Busch: The Obama Halftime Adjustment
In speeches I’ve given over the fall, one of the areas I’ve pointed out to watch for positive change has to do with President Obama’s approach to business.
Over the first two years of his administration, the relationship has been acrimonious and disconcerting. Given an economy that has been in the throes of the “Great Recession” which generated a 9.6% unemployment rate, one would think that the leader of the country would attempt polices that would encourage growth and reduce barriers to job creation.
Sadly, this has not always been the case.
From health care to fin reg to the EPA, it appears that the Obama administration has had an agenda and has not deviated from that agenda despite the economy. (Yes, they did pass a stimulus bill that cut taxes….but raised them in the health care bill and larded up on regulations.) Again, my view is that reducing the burden of government (regulation&taxes) on individuals and businesses is going to generate job growth the fastest. The American electorate showed their displeasure by a massive 60 vote swing in the US House of Representatives.
After the election, the question that the markets had was this: would President Obama remain an ideologue (sticking to views despite voter disapproval) or would he shift to the middle?
My belief is that most politicians are self-preservationists and actually do listen to voters.
The markets hope is that President Obama would shift towards business friendly policies and become just like our last very good Republican president, Bill Clinton. Just kidding, but the point is that the president of the United States must rule from the middle and must forward policies that are supportive of economic growth.
Guess what? President Obama is following the centrist pattern. Yes, he’s starting from a distant point and has a long way to go. Nevertheless, this is what the markets will appreciate and the economy will benefit. Where does this show up?
First, the President took the US Chamber of Commerce along with him when he went to South Korea for the KORUS discussions. The free trade pact didn’t materialize, but the two former adversaries were on the same side of the issue. Yesterday, Bloomberg carried a story discussing the new overtures towards business.This is a very good sign that the President not only recognizes something needs to be done, but that he’s reaching out. Proof is another matter.
Next, the biggest step towards reassuring the markets will come from President Obama’s stance on taxes. Already, he has moved from no extension of the Bush tax cuts for those earning over 200k to a temporary extension of 2-3 years on extensions for all taxpayers. However, the President needs to go further and recommend cutting the corporate tax rate and passing business tax extenders. We’ll know very shortly how he comes down on this issue when Congress gets back in session.
Finally, President Obama can get out in front of the coming fiscal nightmare by recommending Congress move on what his fiscal panel recommends. This would be a long-term positive that would help the US avoid the European train wreck that is devastating PIIGS finances and prolonging economic pain. Unfortunately, it appears that the political will won’t be found until a crisis confronts the US. At the very least, the President will have a plan ready to enact.
Does this sound a bit too cheerful? Definitely. However, the one thing I’ve learned over the years on politics and the markets is that things change….rapidly. A Republican House will help steer the President back to the middle and that will benefit everyone…..including the President.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.