James Pethokoukis

Politics and policy from inside Washington

Obama and the Investor Class

Oct 12, 2010 21:19 UTC

Larry Kudlow lays out a compelling case here:

A series of investor-related polls shows how totally detached the president is from the nearly 100 million folks who directly or indirectly own stocks.

A survey conducted by Citigroup Global Markets of 100 mutual-fund, hedge-fund, and pension-fund managers finds that institutional investors fear a government policy mistake far more than inflation, terrorism, a housing double-dip, poor earnings, or any other potential risk to the economy. (Hat tip to CNBC producer John Melloy.) One-third of the survey’s participants list government policy missteps as their biggest worry, ahead of the more than 15 percent who cite protectionism.

But these investors believe the chances of a big policy error will decrease if Republicans take back the House of Representatives in November.

In another poll conducted by Reuters, 75 percent of respondents believe the employment situation is the most important issue for Wall Street, followed by 41 percent who point to consumer confidence. Fleshing out the survey, nearly two-thirds of respondents say extending the Bush era tax cuts should be a high priority; just over a third say the budget deficit is the main concern; more than two-fifths say interest rates will start to rise and the dollar will weaken more if the deficit is not addressed; more than a quarter want Obamacare repealed; and only one-fifth say additional action by the Fed is crucial.

Then there’s a new poll from Investor’s Business Daily. It shows 56 percent of respondents saying they want tax cuts extended even for households with more than $250,000 in income. Only 39 percent in the poll want the rich to pay more, while support for making tax cuts for the rich permanent hit 63 percent for both Republicans and independents. By solid majorities, that includes taxes on capital gains, dividends, and estates, all to be frozen at current rates.

These polls reveal how utterly alien Obama is to the investor class. And it’s worth noting that investors are among the most likely voters to turn out for elections.

COMMENT

Of course Mr. Obama is alien to the investor class, always has been. The question is whether he and his advisors care in the slightest. Given his shameless sucking up to unions along with China-, bank-, big oil- and Wall Steet-bashing, the answer should be clear.

Posted by Gotthardbahn | Report as abusive

U.S. states in a $3.2 trillion pension hole

Oct 12, 2010 20:06 UTC

Some scary numbers from new research by finance professors Robert Novy-Marx of the University of Chicago and Joshua Rauh, Associate Professor of Northwestern University in Evanston, Illinois.

We begin this article by discussing the true economic funding of state public pension plans. Using market-based discount rates that reflect the risk profile of the pension liabilities, we calculate that the present value of the already-promised pension liabilities of the 50 U.S. states amount to $5.17 trillion, assuming that states cannot default on pension benefits that workers have already earned. Net of the $1.94 trillion in assets, these pensions are underfunded by $3.23 trillion. This “pension debt” dwarfs the states’ publicly traded debt of $0.94 trillion. We show that even before the market collapse of 2008, the system was economically severely underfunded, even though public actuarial reports presented the plans’ funding status in a more favorable light. While we take no stand regarding the optimal amount of state government debt, we do believe it is important to point out that total state debt with pension liabilities included is actually almost 4.5 times the value of outstanding state bonds.

The recovering financial system

Oct 12, 2010 16:43 UTC

The St. Louis Fed had put together a “financial stress index.” It incorporates a number of financial variables.  And it looks a whole lot better than it did two years ago.

stress

Unemployment rate skewing U.S. politics

Oct 12, 2010 16:25 UTC

Between the House passing the China currency bill (and I think the Senate may as well) and various politicians pushing for a foreclosure moratorium, one has to wonder what sort of politics/policy another year of 9-10% unemployment will generate. I am guessing China will finally emerge as the new bipartisan big bad for U.S. politics (more for economic than military reasons), while  there will probably a flurry of new housing ideas like this one proposed by economist Glenn Hubbard.

How Ben Bernanke is trying to raise taxes

Oct 12, 2010 16:05 UTC

It’s the return of the inflation tax, as Ed Yardeni rightfully notes:

The rational for another round of QE is to boost economic growth and to avert deflation. In other words, Fed officials would welcome a pickup in the inflation rate. The problem is that they are stoking an inflationary fire in the commodity pits. I doubt that’s the sort of inflation they are rooting for. Presumably, they want prices for consumer goods and services to rise moderately to stimulate producers to expand their capacity and to hire more workers. Higher commodity prices are a tax on consumers and producers and can have the opposite effect.

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