MarketWatch - 3 Factors Deciding The Next President
The Romney campaign is asking, "Are you better off?" while the Obama campaign is asking to trust them to finish the job. But while the candidates can give speeches, shake hands and kiss babies all day long, there are three economic factors that will decide who will be the next president.
With the stock market rallying more than 11% thus far this year, President Obama has a silver lining in the gray cloud that is the economy. If you have invested in the markets, you probably made some money.
But while companies have beaten lowered expectations, revenue growth has disappeared as a recessionary drag from the euro zone and a weak consumer has impacted sales. However, the markets have ignored the fundamental underpinnings and have been rallying on hopes of further quantitative easing by the Federal Reserve and bailouts of Spain and Italy by the ECB.
With the likely chance that Fed Chairman Ben Bernanke will not act before the November election, this disappointment is likely to send stocks sharply lower. This rapid decline would impact consumer confidence and have a negative psychological impact on investors and companies, which would play well into Romney's favor as individuals tend to vote "emotionally."
With the most important jobs numbers coming out this week, employment is the biggest concern for the current administration, as companies are sitting on cash and not hiring. Since Obama took office, full-time employment remains 1.4 million jobs lower than the day he started. And while temporary jobs have increased by 1.5 million, they do not give individuals the ability to sustain their current standard of living. The result has been lower consumer confidence, as they max-out credit cards and tap into savings to survive.
The problem for Obama is that his plan to increase employment has been focused on the wrong areas. While he has pushed for new technologies and support failing enterprises, the problems that keep businesses from hiring — uncertainty and poor sales — remain the biggest hurdles to hiring by businesses. And the highest levels of unemployment are in several battleground states.
For Romney, the employment landscape is where he should make his stand. Focusing on a plan to jump start hiring in the U.S., reducing restrictions and regulations and creating a clear path on future tax issues will go a long way at getting U.S. businesses to hire.
While Romney still has to prove he is the right leader to create jobs, if the economic data remains negative, those millions of unemployed and under-employed may be willing to pick a different leader to help them.
Global and domestic debt
Lastly, the ongoing economic crisis in Europe coupled with our own country's debt problems could be the deciding factor in the election.
Greek debt defaults, Spanish and Italian debt problems and China's preliminary economic woes could have a devastating impact on our own economy. A worst-case scenario is a sharp resurgence in the euro-zone crisis that quickly pushes the domestic economy into recession. Even if Germany helps "save" the euro zone, which is highly unlikely at the point, the Obama administration has distanced itself from the issue in the public sphere and will get no credit for any type of euro-zone debt solution agreement.
Domestically, we just saw the national debt go to $16 trillion, and the turmoil revolving around the "fiscal cliff" could have a major impact on how people vote.
That fact is, government debt alone has surged by 40% since Obama took office and off-balance sheet liabilities from Fannie Mae, Freddie Mac, Social Security and Medicare have continued to swell to enormous levels.
While the Obama campaign may continue to point to the mess that President Bush left them and tout that bailing out General Motors (NYSE:GM) was a good thing, the average American isn't quite buying in. They know a bad investment when they see one and they are fairly certain that bailing out the banks, Wall Street, AIG and a litany of others was not ultimately a good thing for them.
Romney and Ryan need to come in strongly on this front with a reasonable plan to offset spending on projects that will yield a positive economic return with austerity measures to begin reigning in debts and liabilities. A plan to reform Social Security and Medicare is critical but must not impact current recipients and those within five years of retirement.
In conclusion, President Obama had four years to rebuild our country, and while he made some tough decisions that very well may have saved America from the brink of an irrevocable depression, he has failed to keep people in their homes and incentivize companies to hire. Luckily for Obama, Romney has done very little to persuade voters that "the other candidate" is the better man for the job.
Either way, in the next two months, how the stock market reacts to the Fed, whether unemployment dips or remains at 8.3% this week and if Europe's and America's debt problems unfold may very well decide who becomes the next U.S. president.
Lance Roberts is chief executive of StreetTalk Advisors.