As the election nears, and the race remains tight, I think it’s appropriate to consider what both candidates would mean for various issues. Taxes are certainly one of the most prominent areas of debate, so let’s take a look at both candidates’ proposals and their potential consequences.

Of course, neither candidate has been very forthcoming about what, exactly, he plans to do. We therefore have to make some guesses and inferences about what their general assertions and varied proposals really mean. Another problem is that whatever is proposed by the White House, from either side, must be passed by Congress, which looks likely to be divided again between the Democrats and the Republicans. So, any analysis of the new president’s plans may not be a good guide to what actually happens.

Another day for optimism, I guess, as several good economic reports showed up over the past couple of days.

The papers today are all about elections, and with five days to go, both sides are pushing as hard as they can. Group dynamics are one focus—women had their day in the sun last week; this week, it seems to be Latinos, per the front-page story in the Wall Street Journal (WSJ), “Election May Hinge on Latino Turnout.”

The focus also continues to be on the swing states, where Obama still seems to have an edge. The WSJ has “Polls: Obama Ahead in 3 Key States” on page A9, the Financial Times (FT) has “Obama and Romney vie for every last vote in a handful of states” on page 4, and the New York Times (NYT) has a good explanation of the situation from Nate Silver on page A12: “When State Polls Differ from National Polls” lays out the pros and cons of how his models incorporate both. Bottom line from Silver is that Obama probably has a sustainable national lead, on top of the lead reported in swing states, and that, based on his numbers, a Romney popular vote win and an Obama Electoral College win seems unlikely.

The hurricane has muddied a lot of waters but, surprisingly, may have helped to clear those around the election. Post-Sandy, Intrade continues to have President Obama as almost a two-to-one favorite, 65 to 35, and Nate Silver has him as more than a three-to-one favorite, at 77 to 22. Not all of the models call it for Obama, though. A recent political science paper I looked at reviewed 12 different political prediction models, with the models split evenly down the middle, 6 each.

I am grateful to be back at work. Grateful, because it means we got through the storm with no damage or even inconvenience. My biggest problems yesterday were shoving the cat off the keyboard and entertaining a four-year-old boy. I am much more fortunate than many others, especially in New York and the Mid-Atlantic states. Here’s hoping that everyone recovers as quickly and with as little aggravation as possible.

The storm yesterday got me thinking about weather, particularly here in Massachusetts. We don’t normally have hurricanes, but we’re not known for our sunshine either, as my California colleagues typically remind me in February. Which brings me to a very interesting conversation I had with some clients a couple of weeks ago.

A metaphor I have used repeatedly to describe the European crisis is Hurricane Season, where individual storms brew up and slam into the mainland, with the consequent damage that implies. It is a good metaphor, which is why I use it, but it occurred to me as I looked out my window at a real hurricane that it was worth another look right now.

The good news is that GDP growth came in a bit better than expected—at 2 percent versus 1.8 percent, which is up from 1.3 percent in the previous quarter. This was front-page news in the weekend editions of the New York Times (NYT) and the Wall Street Journal (WSJ). For the first time in two years, government spending was a major driver of growth. Consumer spending was also a significant contributor, but it came at the cost of lower saving rates, so it may not be sustainable. Business investment dropped, as did exports, in the face of growing weakness in Europe and China.

The sustainability of the growth is questionable, given that government spending is very likely to decrease going forward; in addition, consumer spending is also likely to slow (at best) as the fiscal cliff tax increases come closer. Nonetheless, a good quarter.

A friend recently forwarded me an e-mail to comment on. This friend is a very intelligent and informed woman, but the e-mail had raised concerns that she wanted addressed.

I am old enough to remember the last time an Asian economic superpower was going to take over the U.S. Back in the day, we heard a lot about how Japan was inevitably going to overtake the U.S. because of its superior work ethic, economic efficiency, and availability of low-cost capital because of high savings rates—and particularly how its government was so much better at managing its economy through agencies like MITI. Loud cries were heard that the U.S. needed to heed the lessons of Asia and become more like the Japanese. Does this sound familiar today?

Unfortunately, in many respects, we have become more like the Japanese. But that is the subject of another post. What I want to talk about right now are the similarities between China and Japan, especially about how Japan never looked as invincible as it did just before its two lost decades started.

There is a fair bit of news today, which I will deal with in other posts, but I wanted to start with this one because I think it encapsulates a lot of the arguments that are being made at a national level.