Now it looks likely that we will have a Democratic President in 2008. In the graph below, a contract that pays $1 if a Democrat is elected President is trading at $0.61 at intrade.com. This would imply a 61% probability of a Democratic President.
Can we use the same analysis to predict that a Democratic presidential victory would cause businesses and consumers to accelerate demand in anticipation of more regulation, higher taxes, and restrictions on international trade? Followed by a bust?
I have heard some macroeconomists suggest that the 1982 recession, and the subsequent expansion, were caused by anticipation of the Reagan tax cuts. Congress cut the marginal tax rates, the amount you pay on the last dollar you earn, 25% across all income brackets.
Looks like you may not necessarily be guaranteed a better situation in the event of a Republican victory:
ReplyDeletehttp://www.marketwatch.com/news/story/poll-shows-gop-voters-skeptical/story.aspx?guid=%7B3794F501-FE3A-4684-A88D-75CDBFE2D2A6%7D
"A majority of Republican voters view trade pacts as a negative for American workers, according to a new Wall Street Journal/NBC News poll -- a position that might cause fits for GOP candidates in next year's elections.
Fifty-nine percent of Republicans polled agreed with a statement that free trade has been bad for the United States and said they would agree with a Republican candidate who called for tougher regulations on foreign imports, the Journal reported. Thirty-two percent said trade deals have been good for the country."