Election 2012 and the Market
10 Jul 2012, 00h
Here is a simple prediction: If President Obama wins re-election the market will respond negatively (for a brief moment, at least). If Romney wins the election, the market will show signs of optimism. This is based on the perception that Romney is good for the market, and Obama is bad for the market. How does this assertion measure up to actual polling data, and how might it shape the outcome of the election?
According to a recent CNN/ORC International poll, sixty percent of Americans “say the economy will be in good shape next year.” Last October, only 39 percent felt similarly optimistic. One possible interpretation is that the poll reflects Republican optimism that Romney will win. Since those leaning toward Romney approximately equal 47 percent, and some of these believe Romney will win, the number of those with positive expectations would naturally climb. Also, the CNN/ORC poll shows that Romney is favored by those with higher income. This confirms the idea that the market favors Romney over Obama; that is, if the market represents Americans with higher incomes.
An Ipsos/Reuters Poll on the economy from 12 June suggests that only 32 percent of Americans feel the United States is on the right economic track. It is interesting, however, that this poll says more Americans think Obama helped the economy (50 percent) than hurt the economy (44 percent). Curiously, this poll shows that Americans tend to blame Congress for the stagnant economy.
What are the policies advocated by the two candidates? Romney wants taxes to be “fairer, flatter, and simpler.” He wants to cut red tape. He wants to cut government spending and make government (don’t laugh) “smarter.” Romney’s energy policy is pro-market and pro-oil. Romney is a businessman who thinks in the way of practical businessmen.
On the other side, Obama proposes eliminating tax incentives for outsourcing, cutting red tape for refinancing a home, and more money to clean energy. His chief problem in conveying a pro-market policy appears when we consider ObamaCare, which is now understood as a tax which will ultimately hurt small businesses (See “Five major ObamaCare taxes that will hit your wallet in 2013”). Obama’s energy policy has already cost many jobs, especially when he rejected the Keystone pipeline from Canada (initially blaming the Republicans for tacking obnoxious additions to the bill). Yet Obama has taken no corrective action on the pipeline, suggesting instead an agenda based on Left-environmentalist arguments about global warming (see “stopping the Keystone XL pipeline”).
Perhaps the most disturbing aspect of the president’s economic leadership has to do with so-called “green jobs.” These initiatives have proven to be a disastrous misallocation of resources, accomplishing very little in the way of energy independence. It is unfortunate for the president’s position that belief in global warming has been declining since revelations that scientists fraudulently manipulated the global warming evidence for profit (see Climategate scandal). The Obama campaign in 2008 had faith in the global warming message, and this faith seems to continue despite growing negatives.
As for the actual outcome of the election, some observers might compare 2012 with the election of 1980. In both cases we have a Democrat with a bad economy running against a Republican promising deregulation and lower taxes. The Republican should win, right? The situation in 1980 is not a good comparison, because in 1980 President Jimmy Carter’s position was weakened by the Iran Hostage Crisis. Also, in 1980, a Gallup poll showed Reagan ahead at the end of the primaries with 58 percent of the vote. Recent polls do not show Romney with any lead whatsoever.
At Real Clear Politics we find a useful summary of recent polls: RCP Average gives Obama a 2.7 percent lead; Rasmussen tracking has the candidates in a tie; Gallup Tracking has Obama ahead by 2 points; CNN/Opinion Research has Obama by 3 points; a Fox News poll gives Obama a 5 point lead, and the NBC/Wall Street Journal poll gives Obama a 3 point lead.
As for seasoned opinion, Rupert Murdoch is “doubtful” that Romney will beat Obama. According to an analysis of candidate fundraising by John Aloysius Farrell, Obama has more donors than Romney which translates into more campaign volunteers and more passion. “By the standards of the past, Obama is in the preferable position,” writes Farrell. Of course, the election is more than three months away. According to John Galt, writing for America’s Chronicle, “Today’s polls are bad long term predictors because they do not take into account events close to the election.”
Suppose we can predict a worsening economy by November, Obama’s numbers are bound to suffer; unless we adopt the cynicism of Oswald Spengler. “What is truth?” Spengler asked in his Decline of the West. “For the multitude, [the truth is] that which it continually reads and hears.” This is what Spengler calls “the public truth of the moment, which alone matters….” Spengler believed that democratic politics led to “an appalling caricature of freedom of thought” in which the “dictates of party leaders supports itself upon that of the Press. The competitors strive by means of money to detach … peoples … en masse from hostile allegiance and to bring them under their own mind-training.” According to Spengler, feudal obligations have been replaced by a regime that “shapes men’s souls with articles, telegrams and pictures….”
There is truth in Spengler’s words, which leave us wondering which party is more effectively shaping men’s souls. This answer should be obvious to the well-informed, though it will not be obvious to those who have been “shaped.”