Wall Street No Longer Likes Congressional Gridlock

Privatizing Social Security: The bear market has taken some steam out of the idea, but then-candidate Bush supported individual controls over Social Security benefits, and Wall Street would love to administer such programs

.

Guns, butter and more guns: With war with Iraq looming and the ongoing battle against terrorism, defense spending is almost certain to rise. Republican control would likely result in even higher military expenditures, including projects such as missile defense.

While it's not part of the legislative list, Wall Street also hopes Republicans will take a more laissez faire approach to corporate reform and regulation of the scandal-ridden securities industry, which has given 54% of its campaign donations to Republicans, according to the Center for Responsive Politics, a nonprofit organization.

Still, Republicans can at best hope for slim majorities in both houses of Congress. "It's na¿ve to suggest you'd get the enactment of sweeping reform legislation," Valliere said, noting that tax-cut and spending bills require a "supermajority" of 60 votes in the Senate and that it takes 67 votes to defeat a filibuster.

In fact, some are calling this the "status quo" election. The odds at the end of the campaign favor Republicans retaining control of the House and Democrats maintaining control of the Senate, according to the University of Iowa's Electronic Stock Market.

For Every Silver Lining, a Cloud

Still, if Republicans do sweep on Nov. 5, there might be some negative economic consequences. And President Bush may have regrets in 2004 if a Republican majority fails to pass significant legislation and/or get the economy moving again.

Related Stories

Congress Braces for High-Stakes Vote

Wall Street No Longer Likes Congressional Gridlock

Democrats' Pocketbook Campaign Comes Up Empty

Social Security Battle Looks More Like a Ballet

Wall Street Tries to Buy Lenience on Election Day

The Congressional Budget Office now is forecasting deficits will continue through 2005 and that the total surplus for 2003 to 2012 will be just over $1 trillion.

Trouble is, the $1.35 trillion tax-cut legislation sponsored by President Bush in 2001 and passed by Congress was based on prior CBO forecasts for a surplus of over $5 trillion in 2011. The surplus is rapidly eroding, but Republican support for the tax cuts is unwavering.

Combine that with seemingly unfettered spending across a host of areas and it's likely that federal deficits will widen further.

"Essentially, George W. Bush ran on a platform of being a tax-cut-and-spend Republican," said Steve Soukup, a political analyst at Lehman Brothers in Washington, D.C. "Both in Congress and what the administration has pushed there has not been a whole lot of fiscal discipline. Republicans may wish to make the argument they're holding the line on spending but that hasn't proven to be the case."