We are linking to this great content on our site.

    Keep up the great writing.

  16. However, when choosing a plastic surgeon some things are to be
    kept in mind. You have to be very clear about why you want the nose surgery done.
    Often fine dining and jewelry discounts are offered.

    Here is my web site: nose job korea price

  17. I really like reading through a post that will make men and women think.
    Also, many thanks for permitting me to comment!

    Feel free to surf to my site: Dennis Rother (http://www.Washingtonpost.com/)

  18. My brother suggested I would possibly like this blog. He was once entirely right.
    This put up actually made myy day. You ccan not consider
    just how a lot time I had spent for this info!
    Thanks!

    my ppage :: en iyi bahis sitesi

  19. It’s not my first time to pay a quick visit this web page, i am browsing this
    site dailly and take pleasant data from here all the time.

  20. What’s up friends, how is the whole thing, and what you would like to say concerning this paragraph, in my view its in fact remarkable for me.

  21. Tax law about businesses in the USA is ever changing.
    With good habit and savings, you can be assured of having enough to start your own business.
    Typically, this works well if we are involved in a solid networking and we reciprocate, by referring clients to those other businesses.

  22. Although HCG is only produced by females, HCG is an effective way to drop excess excess weight for the two
    genders. The target for the five hundred calories is high-protein foods.
    The HCG diet uses h – CG drops, combined with a very low calorie diet for weight loss.

    my web-site best choice For weight loss

  23. They might be a good fashion declaration at home however, not in Spain. The most incredibly efficient
    solutions and options encompass a dynamic piece referred to as
    DHA. A tanning solution provides the right kind
    of solution which is always extremely helpful in showing the best kind of effect on your
    face.

    My website; st tropez self tan

  24. Tiffiny says:

    Look into their years of experience in managing
    small business accounts so that you can get professional advice on various
    financial matters. Further, amount of loan must be need-based,
    subject to ceiling of Rs 25,000 per borrower for
    purchase of machinery or equipment etc, and meeting working
    capital requirement of one operating cycle. What you give away
    doesn’t have to be costly, but it must be valuable.

  25. If you are going for finest contents like
    me, just visit this site everyday as it gives quality contents,
    thanks

  26. you’re actually a excellent webmaster. The website loading velocity is incredible.
    It seems that you’re doing any unique trick. Furthermore, The contents
    are masterpiece. you’ve performed a fantastic activity in this
    subject!

  27. Silvia says:

    This performa reduce the confusion of guest and relatives and give very precise information to them.

    So how can the happy couple reduce the unrivalled stress levels that come with
    such an predominant event in their lives. Ideal for colour schemes featuring marine tones for a summer seaside wedding.

Leave a Reply




If you want a picture to show with your comment, go get a Gravatar.