What the Presidential Elections Mean for the Economy and You

This is a guest post by Milk Your Money — a daily blog dedicated to helping it’s readers reach their financial goals by making smart everyday money decisions.

Historic Economic Policy Beliefs

Historically, Republicans have believed in policies that favor a free market. Policies that would in any way burden businesses from growing, innovating, or conducting business would be met with strong opposition. Republicans generally believe that the lower taxes are on corporations and wage earners, the more our economy as a whole will prosper. There has been a strong and as we see it, final push from the Republicans on strong economic policies changes dealing with regulation. Political leaders like the Secretary of the Treasury and leading academics have called for an overhaul of the way our markets are policed, requesting less regulation.

RepublicansDemocrats obviously are on the opposite side of the room on many of the issues described above. However, the creation of the Blue Dog Democrats, a group of democrats that are fiscally conservative, has been trying to help build a bridge that both parties can meet in the middle of on economic issues of importance. Democrats believe more in the intervention of the government to help those in economic need and believe taxes should increase as profits and earnings do. In general, most Democrats appose making changes that would de-regulate our financial markets stressing the importance of effective regulation in the wake of WorldCom and Enron.

What to Expect if Democrats Win the White House

The Democrats appear to have an edge when it comes to winning the White House come November, of course anything can happen. Assuming the Democrats can keep control of their majority in both the House and the Senate and perhaps increase their leads in both chambers; drastic changes in economic policies could stand a likely chance of becoming law.

One area likely to see action immediate action is the issue of taxes. Both Democratic Presidential hopefuls have called for the repeal of President George W. Bush’s tax cuts (which have been generalized to be only for the wealthy) and to provide some type of economic relief to the middle class. Any overhaul of the federal income tax system could obviously mean a change in your yearly tax bill, an issue where everyone should be concerned.

Another area that is sure to be addressed, and is currently being debated, is the home foreclosure crisis. If the Democrats take control in November, you will likely see a more proactive government to help these struggling homeowners. Legislation would likely pass aiding money to those facing foreclosures; increasing regulations of mortgage lending; stronger look at the role credit rating agencies play; stronger enforcement actions; and efforts to increase transparency in the overall mortgage business. Regardless of your personal political views, the more we can keep foreclosure rates down, everyone will benefit in the end. The current crisis affects even those who pay their mortgages on time, a foreclosure down the street will decrease the value of your home and weaken the economy as well as your investments, because of these reasons, you will see strong changes in the mortgage lending in early 2008.

Other issues that are sure to be debated include aiding families stressed by high oil prices, costly student loans and soaring health-care premiums. All of these issues are sure to take a back seat to the struggling economy, and the Iraq War.

What about a Republican Victory?

It’s safe to say, if the Republicans win the White House, you will see a lot of the same with John McCain. Although the Democrats will likely control Congress, any major reforms dealing with the structure of our financial markets and our tax system will most likely be me with a veto.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

6 comments
Mark S.
Mark S.

What would the projections be for the strength of the U.S. dollar against other currencies?

Jesse
Jesse

I like that you are touching this topic as I know a bout of PF blogs avoid politics...but the truth is it WILL have an impact on all of us (as much as we would like to think it won't). I think one of the main problems is that over the past 15 years there really hasn't been much of a difference in fiscal policy. BOTH parties have been spending like we have some magic money tree. I am admittedly more concerned with Democrats controlling the whitehouse AND congress because the idea of large increases in taxes and government attempts at bailouts are disastrous (what we really need is a correction, not inflation). The best thing for all of us would be for the government to do NOTHING. The market can take care of itself and will fix itself...though it will be painful for a while.

tracy ho
tracy ho

Great post , love it,

Tracy Ho
wisdomgettingloaded

doohicky
doohicky

Edit:
I should say Republicans in Congress. Of course, not all
Republicans out there believe this way.

doohicky
doohicky

Republicans don't believe in free markets....
They believe in free subsidies that benefit their donors and inner circle friends. Steal from the masses who have no access to our "representatives" and give away the loot to the few who've turned this country into a corporatocracy...
Who needs to make a profit when you can rig the system to have taxes as profit?

Steve Olson
Steve Olson

Jeremy,

I agree with everything you've said here except one thing...

Keeping foreclosures down benefits everyone.

It doesn't benefit everyone. What about young people buying their first home, don't dropping prices benefit them?

Let me give you a personal view. When I bought my first home in 1994 it was 88K. I had my eye on several properties south of me which were on acreage and cost between 160 and 180K. I figured I'd get established in business, save some money, and buy my dream property when I was in a better financial situation. I saved and watched the price of these properties for 5 years. They remained basically unchanged. Then when we were ready to purchase, the prices went up 100% in 2000 and continued from there. By 2005 these homes were million dollar houses. I didn't understand it then, and I don't understand it now. But the banks were willing to finance this nonsense and the people were willing to borrow. What can you do?

Now the prices are finally dropping because they weren't worth the amount people were paying. There simply aren't enough people in our area in the million dollar home market to sustain this. Now people are foreclosing and the prices are dropping. IMHO it is a needed correction. Some of the homes have dropped 40% in the last two years and that is a good thing. I expect to see these homes under 400K in the next two years. No one forced these people to pay these absurd prices. There was stupidity in the market and now they pay the price. The government plan to keep foreclosures down will artificially prevent a needed correction. No matter what they do, the prices will eventually come back in line. Even the government cannot defy the marketplace.

Also if reasonable pain isn't felt now. The banks and the borrowers won't have learned their lesson. When you assume risk, it means risk, not a government guarantee. If the government protects them, they will keep behaving poorly.