Although there are many partisan, esoteric and ancillary issues at play during this election, the primary and dominant issue is the state of the economy and the generally anticipated trajectory of economic activity.
In order for the Republicans and Romney to win the Executive and Senate, at least one of two issues were required to occur or be addressed. The U.S. needed to be in recession or on a recessionary trajectory and Romney needed to provide specific ways he would reverse that.
I am expecting an undramatic continuation of the present with an Obama reelection and a divided Congress with the Democrats retaining control of the Senate and Republicans the House.
Although it is possible that the Republicans win control of the Senate, the resulting gridlock in Washington will preclude any substantial legislative agenda.
I expect Obama to win the electoral vote and a majority of the popular vote, but only by a slim margin on both counts. Results very similar to 2004 are probable, with Obama garnering 286 electoral votes to Romney's 252. I expect the popular vote to be 50% Obama, 49.5% Romney and 0.5% alternative party.
The primary long-term domestic result of this election will be that Obamacare becomes permanent and irreversible, and the opaque Dodd-Frank rules continues to cause problems for the proper functioning of the banking system.
The immediate impact will be felt on the fiscal cliff/sequestration issue. An Obama win will obligate Congress to move toward the president's priorities in order to fashion a budget or simply allow the Budget Control Act to go into force.
Pragmatically speaking, this will mandate implementation of the tax and spending recommendations in the National Commission on Fiscal Responsibility and Reform, recognized by most as Simpson-Bowles.
Notable issues for individuals are:
- Federal income tax rates are reduced across the board.
- Capital gains and dividends are taxed as ordinary income.
- Mortgage interest deduction will be reduced to that on $500,000 of principal balance versus $1,000,000 currently.
- Municipal bonds lose federal tax exemption.
The immediate impact on foreign policy will be that Obama's reactive and/or passive polices will be continued, vs. Romney's more proactive proposals. The Iranians will interpret an Obama reelection as a signal that they may continue on their march toward nuclear weapons relatively unopposed. Israel will interpret this as a distancing of the U.S. from Israel diplomatically and militarily.
The Chinese generational power transfer begins on Thursday, two days after the U.S. elections. An Obama reelection provides them confidence that the U.S. position concerning Chinese currency and trade policies will continue to be passive, affording them the opportunity to concentrate on domestic economic issues.
There will be no national mandate delivered to either party, and turnout will be low. The eligible voter turnout in 2008 was at a 40-year high of about 62% due to the combination of a financial crisis and an exciting young presidential candidate.
A decline to about 55% for this year is probable due to the lack of enthusiasm by either candidate on any issue.
The single most important issue that was ignored by both candidates and parties was housing. Obama's housing policies have been an utter disaster but Romney refused to address the issue at all.
The Romney campaign and the Republicans more broadly appear to have relied on an economic environment developing during 2012 similar to the crisis of 2008, or at least recessionary, which would cause voters to reactively move away from Obama and the Democrats and benefit Romney and the Republicans as a result.
As it became clear a few months ago that a recession or recessionary trajectory prior to the election was unlikely Romney and the Republicans needed to provide an agenda that would cause voters to proactively shift toward them. They didn't.