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Romney Versus Obama: Who Will Be Better for the Economy?

This article was written by in Economy. 13 comments.

Here’s a topic that’s sure to get the public crotchety: politics. Just like I don’t talk about the most intimate details of my personal finances with my friends, I generally don’t discuss politics on Consumerism Commentary. I have friends who consider themselves Democrats, other friends who consider themselves Republicans, and others who prefer not to be pigeonholed with a label. I also find it pointless to argue about presidential candidates’ proposed plans — for just about anything — because as we’ve seen with every election for as long as I’ve been paying attention, whether the winner falls on the left or the right side of the spectrum, the practicalities of running a country deeply divided force policies towards the center.

And Democrat or Republican, politicians in today’s American must cater to those who can fund their campaigns: large corporations, wealthy individuals, and strong unions and organizations that lobby and throw money around in Washington, D.C. The two-party system, for the most part, is a sham. A fiscal conservative who’s a social liberal, for example, could never gain the support of about half the country.

Third-party candidates exist, and voting for them is not a wasted vote as Kevin McKee points out, but it would take significant public groundswell to make a difference. Even if that does happen, one of the two prevailing political parties would simply co-opt the movement’s perspective. For an example of that, remember how the Tea Party had an effect on the mainstream Republican agenda.

As the two biggest political parties answer to the same sorts of masters, during short piece of time that politicians are out of campaign mode and are actually governing, there is little difference in policy. As the recession came to engulf the United States, conservative Republican George W. Bush called for taxpayer-funded bailouts, and that’s likely to have been a similar concept to what a Democrat president would have called for. There may have been some differences in the details in the structure of the bailout, but it would have had the same basic concept. President Barack Obama continued similar policies. Together, the two may have prevented a full-out depression, but hypothetical situations are notoriously difficult to prove.

Policies set by the Office of the President react to the economic conditions surrounding it. There may be slightly different opinions on how to increase economic growth in terms of tax policy, for example, but the rules don’t rely on who is sitting in the Oval Office. Congress has a much bigger role to play in these decisions, and while the President has some influence, it doesn’t amount to much when it comes to everyday economic issues.

The exceptions to this rule can be big, however. With the help of Congress, Obama passed significant healthcare reform; Romney is vowing to dismantle it, but he’ll need to get through Congress first. Presidents also have the power to appoint Supreme Court justices, but that’s more relevant for social issues than it is for economic issues.

I’ve been asked a bit recently about who I’d prefer to see elected in November. From an economic standpoint, I’m willing to go on record saying it doesn’t matter much to me. Any tax law changes promised by the candidates have to get through the Congress, and regardless who wins, the proposed policy will surely be tempered to better address the economic headwinds. I don’t think my taxes will be much different regardless of who is in office. After all, Obama has been interested letting the tax cuts enacted during the previous term expire for as long as he has been in office, but they’ve stayed in place thanks to the prevailing opinion that low rates for the wealthy help stimulate the economy (though it hasn’t been proven to be true), and raising taxes looks bad when you’re trying to win an election, even if the election isn’t for another three years.

Prediction markets are more accurate than so-called experts when forecasting the winner. It’s still a few weeks out, but Obama’s strongly predicted to win with a 70% chance. That’s a huge advantage. There are articles that provide advice on which investments will be hot depending on who wins the election, so if you are focused on the short-term for your investing, you might want to look for suggestions about what to invest in under a Democratic presidency, but you may not need to. The good news for investors is that the stock market has performed better with Democratic presidents, despite the reputation for Republicans being better for business. I think it’s just a correlation, not causation, but that type of statistic hasn’t stopped most people from investing based on past performance.

Will Mitt Romney help the economy more than a second term of Barack Obama? It’s a question without an answer. Despite campaign promises, both would temper their policies towards the center of the political spectrum in order to work effectively with a divided Congress and a divided nation. Both would listen to very similar advisers; with economic advisers, most hail from Wall Street and big financial firms. Neither president would have control over the Federal Reserve Board or Congress. And while we can predict election results, we can’t predict other things that might affect the nation’s economy, like natural disasters or foreign entanglements.

Both presidents would have difficulty passing new tax laws that dramatically shift from the status quo, but when the Office does have a dramatic effect, it’s usually not along partisan lines. The Glass-Steagall Act that contributed to the financial collapse by allowing businesses to grow to the point of systemic interdependence was repealed under Clinton, who campaigned as a liberal against the power of big businesses. The conservative George W. Bush did more than any other president in recent years to interfere in the private sector, contrary to the general Republican stance of non-interference in free markets. Democrat or Republican, the overall economic policies reflect the needs of the overall economy, and if the country needs to continue moving its wealth into overseas military operations, there’s little hope for domestic economic growth.

I would focus my attention on the non-economic policies of both candidates if the personal choice is not already ideological. Preparing for what looks like an inevitable Obama victory based on prediction markets won’t be much different from a personal financial standpoint than preparing for a Romney victory.

Photo: Political Graveyard
The man in the photograph is our eleventh president, James K. Polk, all but forgotten to history if not for the song by They Might Be Giants.

Updated January 2, 2018 and originally published September 20, 2012.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar 1 Anonymous

Economy – Romney no question. I don’t see how anyone can logically argue how Obama’s policies are good for the economy. We already have 4 years of his policies and don’t see how the next 4 years will not be any different. I don’t see how any of the polices are pro growth. This isn’t to say Romney is perfect.. far from it.. but is the lesser of the evils.

Though the stock market (which isn’t the same) probably Obama. Though I would personally rather see a growing economy than a overinflated stock market.

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avatar 2 Anonymous

I find this kind of comment interesting because I’ve been paying attention and I can’t figure out what Romney’s economic plan is other than tax cuts for high earners. What little else his campaign has mentioned (so far, it should be said) is either not that different from what Obama is offering or is based on an assumption that Romney is a good businessman and therefore can fix the economy.

Obama’s policies have not “fixed” the economy, but we experienced, and are continuing to experience, the effects of decades of poor policies and real changes to the international economy and four years of any presidency are not going to fix that. We can debate what policies are pro-growth in a recession, but no president could undo this level of damage even with a supportive and functional Congress, which Obama does not have.

I think the markets would be much happier if we had two political parties that could work together on our real problems, which isn’t going to happen with the Tea-Party-cut-taxes-at-all-costs-or-obstruct representatives. Fiscal conservatism isn’t just about how much money you take in, it’s about how much you spend and all politicians like to bring money back to their constituents. We can tax and spend or borrow and spend, but we’re always spending and that’s not going to change unless we address political incentives head on. So, I’m going to have to outright disagree with your comment below. There is no point in trying to work with people who won’t compromise, especially in politics. I hope more moderates from both parties are elected, but I’m not holding my breath.

Anyway, Luke, great post in line with a number of other thoughtful posts.

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avatar 3 Anonymous

Let me add while you are correct Congress has much more involvement in approving/disapproving fiscal policies, the president (the leader) sets the tone. A good leader helps brings people together and resolve differences. If anything, Obama has been the exact reverse of this. It’s been about separate and divide. In my opinion Obama has been an failure of epic proportions in this area. He’s certainly no Clinton or Reagan.

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avatar 4 Anonymous

You said it, man. To the center, both candidates shall go. That’s how it works in every two-party system.

-Christian L. @ Smart Military Money

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avatar 5 Anonymous

Movement to the center can’t always be attributed to political expediency. After 20 years in the military and 22 in the aerospace industry I always felt like I was pretty far right politically, that is to say somewhat to the left of Attila the Hun. But when they tacked the Tea Party onto the far right I wound up squarely in the middle – well maybe not quite to the middle yet.
Obama is a spendthrift and he is being influenced by the powers within the military, the far left of the political spectrum and the FED. We simply cannot afford to spend our way into oblivion. Seniors like me who tried to “safe-up” their portfolios prior to retirement have taken a beating by ever lower interest rates and poor bond yields and we will apparently be punished far into the future (so sayeth the FED).
I admire President Obama, but feel he lacks leadership ability and executive hardness. When he looks into the future and makes promises about policies and programs, I think he makes one fatal assumption. Nothing bad will ever happen again! But it will. Having no preparation, no thrift and no disaster plan is bad for all of us because there will be another tornado, another earthquake, another Katrina, another bubble and probably more terrorist attacks. Now, the only way we will be able cope is by borrowing, and borrowing, and borrowing. I don’t think that’s wise.
Mitt or Barack — tough a choice … what we need is a progressive republican the likes of Teddy Roosevelt, but I can’t find one.

But that’s my opinion – I could be wrong :-0

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avatar 6 Anonymous

Good article, Flexo. I love the way you stay balanced and unbiased, even regarding politics.

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avatar 7 Anonymous

I agree. I totally thought this was going to be a firestorm but you managed to keep it balanced and centered.

I know who I will vote for in the end. And, like you said it has nothing to do with who I think will win because at the end of the day Congress prevails. I vote based on issues set to impact me swiftly and directly such as healthcare and a women’s right to choose.

I don’t think it’s Obama’s job to get me job or increase the employment rate. Given so many factors that are out of my control, it’s best to create an opportunity for myself.

We also didn’t get here in 4 years so I didn’t expect the economy to be fixed in that time. I think those that are crying about the economy need to buck up and get ready for the long haul. We’re in a position where politics is even more complicated and I have one life. I won’t spend it waiting for money hungry politicians to get it together.

For the inevitable commenters that will come here and mimic Mitt Romney’s assertion that 47% of Americans are lazy waiting for the government’s next check, read this article:

We’re all on the government’s tit.

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avatar 8 Anonymous

This economy is so vast, with hundreds of millions of participants, subject to economic cycles which seem to defy any party or person, that no president can have anything more than a marginal effect. Obama’s best intentions and stimulus packages hasn’t gotten the unemployment rate under 8%. Personally, I don’t think either will make a difference. Like NFL quarterbacks, they’ll be credited with victory or blamed for defeat in a team sport, but in all honesty, this economy is too big for any one person to make a dramatic impact.

Reagan made a difference by using the PATCO strike to symbolically end the wage-price inflation spiral. Clinton made a difference by closing military bases and releasing resources back into a growing economy. Other than those two, I can’t think of a President who really made a difference. Not even FDR made a big difference until WW2 broke out and lifted the economy out of the Great Depression.

But what do I know? :)

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avatar 9 Anonymous

You’re spot on when you say the economy is too big for one person’s control. This lesson was beat into me when I studied political science in college. That and the fact that the presidency is such an organic, flexible position. Presidents make of their reign what they want. They can be very pushy with legislation (think LBJ) or not. Yes, the president is granted power in the Constitution, but it’s what he or she does between the lines that might make an impact.

-Christian L.

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avatar 10 Ceecee

To me, with the economy, it gets down to do you believe in trickle down or trickle up. I have doubts about trickle down because people who run companies won’t hire if the demand from the masses is not there. Without money in the middle, demand suffers. So I guess I believe more in trickle up economics…….many people in the lower and middle classes spend any extra money that they get because they have needs that haven’t been met. The wealthy have more options about what to do with more money because they have not been going without. But it is the Congress that really has the power, and despite what InvestorJunkie says, I don’t think that even the almighty could make these guys work together……….as witnessed by the recently defeated Jobs Bill for War Veterans. How could you vote against that?

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avatar 11 Anonymous

Take a look at this:

“The startling bottom line is that the nation’s GDP has grown more than 45 times faster under presidents with little or no business experience than it has under presidents with successful business careers.”

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avatar 12 Anonymous

Thanks for linking to my post about third party candidates. I do understand that third parties generally don’t win, but I also think they are important because if one of them gains enough support then it can change the direction of the bigger parties. Think about the 2000 election. Al Gore lost because of the Green party and then he went on to become one of the most prominent environmentalists in the world while the democratic party has more fully embraced the clean energy movement. I don’t think that’s a coincidence.

I also have to take issue with you calling George W. Bush a CONSERVATIVE Republican. We haven’t had a conservative Republican in the White House since Reagan, and in my opinion George W is largely responsible for bringing Democrats and Republicans so close together that we needed the Tea Party movement to bring the Republicans out of the middle and somewhat closer to the right.

Finally, as far as your original question I definitely think there are differences in rhetoric, but once one of them gets elected they will just do what they want / what their financial backers want them to do. When is the last time you saw campaign promises fulfilled once that person got elected? These guys say what they need to say so they can get elected and then they do their own thing.

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avatar 13 Anonymous

Obama seemed like he cares the middle-class more than Romney and pays more attention to social wealth of the citizens. However, this has long-term consequences and that’s why, I think markets would be much better if Romney won the election. But at the end, as @Kevin mentioned, what we see on the Media was not the actual strategy neither for Obama nor for Romney. This is politics and once they are elected, they do what they want to do.

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