[Perfectlap]

The more I read the paper and blogs, the more I seem to think I am in the minority who think that people place a REALLY disproportional amount of attention on these elections in the context of the economy or the stock and bond markets. Look at the big picture for a minute...the U.S. economy is $14 trillion. The Federal budget accounts for a a very small part of that. Nearly half that budget goes to defense and war spending. The amount of money that the govt could target to boost the economy is tiny. Certainly not anything close to being enough to reverse a decades long slump in wages and job growth that hit the wall 10 years ago now.

Look at this way, taxes today are lower than they have ever been in recent memory. Google is paying 2% in taxes through perfectly legal measures. Warren Buffett challenged any of his wealthy friends to a $100,000K bet if anyone of them could show an effective tax rate that was higher than that of their own secretary.
Corporate taxes as percentage of GDP have fallen by 50% in the last 30 years.
Today, even after two years of Obama-Pelosi-Reid you have never payed less in taxes as an hourly worker, a salaried worker, a investor or a a Wall Street private equity partner (who pay a mere 15% on their carry). On top of that we had something in the order of $300 billion in tax incentives, larger than either the 2001 or 2003 tax cuts. Trillions upon trillions of dollars NOT collected in taxes and what has that produced as far jobs and wage growth? ZILCH. In other words reducing taxes is certainly better than raising taxes but it will not move the unemployment needle from 10% to 5%. That's become abundantly clear now. We're now into a full decade of these low tax rates with nary a whiff of inflation and the jobs did not come.
Clearly other things are at play here. It's not what the govt chooses to do or not..but what consumers are choosing to do. They whine about govt not doing enough to create jobs and then head for the Apple store to buy a $700 Ipad from a company that employs 1 U.S. worker for every 10 it hires. That's one way to increase profits 70% during 10% unemployment! But apple consumers are not alone...not by a mile. You simply have to be living in Bizzaro land to think that 24/7 consumption of foreign goods would not catch up to us sooner or later. Well this is that reality. And don't think that putting up all these Wal-Marts and Costcos wasn't going to put a seriuos dent in the number of small biz retaliers either. .. 10% unemployment would have come sooner but we had a nice 5 year binge of bundled and securitized credit to keep the faux wheels of consumption turning. That air bag support under our feet has been gone for two years now.

At any rate. Elections are almost pointless in the context of economic turnarounds. The govt is not gong to save you. It is your own every day consumer choices. We are barking up the wrong tree while giving those who do have the ability to hire Americans (Fortune 500s) a pass. It's an interesting knee-jerk reaction that prevalent today: the economy is bad? Well let's start talking about Congress and Obama. Huh? If unemployment is 10% that's because it's perfectly fine with Wal-Mart, Coca-cola, Johnson & Johnson, Exxon, Yum, Merck, Altria and all the others sitting on trillions in excess cash. They make money just same since their customer base has now exploded with Asian and South American consumers now accounting for greater than 50% of sales. And the stock market is back to its pre-bubble normal, they're not too worried about anemic U.S. worker wages. Has anyone stopped to think that 8-10% unemployment is now the new normal?

Okay now as far as the political soap opera that has little to do with reality,
The election was a bit of a double-edged sword for the Republicans. It surprised me in that this was the first time that the House flipped without the Senate. Tha's a red flag for something not being okay with the disgruntled voters. The Republicants and Dimocrats due as they always do, vote in lock-step. Elections are decided by independents. They distrust Republicans as much as they distrust Obama. The latest polling I read in the WSJ said they gave 55% to the Repubes and 45% to the leftys. That's interesting given the state of the economy. I would have pegged it at close to 70% for the GOP. But when you consider that 2/3's of independts considered themselve moderat to liberal (more like fiscal conservative-social liberals) it becomes a little clearer. About a 1/3 are solidly against Obama. The President is currently polling at 44-48% If he can reel in a 1/3 of the left leaning indys he'll be very close to 50%. If the Republicans come up with no good ideas, particularly ones that don't move jobs higher, at least 40% of the indys will move to Obama and that will for sure put him above 50%. The problem is that the GOP is racing to the hard right, even McCain is on board. If this results in a Sarah Palin/Sharon Angle/Bachmann type Republican it's a whole new ball game for Obama because nearly 70% of indy's can't stand Palin or think she's a deal-breaker. The frightening part if you're a Republican is that Palin & Co. haven't a single critic in the elected Republican leadership for fear of the backlash.The only critics are a smarty pundit or GOP strategist here and there like Krauthammer "She has a frightening lack of subsatnce". You need an equally popular opposing force to derail her Presidential run. Where's that going to come from. It would have to be on the level of Hillary vs. Obama and I don't see that happening ever because Palin is singing all the right tunes for the sort of Republicans who turn out to vote and get energized.

The election was almost like a challenge to both Obama and the resurgent Republicans: show us what you can do DIFFERENTLY. No fighting, no repealing without alternatives that show results in two years (they're not waiting long term).
If the Republicans decide to just fight for two years throwing up things they know will get vetoed it will electrify the Republicans and Democrats but will not pass muster with independents. The thing to keep in mind is that they will not give one-party control to either side. That means either we get Republican President (likely) with a very tone-down Congress (yeah right!)...or Obama part II with a fully Republican Congress. Bill Clinton all over again.