“It makes no difference which one of us you vote for. Either way your planet is doomed, DOOMED!!”
This is one of my favorite quotes, from The Simpsons Treehouse of Horror VII – Citizen Kang episode. In it, news anchor Kent Brockman is interviewing presidential candidate Bob Dole, who is actually the alien Kang in disguise. Kodos, the other alien, is disguised as Bill Clinton. When their true identities are revealed, Kodos says, “It’s true, we are aliens! But what are you going to do about it? It’s a two-party system – you have to vote for one of us!”
I was reminded of this episode (well, I’m often reminded of this episode during election years, but most recently) when I came across an article from Knowledge@Wharton, entitled, “Back to the Future: What’s at Stake for the Economy in the Obama-Romney Contest.” In it, three Wharton faculty members say that, while we’re not exactly doomed, the future isn’t likely to look too different from the present, regardless of who wins in November. Basically, the problems facing the economy are too vast to be resolved quickly, and a divided government will keep either party from fully enacting its policies.
As depressing as that sounds, it was a relief to me when I read it, if only because it validated my own feelings about the current situation. Mainly, that a recovery will take time and that there are no quick fixes. The Federal Open Market Committee seems to agree that the recovery has a long way to go. Calling high unemployment a “grave concern,” Ben Bernanke and the Fed extended the bond-buying program with a third round of quantitative easing. They are now expecting to hold the federal funds rate near zero through mid-2015 (after previously saying it would remain low through late 2014). On the positive side, the committee increased its estimate for GDP growth to 2.5-3% in 2013 and 3-3.8% in 2014. The market, of course, loves the announcement of continued stimulus, with the S&P rising above its highest close since 2007 on the news. Of course, not everyone is so sanguine about QE3, fearing that it will fuel inflation at worst, or have a marginal impact at best. Thus far, the stimulus hasn’t materially affected inflation expectations, according to Bernanke, who cited a Fed study that also indicates the asset purchases have raised the level of economic output by almost 3% and increased private employment by over 2 million jobs.
In the near term, the economic recovery may continue to limp along no matter who is elected in November. In the meantime, we can focus on the inspirational words of Kodos/Clinton, who said, “We must move forward, not backward; upward, not forward; and always twirling, twirling, twirling towards freedom!”
Sarah DerGarabedian, CFA
Director of Research