Need to jump-start your economy? No need to spend hundreds of billions of dollars on Keynesian stimulus programs. No need to add a dime to your deficit. Nope, economic stimulation can be achieved with just two words – Conservative Congress.
As it turns out, simply voting conservative this November may provide a spark to the markets that could lead to some huge economic gains. The New York Post reported earlier this week,
“[M]idterm election years tend to presage good times on Wall Street no matter the outcome, with the market up 17 percent, on average, in the year after a midterm . . . but when the election leads to a divided government and a huge reversal in power, as it did in 1994, the gains can be even more stunning.”
As billionaire Kenneth Fisher of Fisher Investments told Bloomberg , “Markets love gridlock. What the market wants to see is no change: less legislation that engages in changes in taxes, spending, regulation, or property rights.”
In other words, markets love certainty, something that businesses have been telling President Obama and Congressional Democrats over the last two years. Instead, we’ve gotten massive legislative changes including healthcare and Wall Street reform that have left many small businesses wondering the increased cost of doing business.
Walter Hellwig of BB&T Management explains the frustration that many businesses face. “The current thinking is that the administration is punitive towards businesses and any erosion of power in Congress would create an environment that’s less punitive.”
Businesses don’t have an ally in the White House. So they are taking ‘the enemy of my enemy is my friend’ approach to fixing the situation. In that sense they are cozying up to the idea of sizable Republican majorities in Congress. The hope is that Republicans will slam the brakes on the Democrats’ agenda and potentially even roll back some of its more harmful business measures. Perhaps most importantly for businesses and investors it will likely mean that President Obama’s proposed tax increases on capital gains will not see the light of day.
Sensing that the political winds may already be signaling substantial Republican gains, the market has made a historic rally. On October 5th the stock market rose an incredible 200 points. The question is why is Wall Street putting the rally ahead of the results?
Former Reagan economic adviser Larry Kudlow has a theory – a newly released Gallup poll showing Republican’s are poised to make enormous gains in the midterm elections. The Gallup poll found that using their “high turnout model” Republicans lead by 13 percent in a generic ballot test. Using their “low turnout model” the Republican lead jumps to 18 percent. As Kudlow explains ,
“Now that’s a game-changer for politics and stocks. . . Anything that even slows down the federal tax-and-regulatory pawing of American firms could conceivably prompt businesses to unleash their massive cash hoard into something that more closely resembles a normal capital-goods-investment and job-hiring campaign — one that would increase economic growth and reduce unemployment.”
Judging by the numbers it appears clear that businesses believe a Republican Congress is the best prescription for their fiscal health. They understand the certainty that Republican majorities would bring to policy arena by providing a powerful check on President Obama’s progressive agenda. They see the opportunity to keep tax rates on investment low, the chance to roll back some of Obamacare’s more punitive provisions, and chart a more even course on fiscal policy.
In short, we don’t need another trillion dollar injection of taxpayer money into the economy. The reality, at least in the eyes of businesses, is much simpler. We just need to vote Republican.
by Brandon Greife, Political Director of the College Republican National Committee