- The Washington Times - Saturday, July 31, 2004

George Bush and John Kerry are in a virtual dead heat in the Iowa Electronic Market — winner-take-all futures market with a record of picking November victors. At midweek, Mr. Bush traded at 50.5 cents vs. Mr. Kerry’s 49.9 cents.

Mr. Kerry had taken a small lead going into the Democratic National Convention, his first lead of the year in the Iowa market. But Mr. Bush pulled ahead by the convention’s half-way point. Looks like the Boston con game — “We’re not really left liberals who believe in soaking the rich, high taxes, massive government spending and wartime U.N. appeasement” — is not working too well.

Between Michael Moore and Teresa Heinz Kerry — and not to mention the Woody Allen sperm-suit picture of Mr. Kerry leaked by NASA — the Democrats have a bit of a public-relations problem. Bill Clinton couldn’t bail them out. Nor could any of the other big Democratic guns, like Jimmy Carter, Al Gore and Howard Dean. True, it’s not what you would call a really deep bench. But you would think the Democrats would get a noticeable lift out of a week in the limelight.

The Iowa futures contracts, however, are not all rosy for the Republicans: The GOP could lose the Senate. At midweek in the market for the Senate, the RSlose contract was trading at 45.5 cents, the RSgain was at 43.1 cents, and the RShold was at a mere 11.4 cents.

For those who believe in lower taxes, this is not good. The inability of the Republican Senate to pass a corporate tax cut, make the Bush tax cuts on dividends and capital gains permanent and get a budget passed (all while continuing to press for a budget-busting pork-barrel highway bill) undoubtedly plays a role in the Iowa markets’ bad news.

The House, however, is in a much more bullish position. At last look, the RHhold contract was trading at 45.5 cents, the RHgain issue at 39.5 cents, and the RHlose at a low 14.9 cents.

When you step back and look at all these results, there’s a hint that the November election could produce a Bush White House working with a Democratic Senate and a Republican House. In other words, preserving the president’s pro-investor tax-cut package is possible — but it won’t be easy.

Undoubtedly, results from the Iowa Electronic Market have been a drag on the stock market for many months. In fact, economists Arthur Laffer and Tom Gallagher have published tight-fitting graphs showing a clear correlation between John Kerry’s rise in the Iowa and Tradesport.com markets and the slump in cyclical growth stocks and the overall stock market.

The expectation of multipronged rate-boosting by the Federal Reserve is another source of angst for the stock market.

The Iowa market sponsors a pay-to-play vote on Fed monetary policy, and the news isn’t great. The FRup August contract shows a very high 90-cent price for a Fed rate increase at the next open market meeting, set for Aug. 10. The FRup contract for September shows a high 80-cent price probability for another rate raise at the Fed meeting scheduled for Sept. 21.

Multipronged rate-boosting is not very helpful to George Bush either. The investor class is a core Bush constituency. If investors are in a bad mood over falling stocks and rising rates, they may not turn out sufficient margins in November to push Mr. Bush over the finish line. Pollster Scott Rasmussen finds only a 3 percentage-point advantage for Mr. Bush over Mr. Kerry when it comes to likely investor-class voters.

But at this stage of a very tight game, poll watchers take good news where they can get it. After two nights of liberal shenanigans in Boston, Mr. Bush had Mr. Kerry beat by half a penny. By the Republican Convention, he might have well more than a nickel’s chance of four more years.

Lawrence Kudlow is a nationally syndicated columnist and is chief executive officer of Kudlow & Co., LLC, and CNBC’s economics commentator.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide