A spelling error appeared in an earlier version of this story. We apologize to Dr. Sherry Cooper for any embarrassment this may have caused.

The renewed Republican mandate in the United States likely spells major policy shifts in that country, and reflects a fundamental shift to the right of the political spectrum, according to Sherry Cooper, chief economist with BMO Nesbitt Burns.

“The GOP has a real mandate this time and as a second-term president, Mr. Bush can take decisive action — not that he didn’t in his first term. In the past four years, he often took an unpopular stand and risked alienating the electorate and much of the rest of the world. Now, with ‘nothing to lose’ and the Congress on his side, I’d expect some dramatic initiatives,” Cooper writes in a new commentary. “Among them, look for further tax cuts and the permanent reduction in the dividend and capital gains tax rates.”

Cooper notes that Bush is on record for favoring the total elimination of both dividend and capital gains taxes. He will likely support elimination of the estate tax as well, she predicts, noting he has also supported greater reliance on consumption taxes, a sea change in federal taxation.

“Some reform of the Social Security System is also probable as is increased spending on defense and national security,” she notes. “This obviously won’t help the burgeoning federal budget deficit, but strong GDP growth, in time, will help stem the tide of mounting red ink.”

And, she predicts, “With the election uncertainty eliminated, consumer and business confidence will rise, boosted as well by the terror-free campaign period … Business could well increase hiring and consumers will spend for Christmas, especially if oil prices look to have peaked. Bush doesn’t mind the decline in the U.S. dollar, so further economic support from this source could well be forthcoming, especially if the Chinese finally agree to revalue their currency.”

Cooper also notes that Bush will now have the opportunity to appoint another Federal Reserve Board chairman, and he will also dramatically impact the Supreme Court for years to come with several appointments likely in the next year. “This is a golden opportunity for the Republicans to show their stuff, but I expect them to trend to a more centrist position in an effort to heal the rift in the nation,” she says.

NAFTA renegotiation and serious protectionist measures are now unlikely, she suggests, but ttort reform could well be on the table. “If anything, the U.S. economy will be stronger than under a Kerry tax increase. Both of these factors bode well for Canada,” she predicts.

Cooper calls this election “a sea change for America”, toward a more conservative stance.