The US Presidential Election and the Fiscal Cliff

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After months of relentless campaigning, both Barack Obama and Mitt Romney received an October surprise in the form of Hurricane Sandy. Fallout from the extreme weather forced the president to cancel events in several swing states, and Romney transformed some of his campaign stops into last minute “storm relief events.” While Sandy has undoubtedly disrupted the two campaigns, only time will tell what effect the hurricane will have on the upcoming elections.

 

With the 2012 presidential election promising to be one of the closest in history, President Barack Obama and his Republican challenger Mitt Romney are bombarding voters in swing states with a flurry of ads and personal appearances in an attempt to gain an edge in the Electoral College delegate count.

 

Once again, Ohio has emerged as the proverbial kingmaker. A Romney win largely hinges on his ability to clinch Ohio’s 18 electoral votes. Propelled by his strong performance in the first presidential debate, the former Massachusetts governor has cut Obama’s lead in the state. A recent CNN/ORC poll shows the president’s once double-digit lead has been pared down to a mere four percentage points among likely voters.

 

A Strong Ground Game

 

Despite Romney’s momentum, Ohio remains Obama’s to lose. The President continues to dominate the ground game in the “Buckeye State,” and several other swing states, thanks to a powerful grassroots organization. Obama’s advantage on the ground is seen in the number of field offices each campaign team has managed to open in battleground states. In Ohio, the Obama campaign has 131 field offices, compared to only 40 opened by the Romney campaign. In Virginia, which Obama won in 2008, Romney has opened just 30 offices compared to 61 for the Obama team.

 

These campaign outposts are key to building a winning electoral base, and the Obama campaign’s sophisticated field operations are one reason Credit Suisse expects Obama win the presidential ballot.

 

“While this election will be one of the closest in U.S. history, we believe that President Obama will win re-election in November,” the bank writes in its latest Washington Notes. “The next few weeks will be a whirlwind of accusations, negative ads, political jockeying, and a roller coaster ride of polling data, [but] barring some major unforeseen event, the hurdles appear high, albeit not impossible, for Governor Romney to be able to get over the hump to the 270 electoral votes necessary to become president.”

 

House & Senate Elections 

 

While the spotlight is on the presidential race, November’s polls will also determine control of the House and Senate. “There is a lot at stake right now in the congressional elections that could change the political environment,” Credit Suisse writes. The bank expects the House to stay under Republican control, with the GOP winning between 226 and 237 of the 435 seats, down from their current 242.

Obamacare is Not the Solution to Tame Healthcare Costs, George Will Says

 

One of the major goals of healthcare reformers in the United States was to tamp down the country’s skyrocketing healthcare costs. Democrats argue that the Affordable Care Act’s focus on improving health outcomes and increased efficiency is a crucial first step in tackling the country’s healthcare costs.

 

However, in a recent talk organized by Credit Suisse, Washington Post columnist George Will claimed the act, widely referred to as Obamacare, does little to control spending.

 

Healthcare expenditures are equivalent to roughly 15% of the country’s Gross Domestic Product (GDP), and Will told the audience at Credit Suisse Private Banking USA’s New York Wealth Management Conference that corralling these costs is a key element in reducing the US budget deficit.

 

According to Will, current demographic trends could overwhelm government-run healthcare programs. He cautions that systems like Medicare were not designed to support a population with the sort of life expectancy experienced today. “Longevity is great, but if American people do not die when the Office of Management and Budget says so, then budgets explode,” he said.

 

Will also argued that the President’s healthcare legislation actually taxes job creation because businesses are forced to spend more moneyto comply with the law. He was kinder to the plan put forward by Republican vice-presidential candidate Paul Ryan, calling the Republican’s plan for healthcare vouchers the blueprint for a solution. Will has called the vouchers “premium support” that will subsidize care while also controlling costs. “We are growing, but we are not growing fast enough” to pay for government programs associated with healthcare and other social services, he said.

 

With the November elections rapidly approaching, Will noted that Obamacare is now part of a larger debate about the role of government. “We are arguing about government and whether a government knows how to allocate wealth,” he said. Many people both inside and outside the Beltway are hoping the elections bring some clarity to the debate, since the question has paralyzed Washington for most of the last year and hampered the government’s ability to address the fiscal challenges that concern Will and many others.

 

In the Senate, the election remains too close to call. The Republicans’ original plan to regain control of the Senate hinged on picking up seats in Montana, North Dakota, Nebraska, and Missouri. Controversial comments on women’s reproductive rights by Missouri Republican Todd Akin and Indiana’s Richard Mourdock might sink any hopes of a GOP-controlled Senate, but the elections will likely be tight enough that neither party wins a commanding majority. The end result could mean that, regardless of whether Obama or Romney captures the White House, the president will have a stormy relationship with Congress.

 

The Fiscal Cliff 

 

Although the next Congress will have a crucial say in how the country tackles its long-term deficits, the current Congress will be left to manage the looming tax increases and draconian budget cuts that collectively make up the so-called “Fiscal Cliff.” Originally a compromise crafted by Congress a year ago as part of a deal to raise the debt ceiling, the Fiscal Cliff includes about $400 billion in tax increases and across-the-board cuts in discretionary spending.

 

The measure was designed to force the two parties to take up the unpleasant task of dealing with the deficit, and both Democrats and Republicans are aware that allowing the provisions associated with the Fiscal Cliff to go forward could push the US economy into a deep recession. The fear of the Fiscal Cliff between both parties paves the way to a compromise that will likely be drafted immediately following the November elections, before the newly elected Congress is even seated. According to Credit Suisse, such a compromise could extend the Bush tax cuts by one year. “While there is no clear indication how the Congress will definitively address these issues, we do expect them to be addressed in a “lame duck” session of Congress after the November elections,” the bank writes.

 

The irony is that, despite the hype surrounding the elections, it is the current Congress, not the Congress Americans elect in November that will likely make some of the most important political decisions regarding the future of the US economy.

 

Photo: MysticPolitics — Flickr