Wednesday, February 06, 2008

Probing the Primary Plunge

It’s very curious that the stock market has plunged on either the day of, or the day after, the four or five recent primary election contests. While there may be no direct causality, one can’t help but wonder whether the investor class hasn’t been disappointed with the shape of this election battle.

Democrats are trashing rich people. They want to raise tax rates. Meanwhile, Republicans have been skirting around this issue. While some decent tax-cut plans are out there, there really has been no direct connection to investors. Remember, investors make up about 65 percent of the voting electorate. In recent national elections, nearly two out of every three voters owned stock.

Again, there might not be any causality between the market plunges and the primaries. But rest assured that a good number of people have been disappointed by the shape of this election battle. Nobody in either party has been reaching out to the investor class.

As far as last night’s primary results are concerned, one thing was made official: Mac is back. Sen. McCain is moving right along toward securing the GOP nomination. He is also developing some solid pro-growth tax reforms. This includes slashing the onerously high corporate tax rate and extending the Bush investor tax cuts on dividends and capital gains. This is good.

McCain may also be moving toward a broad-based, pro-growth tax-reform plan. He has surrounded himself with an all-star supply-side team that includes Jack Kemp, Phil Gramm, and Steve Forbes, along with senior McCain staffer Douglas Holtz-Eakin. So there may be some meat on the bones for investors after all.

Judging by the polls, Mac can win the grand prize this November. So higher taxes and a big-government surge are not inevitable. Investors take heart.