President Bush's tax cuts have been a boon for high- income stockbrokers and money managers, and his plans for new investment accounts could bring a torrent of money to Wall Street.
Yet an undercurrent of concern exists among the nation's financial elite about the broader consequences of Bush's policies.
Record federal budget deficits -- swelled largely by the tax cuts passed in 2001 and 2003 -- are fueling fears that the economy and securities markets are headed for serious trouble. Those pressures could be exacerbated if Bush makes permanent the tax reductions, as he has pledged.
"There is a day of reckoning out there, and it's closer than a lot of people realize," said Brett Gallagher, who directs stock market strategy for Bank Julius Baer & Co. in New York.
George Mairs, president of money management firm Mairs & Power Inc. in St. Paul, Minn., said he too had been disappointed that Bush allowed the budget deficit to soar by failing to rein in spending.
Nonetheless, both Gallagher and Mairs said they were likely to vote for the president -- though "not with much enthusiasm," as Mairs put it.
For financial professionals, the Nov. 2 election presents a quandary: Although the Bush White House has been good for their pocketbooks, some worry that the administration's policies will hurt the economy and markets over the long term and ravage their clients' nest eggs.
Indeed, some Wall Street Democrats accuse their Republican counterparts of focusing on short-term personal gain in backing Bush, while overlook- ing the risks inherent in the ballooning budget and trade deficits.
"The average Wall Street firm is run by extraordinarily avaricious, greedy people who don't know their own interests," said Seth Glickenhaus, who at age 91 continues to oversee $1 billion at Glickenhaus & Co., a money management company he founded in New York.
"These are salespeople," he said. "They're not thinkers."
For their part, Bush's backers in the financial community say the criticism is unfair. They maintain that the president's tax cuts are good for the economy and that his plan to create expansive new tax-sheltered investment vehicles would benefit the country as a whole.
"We need growth," said Richard Kayne, a principal at money management firm Kayne Anderson Rudnick Investment Management in Los Angeles. "I see the free market as being the best shot that we have" to fix things, including the budget deficit.
Bush supporters also say their votes for the incumbent won't simply be in response to Democratic Sen. John F. Kerry's plan to raise taxes on people earning more than $200,000.
"I'll eat either way," Kayne said.
Whatever the reasons, Wall Street, long viewed as heavily Republican, appears to be solidly in Bush's camp.
Pensions & Investments, a trade magazine for money managers, said 58.6% of 1,700 readers in a September e-mail survey backed Bush, compared with 33.6% for Kerry.
The financial industry also has opened its checkbook for the president. Major securities firms hold seven of the slots on the top 10 list of contributors to Bush's reelection campaign, ranked by total giving by employees, according to Dwight Morris & Associates, which tallies political donations.
Brokerage Morgan Stanley is ranked No. 1; through August its employees had given the Bush campaign $527,030. Merrill Lynch & Co. ranked second, at $495,604.
Kerry has benefited from Wall Street's largess as well but to a much lesser degree. Three securities firms are on his top 10 list of contributors, led by Citigroup Inc., whose employees gave the candidate $212,504 through August, according to data from Dwight Morris.
The industry's support for Bush is more prominent now than it was in 2000. Then, just three brokerages were on his top 10 list of contributors.
The administration's tax reform package in 2003 included a sharp reduction in the top rate on dividend income, something the financial services industry had long had near the top of its federal wish list.
Yet whether Bush's tenure has been good for securities markets is debatable.
Among classic financial yardsticks, the blue-chip Standard & Poor's 500 stock index is 18% below its level when Bush took office. The dollar is worth 26% less against the euro currency, slashing Americans' purchasing power. And the price of oil is 69% higher.
Interest rates are lower, thanks to deep cuts made by the Federal Reserve in 2001 in an effort to end the recession that began that year.
As for the economy, it has enjoyed reasonably strong growth of late but continues to have trouble generating jobs. Soaring energy costs are raising fresh concerns about the risk of a slowdown in consumer and business spending.
It is the budget and trade deficits, however, that trigger the harshest criticism of the administration from Wall Street's traditional Republican base.
The budget deficit hit a record $413 billion in the fiscal year ended Sept. 30, although as a percentage of gross domestic product it was below the peaks of the early 1980s.
Meanwhile, the nation's trade balance with the rest of world was in the red by an unprecedented $530 billion in 2003, up from $297 billion in 1999.
Peter G. Peterson, a veteran New York investment banker who was secretary of Commerce under President Nixon, warns that massive budget and trade deficits leave America at the mercy of foreign investors and central banks. In his new book, "Running on Empty," he says neither Republicans nor Democrats are facing up to the dangers.
Peterson has long sounded this alarm, but he says the chances of deficit-induced economic and market calamity are far greater today than 25 years ago because the first baby boomers now are approaching retirement and soon will place new demands on stretched government resources.
"It seems very inappropriate for this country to be this dependent on foreign capital," Peterson said.
If foreign investors who are loaded up with Treasury bonds suddenly turned away from U.S. securities, the dollar's value could plunge and interest rates could rocket, Peterson and others caution.
Both Bush and Kerry say they have plans to halve the annual budget deficit by 2009. But many economists are dubious -- not just of the two candidates' proposals but also of Congress' willingness to go along with either plan.
Sentiment in Washington is far different from what it was in the early 1990s, when there was bipartisan support for tax increases and spending restrictions. That allowed the nation to register a budget surplus by 1998 under Democratic President Clinton. It was the first surplus since 1969.
"There is no fiscal discipline in Washington," said Edward Yardeni, an economist at money management firm Oak Associates in Akron, Ohio. "Nobody's interested in it anymore."
As for the risk of continuing to run large deficits, Yardeni said, "there has to be some outer limits" that free markets won't allow the United States to exceed in its borrowing and spending.
Because the doomsday scenarios raised repeatedly during a quarter-century of warnings about deficits have failed to materialize, however, there is little incentive for the White House or Congress to take Peterson and other hard-liners seriously, Yardeni said.
Despite the effect on the budget deficit, Yardeni believes that Bush was right to push through the 2003 tax cuts.
"You can definitely fault Bush for widening the deficit," he said. "But it was an emergency situation" for the economy after the 9/11 terrorist attacks, he said.
That view is backed by other Wall Street veterans. And although most say they are disturbed by the size of the budget and trade gaps, many also contend that Bush offers a smarter long-term plan for erasing them.
"If you take a look at the projected deficit under Kerry or Bush, there's very little difference," said Joseph Keating, chief investment officer at AmSouth Bancorp in Birmingham, Ala. "But the path is far different. Bush would get there through growth in the economy and a reduction in spending. Kerry would get there by increasing taxes."
Bush proposes a virtual freeze on discretionary federal spending that isn't related to defense or homeland security. The administration's view is that healthy economic growth, fueled by tax cuts, would raise overall government revenue and shrink the deficit.
Kerry, by contrast, proposes a number of new federal programs, including healthcare and education initiatives that his campaign estimates would cost $860 billion over 10 years. The latter would be paid for by rolling back the 2003 tax cuts for the well-off.
The Concord Coalition, a think tank headed by Peterson, contends in a report this month that neither candidate has a credible plan to address budget shortfalls. "The choice is between large tax cuts that are unaffordable" under Bush "and smaller tax cuts with higher spending that are also unaffordable" under Kerry, it says.
Gallagher, at Bank Julius Baer, said it shouldn't be surprising that Wall Street -- seeing little willpower on the part of either candidate or Congress to address spiraling deficit spending -- would take the attitude that "they're not going to do anything for the greater good, so I'm going to worry about myself."
Jim Grant, editor of the widely read Grant's Interest Rate Observer newsletter in New York, put it another way: "Money matters first on Wall Street. The next important thing is No. 28."
(BEGIN TEXT OF INFOBOX)
Leading campaign contributors
Brokerage firms dominate the list of employers whose workers have contributed the most, in total, to President Bush's reelection campaign. By contrast, employees of major brokerages have contributed far less to Sen. John F. Kerry's campaign. The data, through August, cover all individual donations of $200 or more. Brokerage firms are highlighted.
Top 10 Bush contributors
*--* Employer Amount 1. Morgan Stanley $527,030 2. Merrill Lynch $495,604 3. PricewaterhouseCoopers $487,000 4. UBS Financial Services $364,300 5. Goldman Sachs Group $314,425 6. MBNA Corp. $307,250 7. Federal agencies $275,016 8. CS First Boston $268,850 9. Citigroup $258,245 10. Lehman Bros. $255,600
Top 10 Kerry contributors
*--* Employer Amount 1. University of California $530,155 2. Harvard University $261,410 3. Citigroup $212,504 4. Goldman Sachs Group $207,300 5. Skadden, Arps $200,527 6. Federal agencies $182,845 7. Time Warner $180,539 8. Microsoft $172,293 9. Stanford University $161,699 10. UBS Financial Services $160,750
Source: Dwight Morris & Associates