| | | Thursday, December 3, 2015 | Issue #2688 | |
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Don't Blame Trump Supporters... Blame George W. Bush Alexander Green, Chief Investment Strategist, The Oxford Club
 The 2016 presidential contest will be one of the most consequential elections in modern history.
It will have enormous ramifications for national security, the economy and, yes, the stock market.
The primary domestic consideration, in my view, is whether we will become more like Europe, with greater government intervention in the economy, more entitlements, greater welfare programs, more redistribution and higher taxes... or return to our roots as a country founded on limited government, low taxes, individual initiative, personal responsibility and fiscal sanity.
I'm not a Republican. I'm a libertarian. (That means I belong to no organized political party.) I do favor some of the conservative pro-growth policies: fewer government regulations, lower corporate tax rates, tort reform, a simplified tax code and so on.
History shows these things increase rather than decrease total tax revenue, helping to solve the debt problem we face.
However, if Donald Trump is the eventual Republican nominee - and the polls suggest he may well be - we will get none of these things.
Not because Trump doesn't favor them or wouldn't implement them, but because he doesn't have the proverbial snowball's chance in hell of winning the general election.
You can thank George W. Bush for that.
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For decades, conservatives said, "If we only had a Republican House, a Republican Senate and a Republican president, we'd have limited government, a balanced budget, a flat tax, tort reform and all the other pro-growth policies that lead to great economic prosperity."
Well, under Bush 43, those partisan planets finally aligned.
And, aside from the invasion of Iraq - the biggest foreign policy blunder in American history - here is what this Republican trifecta delivered:
- The largest increase in entitlements since LBJ
- An enormous increase in the size and scope of government, thanks in part to the ill-conceived Patriot Act
- Record government spending
- Record government deficits (at least until You-Know-Who came along)
For many conservatives, this was the last straw.
Some people imagine the Tea Party movement rose in protest of Barack "The primary domestic consideration, in my view, is whether we will become more like Europe, with greater government intervention in the economy, more entitlements, greater welfare programs, more redistribution and higher taxes...
"Or return to our roots as a country founded on limited government, low taxes, individual initiative, personal responsibility and fiscal sanity." | |
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Obama's policies. Wrong. Check your history. It was a reaction to George W. Bush's policies.
The sad part is that if Republicans actually enacted their own proposals, it would give a huge boost to the economy and the stock market.
This is more than just a theory. Over the eight years of the Reagan administration, 20 million new jobs were created. Inflation dropped by two-thirds from 1980 to 1988. Unemployment fell from 7.6% to 5.5%. The net worth of families earning between $20,000 and $50,000 grew by 27%. Real gross national product jumped 26%. And the Reagan tax cuts saved the median-income two-earner American family of four almost $9,000 in taxes.
Voters did not fail to notice. Reagan won re-election in a landslide, taking every state but Mondale's Minnesota.
What does all this have to do with Donald Trump and the 2016 election? Everything.
When the Republican presidential candidates with actual government experience get out there and say they'll deliver - act surprised - limited government, less regulation, a balanced budget, a simplified tax code and the rest of the laundry list, it doesn't inspire conservatives. It reminds them how badly they've been had.
If anything, it sounds like Lucy saying, "Come on, Charlie Brown. I promise I'll hold the football for you this time."
As a result, many right-leaning men and women are throwing their support to Donald Trump, someone who at least doesn't have a proven record of jilting them.
But there's a serious problem here for those who care about domestic policy and would like to experience what happens to the economy - and the stock market - when free market forces are encouraged and unleashed.
Donald Trump is not electable.
Do the math. According to recent polls, 72% of Republicans would prefer one of the other potential nominees. But that's just Republicans. In a national election where conservatives, liberals, independents and the totally clueless all cast their votes, Trump doesn't have a prayer.
Republican officials, strategists and donors all realize it would be an electoral wipeout.
I don't usually quote politicians, but Sen. Lindsey Graham, R-S.C., stated the obvious rather plainly the other day:
"Trump would be an utter, complete and total disaster. If you're a xenophobic, race-baiting, religious bigot, you're going to have a hard time being president of the United States."
I can hear the Trump supporters loading both barrels right now.
Go ahead. Fire away. But understand that however strongly you believe in your man, the vast majority of the electorate does not share your affection.
A Trump nomination is a guaranteed victory for Hillary Clinton in the general election.
The only question is whether his supporters will recognize this before it's too late.
Good investing,
Alex
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Last week, Turkey shot down a Russian jet that strayed over its border. Now an outraged Russian general is calling for nuclear war. Here's what you need to know as an investor. Read On... | |
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Polls regularly show that investor Warren Buffett is one of the most trusted men in America. But our newest columnist disagrees strongly with that assessment. Read On... | |
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We're still months away from the primaries... and yet the political circus is already in full swing. It could wreak havoc on the markets in the months ahead. But today, Investment U Plus readers are discovering a play that should prosper regardless. To find out how you can get all the details, click here. | |
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