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This year the Republican field is as competitive as I've ever seen. You can make a case for multiple candidates winning the caucuses, and any candidate could be boosted into the thick of the race by a strong finish.
For investors, there are two criteria when looking at presidential candidates: First, how well will a candidate's ideas and personality play in the market and in the U.S. economy? And second, how likely is the candidate to beat President Obama in November?
Generally, a Republican victory, if accompanied by Republican control of Congress, would be good for the market and would cut domestic public spending below that of a renewed Obama administration. It would also keep taxes lower, although a substantial tax increase is probably inevitable in 2013-14.
A Republican president would repeal Obama's healthcare legislation, although it's unlikely that that would save much money or solve healthcare's funding problems.
A Republican president also would probably replace U.S. Federal Reserve Chairman Ben Bernanke, although a President Mitt Romney or President Newt Gingrich would be unlikely to change the overall "loose money" thrust of monetary policy unless forced to do so.
Most likely Republican candidates would also pursue a more aggressive – and expensive – foreign policy than a re-elected Obama. So unless a real budget-cutter is elected, there will be little improvement in the U.S. budgetary position and a likely worsening in inflation over time, leading to another financing crisis well this side of 2016.
That said, let's take a detailed look at each candidate in this field guide to the 2012 primaries.
Rick Santorum, 53, was Senator from Pennsylvania 1995-2007, unluckily losing his 2006 re-election bid by 18%. He's the darling of the social conservatives and of the neocon foreign policy hawks, with an economic policy of tax breaks for manufacturing.
Santorum is knowledgeable but has a rather aggressive personality and can be a wooden speaker. That makes him very unlikely to win against Obama. Though, he might mollify conservatives (but alienate Ron Paul supporters) as a vice president on a Romney ticket.
If elected president, he'd be bad at compromise across the Congressional aisle, protectionist, and probably not good for the market, although smokestack companies might benefit.
Ron Paul, 76, is a 12-term Congressman from Texas (serving since 1976 with breaks). He was the libertarian candidate for president in 1988 and a GOP presidential candidate in 2008.
Paul is strongly conservative economically, inspired by the Austrian School of economics. He believes in the gold standard, proposes cutting federal spending by $1 trillion in his first year in office, and abolishing departments of Commerce, Education, Energy, the Interior, and Housing and Urban Development.
His foreign policy is heavily isolationist – even pacifist – and his social policy is moderately libertarian.
Paul is a highly eccentric candidate hated by much of the party establishment. He is knowledgeable and gained considerable credibility by accurately predicting the 2008 financial meltdown. His economic policy is popular with party conservatives but not the general electorate. His foreign policy is very unpopular with the GOP establishment but may have considerable hidden appeal to the electorate, especially the young.
If he were to win the nomination, he would have a better shot than most to beat Obama because of his youth support.
Paul has said he won't run a third party candidacy (which would almost guarantee Obama's re-election). However, his son, Kentucky Senator Rand Paul, is less extreme on foreign policy and would make sense as a vice presidential candidate for an establishment figure who wanted to ensure the Paul movement's support.
As president, Ron Paul would have fun with the Fed, but great difficulty assembling legislative coalitions or ensuring party discipline. His tight money policy would be highly beneficial in the long run, but would in the short-run involve a painful weeding out of "malinvestment," which would cause a stock market crash.
Newt Gingrich, 68, is a former 10-term Congressman and served as Speaker of the House of Representatives from 1994-98.
Gingrich has eclectic political views, and a fountain of new ideas which aren't always sound. He can be ultra-conservative or moderately liberal, depending on the issue and the timing – he can be surprisingly supportive of "big government" solutions. He's also fairly "neocon" on foreign policy, though he describes himself as a "cheap hawk."
Gingrich organized the Republican takeover of Congress in 1994, but four years later was ousted by colleagues dissatisfied with his leadership style. Negatives include his post-Speaker lobbying career and his marital difficulties.
Gingrich is short of money and disorganized, so would have difficulty winning the nomination, but might prove a strong opponent for Obama because of his debating skills. As president, he would be center-right, with his greatest achievements through forming bipartisan Congressional majorities. His foreign policy might be expensive, however. He has promised to replace Fed Chairman Bernanke, but it's doubtful he has a hard money commitment like Paul.
Look for a sideways market with inflation, with military contractors doing well.
Mitt Romney, 64, is the former Governor of Massachusetts and CEO of Bain Capital, a highly successful private equity company. Romney is still by far the front-runner for the nomination on Intrade, the political odds-making site.
Romney has espoused a wide variety of political positions. However, his healthcare plan in Massachusetts, and his father George Romney's political career as Governor of Michigan and 1968 presidential candidate, make me believe Romney would govern to the left of the Republican party, with occasional forays further left as fashionable Washington and media opinion influenced him.
Romney has a 53-point plan for the economy that includes minor and poorly designed tax cuts. He'd have been a great candidate in 2008, as his expertise would have served him well in the September crash. However, Wall Street and private equity-driven job cuts are now politically toxic, so Romney is less certain of the nomination than many think and would be a very vulnerable candidate against Obama.
If (perhaps owing to a "double-dip" recession) he managed to get elected, Romney's economic policy would be close to that of President George W. Bush, although it's likely he would add a trade war with China to Bush's policies. You could thus expect continued anemic growth with "Bernanke-esque" loose-money policy (he has said he would remove Bernanke, but that is most likely a sop to the primary electorate). Short-term, his election would give the market a fillip, but it wouldn't last.