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How Will the 2012 Election Impact Income Investors?


Investors who depend on dividends for retirement income are anxious about the election's impact on dividend stocks. However, fears that dividend-paying stocks could suffer a massive sell-off are overblown.

The reason political party platforms are so long is that when you straddle anything it takes a while to explain it.
-- Will Rogers

That was what legendary entertainer Will Rogers quipped about political conventions and the policy platforms they produce. And while there weren't too many surprises to emerge from the GOP's latest platform, there were some planks that could have a substantial impact on investors, particularly if the party should win both ends of Pennsylvania Avenue in November.

Anything less than that, of course, would force both parties to compromise to pass any meaningful legislation. And it's likely that frequent face-offs over policymaking will continue anyway, particularly since any party that holds at least 40 seats in the Senate still has the ability to block almost any legislation by means of a filibuster.

Whoever wins the White House, however, will have enormous latitude when it comes to enforcing federal regulations under existing laws. And the list of affected industries includes everything from communications and electric power to natural gas drilling and media ownership.

One of the narratives in the Republican campaign this year is that the Obama administration has a hidden agenda that it's waiting to spring on America in a second term. The president, however, not only enjoyed congressional majorities in both houses during the first two years of his administration, but for several months his party actually had the necessary votes in the US Senate to invoke cloture and end filibusters. It's a bit rich to claim there's something he wasn't pushing then when he held all the levers of power in Washington, and that he's instead held it in reserve should he get elected to a second term.

Rather, the primary uncertainty surrounding this election is what will happen if Republican candidate Mitt Romney wins the White House. Romney's claim that he would not reappoint Federal Reserve Chairman Ben Bernanke -- who was originally appointed by Republican President George W. Bush -- is certainly red meat for many conservatives. But it does beg the question just who would he appoint to the position, and how much the decision would be influenced by politics. And there's no doubt this will create uncertainty in global markets until the decision is made.

Similar uncertainty exists for other key offices the president appoints. For utility companies, a Romney win would bring a 3-2 Republican majority to the Federal Energy Regulatory Commission (FERC). The Obama FERC's 3-2 Democratic majority has shown itself to be less laissez-faire than the Bush and Clinton FERCs that preceded it.

My guess is that a Romney FERC would draw its cues from the Bush-era FERC, with consultation from the industry playing a bigger role. The Republican Party platform, however, includes a sharp reversal from that of 2008, when it pledged support to nuclear energy as a way to reduce carbon dioxide emissions from power plants. Additionally, there's opposition to tax credits to support renewable energy, and there's only vague language about supporting oil and gas drilling in North America.
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