Maybe U.S. financial markets have a chance after all. That's the message many of us take away from the news that Representative Paul Ryan will join Mitt Romney on the Republican presidential ticket.
To see why the bulls should be snorting, start by recalling the pattern in past elections. Candidates talked a lot about jobs. Then they patted themselves on the back for having covered "the economy."
But jobs don't cover the economy from the point of view of investors. To investors, job creation is a second-order effect. Market participants care first about interest rates, exchange rates, bond prices and the one great factor that affects all three: the long-term solvency of a bond company called the U.S. government. Yet the issues that affect that solvency are rarely taken up in the months before a general election. Even discussing Social Security has traditionally been considered the political equivalent of stepping on a "third rail."
This time is different, and for three reasons.
— Choosing Ryan shows Republicans are serious about something the markets do care about: budgets. Romney is a numbers guy. Ryan is a numbers guy, too (indeed, such a numbers guy that I asked him to write a blurb about the numbers president whose biography I'm writing, Calvin Coolidge). In his willingness to sacrifice political diversity on the presidential ticket, Romney is saying he cares more about markets than marketing.
— The budget is finally going get the prime air time it has long been denied. Election television gives fabulous, Olympic-level media exposure to whatever topic candidates bring up. This time the candidates are going to talk about Social Security, interest rates, dynamic analysis and all kinds of fiscal arcana. Democrats will ensure this. They're already racing to capitalize on the fact that Ryan comes with a policy past they can pick apart, and even a detailed budget plan, called "The Path to Prosperity."
Romney's choice of a candidate with baggage demonstrates courage. Where other candidates avoid Social Security, Ryan says: "This is your third rail? Let me step on it." Together, Romney and Ryan will make clear they're determined to cut the budget, reducing the uncertainty investors routinely say is a deterrent. Even if the Republicans lose, the increased exposure of these topics will alter public consciousness.
— Legislation that affects budgets is likely to come sooner if Romney and Ryan win. And markets like sooner — the faster the law comes, the shorter the period of uncertainty.
An America ready to talk about its budget looks plenty attractive relative to a Europe still deep in fiscal denial. Welcome, bulls.
(Amity Shlaes is a Bloomberg View columnist and the director of the Four Percent Growth Project at the Bush Institute. The opinions expressed are her own.)
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