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After Iowa: The Caucus Yields a Three-Way Tie

The Republican Party is being pulled apart in three directions at once. Eventually, it will be up to voters to decide if this muddled mess provides America a real alternative to Barack Obama.

Although Mitt Romney technically won the Iowa contest last night, I agree with Ron Paul that the results were substantively a three-way tie. (Michelle Bachmann, who came in a distant sixth, announced that she’s ending her campaign.) Rick Santorum lost by a mere 8 votes, and Paul amassed an impressive third-place finish. In fact, Paul received double the number of votes he got four years ago, while Romney’s numbers didn’t budge.

The strange thing is, the policy differences between Romney, Santorum and Paul are so substantial that it’s hard to believe these top three candidates are even in the same party.

What can we conclude from last night’s overtime game in Iowa?

First, say goodbye to the flat-tax gimmicks that sucked up a lot of airtime last fall. The exit of Cain and Perry from the race ensures that the real debate over tax reform will remain a conversation about tinkering around the edges and supporting particular groups or industries. The fact that Romney and Santorum received a combined 50% of the vote last night and neither has endorsed even the concept of a flatter tax strongly suggests that the idea will be deprived of oxygen in the coming weeks. Even if Gingrich is able to put it back on the table, his plan of having two separate tax codes (the old one or a flat tax) that you could choose from is obviously more complicated than the current system, as it introduces one more layer of complexity.

Second, the Republican elite will go into overdrive in an effort to support Romney. The thought that Rick Santorum, a social conservative who handily won the evangelical vote last night, will gain momentum, airtime and money in the coming weeks should rightly keep the GOP Beltway Establishment up at night. His views on social issues are so far outside the mainstream of public opinion that he could never have national appeal. His influence in the coming weeks will remind a lot of independent voters of what they don’t like about Republicans. Note the late-night plans John McCain made to travel to New Hampshire to endorse Romney.

Romney’s policy views and governing history are moderate at best and slightly liberal at worst from the perspective of the GOP. As the right-wing spinners move into full panic mode in an effort to get the electable Romney nominated, they will inevitably have to concede some of the terms of the debate to their opposition. For example, Romney tacitly places the starting point of who’s rich at $200,000 per year. His tax plan calls for eliminating capital-gains taxes only for those making less than $200k. This is lower than even Obama’s tradition marker of an annual income of $250,000.

Third, beware the wrath of Newt Gingrich. Ari Fleisher (George W. Bush’s former press secretary) noted last night that Gingrich made perhaps the worst and most ungracious concession speech in political history. He called Ron Paul “dangerous” and Mitt Romney a bully. Newt’s only kind words were reserved for Santorum, who he noted ran a positive campaign, as opposed to the Romney, who he blamed for the barrage of attack ads put out by super-PACs over the previous week. Clearly, Newt is fired up and ready to get really dirty in the coming weeks. He claims he won’t go negative but reserves the right to tell the truth. Since Romney has zero personal baggage, Newt will have to spend his time and money savaging Romney’s record and policy positions. Gingrich’s resources and acumen are substantial. Although Romney claims he has “broad shoulders” and is ready for whatever comes his way, it’s hard to imagine he will sail through the Gingrich wood chipper unscathed.

Fourth, Ron Paul has garnered a significant and enthusiastic base of support. His isolationist views on foreign policy are anathema to the still-breathing neocon movement within the GOP. As the debates continue over the coming weeks, he will inevitably force his rivals to highlight their anti-diplomacy/pro-war views. Santorum has already made it clear that he would like to bomb Iran; Gingrich is hypothesizing about nuclear weapons being detonated on American soil, and Romney has accused Obama of a policy of appeasement. To a broke and war-weary nation, Republican saber-rattling may not be appealing when contrasted with Obama’s record of capturing Osama Bin Laden and supervising the return of 100,000-plus  U.S. war veterans.

As we anticipate New Hampshire and South Carolina in the coming weeks, look for this deeply divided GOP to try to bring Paul’s isolationist libertarians, Santorum’s evangelicals and Gingrich’s conservative Southerners together under the umbrella of the moderate Mitt Romney. This should be an exciting ride.

Article printed from InvestorPlace Media, https://investorplace.com/ipm_invpol/after-iowa-the-caucus-yields-a-three-way-tie/.

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