Foreign policy will be the focus of tonight's debate, but it's the economy that's more likely to decide the presidential election. In that case, who is the best man for the job?
Near the end of Obama's first term, the unemployment rate is 7.8% — its lowest level in almost four years but still historically high; the hemorrhaging in housing seems to have stopped but existing home sales recently retreated from two-year highs. Corporate profits reached record highs in the second quarter but seem to be retreating in the latest third quarter earnings reports.
Romney has attacked the president repeatedly for the weak economic recovery and has offered instead a "five-point plan" that includes tax and spending cuts, regulatory reform and improved education and job training, which he says, will help create 12 million jobs.
Related: Romney's Plan Would Cut Taxes on Rich, Raise Them on the Poor
Romney would extend the Bush tax cuts, slash income taxes 20% across the board for all and increase defense spending. He says his tax plan won't increase the deficit because money would be raised by closing tax loopholes. The nonpartisan Tax Policy Center says it will increase the deficit by $5 trillion over 10 years—maybe less depending on which loopholes are closed, but Romney hasn't provided those details.
Related: For Economy, It Doesn't Matter Who Wins, Ritholtz Says
"I don't think it makes a lot of difference (who wins) in the short run because the deleveraging that's taking place in the private sectors around the world is so great that it's really overwhelming pretty much anything they can do in Washington," says Gary Shilling, president of A. Gary Shilling and Co., a financial forecasting and money management firm.
Shilling says Romney or Obama could make a difference if their party ends up controlling both houses of Congress. In that case, there could be decisive action on reducing the deficit long term, he adds.
As it stands now, Shilling says there are advantages and disadvantages to the approaches of each candidate. Spending more on infrastructure and other stimulus, which the president has proposed, would boost growth but increase the deficit and distort the economy, says Shilling.
"Government spending builds constituencies and they don't go away, " says Shilling in an interview with The Daily Ticker. "The Tennessee Valley Authority was put in to tame the wild Tennessee River. How did they end up becoming the biggest coal fire generator in the country?
In contrast to Obama, Shilling says Romney's approach resembles the "Austrian school" to cut taxes and spending in order to "starve the beast." He says it might look promising at first glance "but can you do that in an economy as weak as it is without some dire consequences?"
Shilling says voters shouldn't expect any grand, dramatic changes to the economy no matter who wins the election.
"When people really get down to it, not as campaigners but as people in charge of the government and a big influence on the economy, they do try to act sensibly," he notes. Let's hope he's right.
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