Oct 17, 2004

Election Crunch

Today's News
Since the debates ended pundits have been spending a great deal of time analyzing Kerry's "outing" of Cheney's daughter. It is a bit amusing that it is taking air time away from the investigation into the administration's "outing" of a CIA spy. While the spy case will not reach the President or V.P., the leak was in response to Bush being called out for talking about Nigerian "yellow cake" in his State of the Union address. I recognize the need for the media to give equal time and their desire to make the election a horse race but at some point it stops making sense to weigh each candidate phrase by phrase and action by action without taking into account the ramifications of those actions. The two political maneuvers are not even in the same league and yet the air time is all going to Kerry's insensitivity.

On to the Bigger Question.
For the markets it is difficult to see either candidate making much of a difference. The deficit is too large and the global forces of my previous post are too strong for the US to do anything but struggle. Kerry's plan to move "catastrophic" insurance costs to the public sector seems promising because if he does manage to curtail healthcare costs that will improve U.S. competitiveness tremendously. Kerry needs to spend his entire tax hike though (and maybe more) which ensures that the risk of capital flight from U.S. markets remains high. Deficit, deficit, deficit.

The flipside, to me, is Bush's overwhelmingly bad track record. It was going to be a bad 4 years no matter what but he has spent too much on projects (Iraq war) which that have no monetary payoff. The short-sighted nature of his decisions means he could probably still make things worse. While the deficit growth has produced a lot of hand wringing by market watchers it has not had an impact yet and interest rates remain low. A Bush re-election alone would not alter the markets perceptions.

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