Romney Selects Rep. Ryan As VP Candidate; A National Fiscal Consensus Would Be Good For The Stock Market

“If Romney wins then a GOP Senate is also a likely outcome and a mandate for change may result in sweeping changes in early 2013 along the lines of the Ryan plan to avert a fiscal cliff, avoid downgrades, and deal with the debt ceiling,” Jeff Kleintop, chief market strategist of  LPL Financial, wrote in his report. “However, if Obama wins by focusing his campaign on attacking the controversial and potentially unpopular elements of the Ryan plan (which is supported by the House GOP and Ryan is chair of the House Budget committee) it may make a grand compromise more difficult between the White House and Congress in 2013 to avoid going over the fiscal cliff into a recession.”

Ryan is, of course, famous for his bold proposals for cutting government spending for all departments, except the military, and reorganizing Medicare and Medicaid. Read Ryan’s proposal, “Path to Prosperity.” For the record, Romney is not endorsing Ryan’s proposal. "I have my budget plan," Romney said in published reports. "And that's the budget plan we're going to run on.”

No matter whose budget plan is front and center, one thing is certain according to Bob Doll, a senior advisor to BlackRock. “We expect that the November elections will focus primarily on economic and budget issues,” Doll wrote in his weekly commentary. “The fact that Mitt Romney chose Wisconsin Congressman Paul Ryan (who has long focused on fiscal issues) as his running mate reinforces this view.”

In addition to the elections backdrop, Doll said in his weekly report that the debt ceiling will again need to be raised soon, the threat of ratings agency downgrades is ever-present and, of course, there are a number of scheduled tax increases and spending cuts lurking on the horizon. “We do expect to see some tax and entitlement reform occurring after the election, but the process will almost certainly be volatile,” he wrote.

It’s clear, wrote Doll, that pressure is mounting to address the nation’s long-term fiscal imbalances.

Others seem to agree. Romney’s selection of Ryan as his VP is a non-event short term said Marty Leclerc of Barrack Yard Advisors.  “If the stock market believes he and Romney will win on November 6th, (absent an unforeseen calamity) the current rally will likely continue because of their strong free-market rhetoric,” said Leclerc.

But reality will set in once the election is over, “as debt and deflation won't magically disappear,” said Leclerc.  “Doesn't really matter who wins as neither party has a credible plan to lead us forward.”

For his part, Leclerc opined that the real problem is that we have no consensus as a nation:  “Americans hate the government in the abstract, but enjoy many benefits in practice:  We ‘talk-the-Ayn-Rand-talk’ but we ‘walk-the-New-Deal walk.’  Until we reach a consensus on what it is to be American in the 21st Century, ‘muddle-through’ is the best we can hope for.”

For Leclerc, Ryan’s candidacy holds out the promise that we might have a true national debate about things politicians have been dancing around for years.  “In the domestic sphere, do we kill the New Deal or do we simply reform it?” he asked. “And if we keep it, are we willing to pay for it?”

It's no doubt too optimistic to think that such a debate will transpire, said Leclerc.  “The outcome for the ‘Power Class’ is too binary,” Leclerc said.  “But if a real debate happens, and the election becomes a mandate—one way or the other—then a significant amount of political risk would be removed from the equation. “

Said Leclerc: “A nation in fiscal-consensus would be a beautiful thing for the stock market.”

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