In this great land of the free and home of the brave, a country where 75% of the people do not know the name of their own representative, we will go to the polls tomorrow to elect a new Congress, the 104th in our history, and Republicans may gain control of both House and Senate. Across the nation, 36 gubernatorial races are at stake.
Political campaigns this autumn, with alarming frequency, have been horrifying and absurd, and we cannot make sense of them, much less figure out what the outcome will portend for the parochial world of municipal bonds. Can Huffington and North really win? Can Cuomo and Kennedy really lose? Will the Bush boys take Florida and Texas? Will Speaker Foley be ousted? Will Bob Packwood, who once stopped the municipal bond market in its tracks, replace Darnel Patrick Moynihan as chairman of the Senate Finance Committee? Will Edward Markey no longer be the most important mum bond legislator in Congress?
The New York Times and CBS polled 1,429 adults nationwide by telephone on Saturday, Oct. 29, and found them to be profoundly alienated from their elected representatives and from the political process, filled with a feeling of deepening powerlessness and pessimism, and more disconsolate than at any time since 1979, a year marked by rampant inflation and economic stagnation.
If that's the way the country feels now that the economy is expanding, unemployment is down, inflation is muted, and the Cold War is over, you wonder how its young citizenry would act if it experienced the Depression at home and Hitler abroad. In fact, that's probably the problem of 1994: There's no adversity big enough to unite this huge, heavily populated, diverse country, and it has fallen to squabbling, whining, and name-calling instead of working to lessen the serious problems it does have.
Lower taxes are much in favor, which does not bode well for municipal bonds because bond issuers need revenue streams to pay principal and interest. New Jersey's Gov. Christine Todd Whitman pushed through half of her promised 30% tax reduction in her first year, and now Republican candidates across the country are rushing to promise much the same.
Watch George Pataki in New York, John Rowland in Connecticut, Ellen Sauerbrey in Maryland, Jeb Bush in Florida, George Bush Jr. in Texas, John Engler in Michigan, J. Fife Symington 3d in Arizona, and Pete Wilson in California. If they win, lower state taxes will in many cases follow, shifting responsibility for local government programs downward.
Then governments at all levels will have less propensity to borrow, and some will have less ability to repay. The antigovernment atmosphere of the mid-1990s will mean more to municipal bonds than our decaying infrastructure will, for a vote tomorrow against government also means a vote against government borrowing. Then again, the world of politics and finance has been so preposterous this fall, the odds are it won't make any more sense on Wednesday.