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Busch: 2012 Presidential Race and S&P

Thursday, 21 Apr 2011 | 1:37 PM ET

What does the 2102 US election have to do with the S&P downgrade and warning?

Everything.

Since Obama announced on April 4, the president's numbers have gone down in every poll conducted during that period according to The Hill.

This isn't surprising given that gasoline prices are at new highs and the economy is not kicking off enough new jobs to make people feel good. Gallup has Obama's approval rating at 41% and is a tie for the lowest of his presidency.

Recently, I asked a pollster who would win between President Obama and most of the Republican field if these economic conditions remain in 2012. With the exception of Palin and Trump, almost every Republican would beat the President. Again, this was just an opinion and isn't clearly borne out of the data....but it highlights what voters are concerned about.

Back in January voters were asked this question by Quinnipiac University, "Do you think President Obama's policies have helped your personal financial situation, hurt your personal financial situation, or haven't made a difference?"

Helped: 19%

Hurt: 29%

No Difference: 51%

On March 31st, Quinnipiac polling found that American voters disapprove 48 - 42 percent of the job President Barack Obama is doing and say 50 - 41 percent he does not deserve to be re-elected in 2012, both all-time lows. "This compares to a 46 - 46 percent job approval rating and a 45 - 47 percent split on the President's re-election in a March 3 survey....In a hypothetical 2012 matchup, President Obama gets 36 percent of the vote to 37 percent for an unnamed Republican challenger." Quinnipiac is seen as a non-partisan, objective pollster.

On the campaign trail last night at Facebook HQ, President Obama stated this about the Ryan deficit reduction plan, "Yes, I think it's fair to say that their vision is radical ... No, I don't think it's particularly courageous ... because the last point I'll make is this. Nothing is easier than solving a problem on the backs of people who are poor or people who are powerless or don't have lobbyists or don't have clout. I don't think that's particularly courageous."

What does this mean for the markets? Sadly, the rhetoric on the campaign trail is normally heated, partisan and not conducive towards compromise. Even if you disagree with the opposition Republican plan, it's almost impossible to see where there can be agreement with these competing visions of the future.

To me, this supports what S&P said when it downgraded the US outlook from stable to negative due to the likelihood that nothing of merit will be accomplished on the US budget deficit before 2013. This is one of the reasons I believe we will continue to see a US dollar devaluation.

With the potential for no meaningful steps towards a solution or compromise due to the presidential election, we're well on our way to making S&P's warning a reality.

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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 contributor to CNBC's Money in Motion Currency Trading.You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch .

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