Political Headwinds -- Wall Street in the Cross Hairs

Iowa caucus results increase nervousness among establishment financial types, who favor former private equity whiz Mitt Romney on the Republican side and Hillary on the Democratic ticket. Al Gore and John Kerry got absolutely no traction talking about raising taxes on the rich, but the early 2008 winners — Obama, Huckabee, and even John Edwards — make hay by implicitly countering Wall Street dogma for making permanent Bush style tax cuts and cutting corporate taxes further. People in the downtrodden heartland at least raise hackles over the growing inequity between payouts to private equity barons/corporate chieftains and the rank and file. Stoked by the Huckabees and Edwards, voters finally wake up to the idea that the deck may be stacked against them, especially in the souring economy. It wouldn’t surprise if John McCain starts reminding people that initially he had voted against Bush tax cuts.

Stalwart Reagan blue-bloods (like CNBC’s windy Larry Kudlow) relentlessly talk up free market, lower taxes, less regulation mantra in the face of a housing debacle precipitated by free market licentiousness. And lets not forget earlier iterations of similar out-of-hand market disasters — the junk bond scandals, the S&L crisis, the internet meltdown and Enron, all in the last 20 years. The market will self correct, the Wall Street establishment says, don’t snuff out the nation’s entrepreneurial spirit and give us lots of cheap money so we can continue to play (lower interest rates). But self correction seems to mean that fired CEOs walk away with vast fortunes, while little guy borrowers lose homes and ordinary workers need to worry about layoffs.  Gasoline pump prices and heating bills now really start to bite when mortgage payments ratchet up. This environment gets ugly for any politician looking to support economic policies that appear to favor well-heeled, wheeler dealers.