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.