Chandler: Little Difference in Obama, McCain Policies
The US presidential election is upon us. There is a young ambitious man of color running against an older white man. And yet, as different as they look, the policies that either will pursue are not all that different. Although this sounds like a rather dubious proposition, there is much merit to it.
First, the US political parties are not divided down ideological lines. In fact, much of the debate between the Republicans and Democrats could take place on the right-wing of the Tory Party in the UK. Second, consider that Obama and McCain have co-sponsored more than 80 pieces of legislation.
Third, on foreign policy, both support NATO membership for Georgia and Ukraine. Both want to take troops out of Iraq and put them in Afghanistan. Both want to keep the pressure on China to allow greater currency appreciation, and yet neither objected to the latest arms sales to Taiwan, which antagonizes the Chinese, just as cross-strait relations improved.
On economic issues, it seems that one of the US political parties traditionally prefers to borrow and spend and the other typically prefers to tax and spend. Yet the financial tsunami will likely limit the degrees of freedom of the next US president, regardless of their campaign promises and intentions. Neither candidate, if elected, will be able to prevent the US economy from falling into a deep and protracted recession. Neither candidate is likely to be able to prevent unemployment from rising. Neither candidate is likely to make the American dream — a house, a car and college education for one's kids — more accessible to a greater number of people.
There is a large time gap between the election and when the next President assumes office — a lifetime in the current economic environment.
If Republican John McCain gets elected, against the odds, it is possible that Treasury Secretary Paulson stays on. That might be good from a continuity point of view, but continuing the course is not apparently what people want, especially if the main fire chief is suspected of being one of the arsonists.
If Obama wins, as expected, there will most likely be a new Treasury Secretary. It would not be surprising, regardless of who wins that the top economic officials are announced early, perhaps in time to participate in the summit in Washington in the middle of November. Washington contacts suggest that former Treasury Secretary Summers is a likely candidate for the same post in an Obama Administration. He is experienced and played an important role for the US during the 1997-98 financial crisis.
Do not expect the markets to respond very much on the electoral outcome. If Obama wins, it is largely as expected and the markets respond more to unexpected developments. If McCain wins, that would be a surprise, but the impact on the market will likely prove short-lived.
To be clear, this is not to say that who is elected US President is not important. Few things are more serious. However, the economic and foreign policies might not be all that different and there are forces at work that may be greater than even the president of the most powerful country.
Marc Chandler is the global head of currency strategy for Brown Brothers Harriman. He has been analyzing, writing and talking about the foreign exchange market for more than 20 years. He is a regular guest on CNBC and his essays have been published in numerous economic and business publications. He previously served as the chief currency strategist for HSBC Bank USA and Mellon Bank.