Obama and the UK Economy
Professor Michael Luger, Dean of Manchester Business School talks about the US President and the UK economy.
Before we talk about specific policies coming from the US that may affect the UK economy we should acknowledge that it is good for markets to have the US election behind them. America is still the world's largest economy, and the uncertainty about its political leadership made investors and businesses around the world nervous. My sense is that markets are breathing easier having had American voters support the devil they know, rather than the devil they did not know.
Whether or not we agree with Obama economics, we at least know the direction he will continue to push fiscal and monetary policy. His cuts will not be too deep and he will propose strategic investments as stimulus. And he will attempt to shift the tax burden more onto the very rich. On the monetary side he will keep Ben Bernanke at the helm of the Fed, which means an activist approach to QE.
The Romney campaign used fairly broad brush strokes in its picture of economic policy. President Romney would have fought to renew the Bush tax cuts, lower taxes as stimulus, and shift spending from social to military programmes. There was concern, even among Republicans, that the Romney-Ryan maths did not work, so that other approaches would likely have had to be taken.
Whilst investors and businesses in Europe may be breathing a little more easily, they still worry about the US's economic fortunes. There is concern that the Democrats' approach will not bring the US deficit under control, and that growth will continue to be anaemic, meaning less demand for European exports. And there is concern that the continuing near-stalemate in Congress (different parties controlling the two chambers) will add to the political paralysis that has gripped Washington for the past four years.