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BofA Calls the Election, And It's Bad for Obama

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Bank of America Merrill Lynch experts think they have the presidential election next year figured out, and the news is not good for the incumbent.

President Obama likely will lose in a narrow race, while the Republicans also take complete control of Washington by getting a Senate majority as well, according to the BofAML “base case,” or most likely scenario that is predicated on a president’s chance of re-election amid a stalled economy.

“Right or wrong, the party in control of the White House is held responsible for the state of the economy,” writes Ethan Harris, BofAML’s North American economist.

So what will a changing of the guard mean for the sluggish economy?

Good things, according to Harris’ analysis.

For one, the country would not see the brinkmanship that has characterized the past year since Obama lost his congressional majority and the Democrats and Republicans came to loggerheads over the nation’s direction.

That would mean no more threats of deft defaults, government shutdowns and all of the other ills Washington has seen in 2011.

Meanwhile, some unpopular programs, at least to the political right, could fall by the wayside. Lackluster growth projections likely would be revised higher for 2013.

“Judging from the campaign rhetoric, a Republican government would roll back Obama Care and water down the (Dodd-Frank) regulatory bill, all of the Bush tax cuts would likely be extended and most of the mandatory defense cuts under the debt-ceiling agreement would likely be rescinded,” Harris said.

Republicans, though, would be under the gun to put up or shut up.

“Unifying government under one party would likely be better for growth than the current dysfunction in Washington,” Harris wrote, adding that “a unified government would have no one to blame for poor governance.”

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