Wall Street Can't Decide Who's Better - Or Worse
Oct. 07, 1992
WASHINGTON (AP) _ Wall Street is skeptical about Bill Clinton - when it's not being skeptical about President Bush.
Financial markets are clearly jittery as the recent roller-coaster ride of the Dow Jones average and a slump in bond markets demonstrate. But analysts are having a hard time deciding whether a Bush or Clinton victory would be better for the economy.
There are two rival schools of thought:
- Investors would prefer Bush's re-election because he's a known quantity, they're used to Republicans in the White House, and Bush seems less likely to raise their taxes than Clinton.
- Investors are tired of four years of economic stagnation under Bush and since things couldn't get much worse, Clinton is looking better all the time.
There's no consensus. Many analysts suggest a general lack of enthusiasm in the financial community toward either major candidate and a widespread feeling of mistrust toward independent challenger Ross Perot.
Sorting it all out is difficult, underscoring extensive pessimism about the economy and the ability of either presidential candidate to fix it.
''I think the markets are having a tough-enough time digesting the data coming out on how weak the economy is,'' said Laurence H. Meyer, president of a St. Louis economic forecasting firm. ''They've got enough to worry about on economic fundamentals without having to factor in how Clinton versus Bush would change things.''
He said neither candidate has offered a plan to jolt the economy into recovery; and that the harsh deficit-cutting plan offered by Perot would make things even worse. ''There's nothing constructive about Perot getting back in the race,'' he said.
Economist Michael K. Evans, who operates a Washington consulting service, said he sensed ''opinion is actually shifting'' toward Clinton and away from Bush, whom markets earlier favored.
''Investors are saying maybe Clinton won't be so bad for the economy,'' Evans said. ''They're prepared to have Clinton win, and are getting used to it.''
The stock market plunged 54 points on Friday. On Monday, the Dow plummeted 105 points before regaining most of the loss and finishing about 22 points down. On Tuesday, prices were essentially unchanged.
Falling markets overseas, failure of the Fed to ease interest rates last week after a series of gloomy economic reports, uncertainty about the world's economies and election doubts were all blamed for the turbulence.
David Wyss, chief financial economist for Data Resources Inc. in Lexington, Mass., still sees a market bias toward Bush. ''They know him,'' he said. ''Markets hate uncertainty.''
Investors prefer the Republican president's proposals - especially Bush's proposed capital-gains tax cut - to Clinton's plan, with its tax increases. Still, Wyss said, ''Clinton's plan isn't exactly radical.'' Furthermore, he said, markets now assume a Clinton victory.
Clinton has proposed raising taxes on the wealthiest Americans and offering families with children new tax breaks. He says he would cut the deficit in half in four years, would cut 100,000 federal jobs and impose a national ceiling to hold down private and government health-care costs.
Bush has proposed an across-the-board tax cut, suggesting 1 percent as a possibility, and a cut in the capital gains tax roughly by half. He says he would cut spending $300 billion in five years.
Both plans focus on the long-term and neither offers the kind of stimulus that many financial analysts say is needed to jump start the economy.
Perot's plan - the most austere of the three, with its big tax increases and large cuts in popular government programs - frightens the markets most because it would do almost nothing to stimulate the economy, analysts suggested.
While no one expects Perot to win much support, some analysts have argued that Perot's re-entry itself - and the attention the Dallas billionaire puts on balancing the budget - could force Bush and Clinton to steer away from proposals to stimulate the economy with increased government spending.
That adds to investor nervousness. And it clearly will take more than Clinton's advice on Monday to Wall Street to ''calm down'' to restore stability.
''No matter who wins this election, there are no easy answers or quick fixes,'' said Bruce Buchanan, a University of Texas political scientist. He said that's partly to blame for the ''general state of angst'' on Wall Street.
EDITOR'S NOTE - Tom Raum covers national politics for The Associated Press.