Obamanomics vs. McKeynesianism
With only four days to go before the election, it's worth asking: Who would be better for Wall Street -- President McCain or President Obama?
Or would Wall Street even care?
This view says Obama would be bad for the markets, if not just for his plan to raise capital-gains taxes, but for what an Obama presidency would mean: The economy would be in the hands of a Democratic president and a Democratic Congress led by Speaker Nancy Pelosi (D-Calif.), Rep. Barney Frank (D-Mass.) and Senate Leader Harry Reid (D-Nev.).
For fiscal conservatives, those are three horses of economic apocalypse.
Then again, this view (from a hedge fund manager and Obama supporter) says the market will surge 10 percent regardless of who's elected, likening the new president to a new chief executive who gets a honeymoon period.
Obama favors raising the capital-gains tax and taxes on the wealthy. But he also wants a tax cut for the middle class, on the theory that will help stimulate the economy. It's not quite supply-side Reaganomics. Let's call it Obamanomics.
Traditionally, investors favor Republicans for their low-tax, pro-free market policies. Wall Street gets left alone and they get to keep most of what they make. Pretty simple.
But this election is different.
There is widespread sentiment that the style of U.S. capitalism that got us into this financial crisis -- too much greed and free money, too little regulation and personal responsibility -- is due for a check-up, at the least, or an overhaul at most.
That works in Obama's favor. Also possibly working against McCain is that he's not a traditional, hands-off Republican, and Wall Street may not like that.
On the one hand, McCain wants to cut the capital-gains tax in half. Investors like that.
One the other, McCain wants the federal government to buy troubled mortgages, make them fixed-rate and then back them. That sort of massive government intervention and stewardship of functions traditionally left to the private sector would be anathema to a Barry Goldwater/Bill Buckley conservative.
Indeed, government-backed economic stimulus is one of the hallmarks of liberal economist John Maynard Keynes, whose name is mud to real conservatives.
McCain is not a full-on Keynesian. Let's call him a McKeynesian.
The latest poll of the investor class from Investors Business Daily/TechnoMetrica Market Intelligence shows a near-deadlock between Obama and McCain, with McCain holding a 47-46 percent advantage. Typically, the Republican candidate's lead is much higher.
Finally, there is this possibility: Wall Street may really not care that much who gets elected.
Even though the U.S. has become a more nationalized economy in recent weeks, both lawmakers and officials say it's a temporary measure -- the government will get out of the bank/insurance/bailout business as soon as it can.
That means Wall Street gets the best of both worlds -- the government comes in to clean up the mess, then lets the kids get back to playing. Wall Street's real concern will be for tighter regulation, but even that would not compare to ongoing nationalization.
It is Wall Street's business to make money. Regardless of who is elected president, be assured it will find a way to keep doing that.
-- Frank Ahrens
Posted by: sls213 | October 31, 2008 4:55 PM | Report abuse
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