In a McCain Presidency Markets Would Breathe Sigh of Relief

Capitalism creates the most wealth for the greatest number of people. A look at socialist regimes throughout history can attest to that. In large part, capitalism is responsible for the United States’ greatness (and the economic freedom that should go hand and hand with it). Last time I checked, capitalism requires capital. Labor depends on capital investment, not the other way around. From an economics perspective, stripping investors of capital will not promote prosperity; any view of prosperity including job growth. Let us now wrap our minds around higher dividend and capital gains taxes. How will stripping investors and business owners of capital promote economic growth? A break down of Senator Barack Obama’s tax plan can be found here:

European Levels of Taxation: Barack Obama’s Tax Plan

A John McCain presidency will be welcomed by the stock market. The country is searching for psychological relief.

The consumer has not been left behind yet. Spending is up 3% at an annual rate over the past three months. March and April saw individual increases in spending that preceded distribution of rebate checks. The consumer low occurred in February. Basically, consumers keep on trucking despite lowering consumer confidence (increasing economic fear) data from the University of Michigan Consumer Sentiment Index. S&P 500 earnings continue to beat expectations outside of financials. Forward earnings for five of the ten S&P sectors are at all-time highs. That includes sectors insensitive to inflation: health care, consumer staples, and information technology. The two-year plunge of housing wealth, a 52-week 98% increase in oil, and hammered retirement accounts haven’t slain the consumer. One might think it would have happened by now. On top of those huge factors, defaults on revolving credit lines have stayed fairly level. The stock market is treading water but wants to see pro-growth policies locked in for the next presidency.

The University of Michigan’s index is a strong indication that economic fears abound; namely rising inflation expectations, a battered financial sector still searching for liquidity, and an uncertain energy future. Of the two presidential candidates we’re left with, McCain will be most helpful to the stock market. He will resist raising taxes. McCain’s fiscal conservative colors have been questioned but he’s the Ronald Reagan of election ’08. Increased off-shore drilling is a part of McCain’s energy plan. Both candidates call their plans “comprehensive,” but Obama’s has no place for increased domestic oil exploration or clean coal. Obama has also waffled on nuclear. Do Americans honestly believe an energy solution is possible without nuclear and clean coal? Most of us believe in conservation, fuel efficiency, and other demand-reducing mechanisms. Unfortunately the increasing hunger of developing economies drives global oil demand more so than the U.S.

France powers 77% of their electricity from nuclear energy and stores the waste safely underground. Ukraine and Sweden supply almost half of their energy from nukes.

Obama has said, “I have not ruled out nuclear…but only [would support it] so far as it is clean and safe.” Obama can visit France to see their nuclear system. Until then, nuclear will be a part of McCain’s solution.

In Norway, revenues from offshore oil production account for 30% of GDP. Oil production has made Norway a prosperous country and taken away foreign dependency on oil all the while being environmentally safe in the North Sea.

To take this country’s economy back we need nuclear energy, clean coal, natural gas to liquid, hydrogen, wind, solar, and oil exploration. McCain’s plan is best equipped to do this despite his reluctance to drill in ANWR. We can be energy independent at long last and provide high paying jobs to this economy.

Oil speculators set the market for forward contracts that allow businesses to lock in long-term prices for their oil (think airlines). An energy plan to increase domestic production would lead to speculators selling oil futures short and that would turn into lower spot prices for barrels. All around, McCain’s tax and energy policies will allow the market to let out a long sigh of relief. Uncertainty regarding the dollar and tax policy is holding the stock market down. The Fed and the Treasury are responsible for promoting the dollar and corralling inflation and lets hope they do. Along with a strong dollar, McCain’s tax policy will help unleash the greatness of America’s stock market.