TORONTO -- Canada's economists are casting a cautious eye toward the re-election of U.S. President Barack Obama as his adminstration mulls a contentious pipeline and U.S. lawmakers face a potential fiscal crisis that could stall Canadian growth.
The election results Tuesday night generated another round of questions about whether the U.S. is a step closer to putting its fiscal house in order.
The country is heading toward a critical precipice, the so-called fiscal cliff, which would be reached if gridlock in Washington prevents a deal to extend about $600 billion in tax cuts and spending beyond Dec. 31.
Some, including Canada's Finance Minister Jim Flaherty, say if those measures are not extended, the U.S. economy could sink back into recession, which would ultimately hurt Canada as the U.S. is the country's biggest trading partner.
Also still uncertain is the future of TransCanada's contentious Keystone XL pipeline that would connect oilsands crude to U.S. markets, and whether the shaky U.S. economy could weigh further on exports of Canadian goods.
"There will be a period of unease as we now turn from the politicking to the heavy lifting," said Paul Taylor, chief investment officer of BMO Asset Management Inc. in a conference call.
"I think the real question is the extent to which the president will be able to reach across the aisle to, in a bipartisan way, deal with the very heavy lifting related to the fiscal cliff."
Many businesses have been sitting on piles of cash and reluctant to make capital investments or hire new employees as they await the outcome of the fiscal cliff scenario and for some economic certainty.
Concerns include whether Obama can draft, and gain support, for an alternative budget plan before hitting the cliff at the end of the year.
"The Republicans' retention of the House, the Democrats the Senate, means Obama will face the same fractured landscape that impeded the legislative progress during the last two years of his term," said CIBC World Markets senior economist Peter Buchanan.
"That leaves markets with significant policy uncertainty leading into the fiscal cliff and debt ceiling discussions."
While a Romney win would have almost certainly ensured the startup of Calgary-based TransCanada's (TSX:TRP) Keystone pipeline, some observers have suggested that Obama will be more critical of the project.
The president has already delayed a final decision on the pipeline after Republicans sought to force an ultimatum on the State Department, prompting the Obama administration to reject the US$7.6-billion Alberta-to-Texas pipeline in its entirety in February.
The State Department stressed the rejection was due to the fact that it would not have had enough time to properly weigh the new Nebraska route, not because of the merits of the pipeline itself. It left the door open for TransCanada to apply for a new permit, which it did in May.
Leaders in the oil and gas industry said Wednesday they are confident Obama won't hold the project down.
TransCanada issued a statement saying it still believes it will be approved.
"The facts that support the approval of Keystone XL remain the same -- and the need for this pipeline grows even stronger the longer its approval is delayed," the company said.
And Enbridge (TSX:ENB) CEO Al Monaco told investors on a conference call that he doesn't see much of an impact on the oil and gas industry from the outcome of the leadership race.
-- The Canadian Press