From the October 2008 issue of Investment Advisor • Subscribe!

October 1, 2008

And the Winner Is...

A refresher course on the Presidential candidates positions you care about

With the Presidential election only a month away, we thought we'd review where the candidates--Sens. Barack Obama (D-Illinois) and John McCain (R-Arizona)--stand on various hot-button issues that are sure to influence who becomes the next leader of the free world, and also are of interest to advisors and their clients. The Presidential race is shaping up to be closer than many anticipated--particularly since John McCain picked Alaska's Republican governor, Sarah Palin, as his Vice Presidential running mate.

Palin, for instance, is being hailed as someone with little international and national experience compared to her VP counterpart, Senator Joe Biden (D-Delaware). Yet many say she can bring some smarts to the table when it comes to energy--a major issue facing the U.S. To be sure, Obama and McCain's energy policies differ. As Philip Orlando, chief equity strategist at Federated, noted in a recent speech, Obama is against expanded exploration/drilling in Alaska and offshore, but "has recently said he may compromise on this," while McCain advocates expansion of domestic oil and natural gas exploration. McCain also advocates the construction of 45 nuclear power plants by 2030, while Obama is against nuclear power plant development.

When it comes to healthcare, McCain's campaign has said that he would provide $5,000 to every family to purchase health insurance through a refundable tax credit--with households choosing the insurance plan they prefer. But Obama wants universal health coverage with "affordable" health coverage and benefits similar to those available to members of Congress, and he also is calling for mandatory health insurance for children.

As for economic and tax policies, McCain supports making permanent President Bush's tax cuts of 2001 and 2003--presently, Orlando notes, there are six income tax brackets with 35% the highest rate. Obama says he would cut taxes for middle and lower income families, raise taxes on higher-income families, and "completely eliminate incomes taxes for an additional 10 million Americans," Orlando says. As for corporate tax rates, McCain would reduce the maximum corporate income tax rate to 25% from 35%; under Obama, there would be no corporate tax rate change.

When it comes to Social Security, often referred to as "the third rail of politics," there would be no change in Social Security taxes under McCain, but Obama plans to raise Social Security taxes for higher-income workers.

Obama would make the estate tax permanent, with a $3.5 million exemption (the level it is now scheduled to reach in 2009) and a 45% maximum rate (the level applying from 2007 to 2009). McCain would also make the estate tax permanent, but with a $10 million exemption and a 15% top rate.

Last, but certainly not least, is how McCain and Obama will handle the housing and credit crisis, particularly the current government takeover of Fannie Mae and Freddie Mac. Senator Christopher Dodd (D-Connecticut), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, told reporters in a conference call just days after the takeover plan was announced that Obama or McCain would inherit "a mess" with Fannie and Freddie. Dodd scheduled a hearing in mid-September so that members of the Bush Administration could "provide members of Congress and the public with more information" about the takeover. "This Administration has presided over the greatest financial crisis in 70 years," Dodd said. "Americans need to know if this plan will alleviate, not deepen, our current economic problems."

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