A $350 billion verdict?

Posted by Marc Hodak on October 28, 2008 under Economics | Be the First to Comment

While the presidential election is quickly becoming anti-climactic, the real race is in the Senate, where the Democrats might possibly gain a filibuster-proof majority of 60 seats. A lot of the most economically destructive aspects of an Obama presidency, like implementation of a thoroughly pro-union agenda, or carte blanche on appointing liberal judges, would need to get through a Senate unable to block those initiatives.

Normally, it’s impossible to isolate the impact of political power on economic value. Many studies purporting to find that economic growth is more or less likely to occur under one party or another are hopelessly overwhelmed by noise in the data. But is it possible that yesterday we got a data point that could support the semblance of an event analysis?

Yesterday afternoon, at about 3:30 pm, a jury announced a guilty verdict on Senator Ted Stevens of Alaska. Before the verdict, the Senate race was extremely close. The verdict itself was not able to be predicted. So, the guilty verdict is a bona fide surprise event (statistically speaking), with a certain impact on a close race, which could determine a key threshold composition of the Senate. Shortly after the verdict was read, the stock market dived 2.6 percent. The rest of the world dropped by the same amount, but that is to be expected under current conditions.

That would be about a $350 billion verdict, half the amount set aside for the bailout. Not that I’m blaming the jury for Steven’s misconduct.