Effects of current political developments on Financial matters

[whatsupdoc]

In all fairness to readers who do not want politically related subjects
discussed in the weekly Stock Market threads, I have initiated this new
thread   "Effects of current political developments on Financial matters"

Last week there was talk on this board that if Obama were to become President,
the Democrats would raise the capital gains tax. I did some checking and I
believe what Obama said was that he would propose to raise the capital gains tax.
He would have to get support from both Houses of  Congress, which I think is highly
unlikely considering that these are the very same politicians who colluded with the
Bush Administration to pass favorable tax laws for the wealthy. Favorable tax laws
for the wealthy in which they themselves became the primary beneficiaries. Let's not
forget that these guys in Congress are notorious for regularly raising their salaries
without any approval from the general populace.  Why on earth would they pass
laws that would reduce their income?  Besides,  the so called "wealthy" who would be
negatively affected by the capital gains tax increases are the very ones who are filling the
coffers for their re-election campaigns.  I am hard pressed to believe that these politicians
are going to bite the hand that feeds them,  has been feeding them, and will be
feeding them into the future. However, I won't be surprised if the Democrats  do try to
pass some token unbinding legislation knowing that it won't pass. Very similar to
their token unbinding legislation and resolutions regarding the funding for Bush's wars.

Oh yeah, by the way on the "surprise" factor from Israel, its not necessary.  That is not a country that tends to talk alot about military action, I would not expect this to be an exception.  Its coming, soon!  YIKES!!!

I was surprised not to here "anyone" come out and really even comment much on it!  Looks like the temperature got taken and that was about it.  Maybe one day the going into Iraq deal might looks like it made some sense.

Bottomfeeder,  here are links to 3  recent articles that will provide some
additional insight and perspective that you won't see or hear in our
regular mainstream news media. There is no doubt that the chatter
on a possible strike against Iran is having some effect on the markets.

Published on Weekend Edition June 7/8, 2008 of CounterPunch
Oil, Israel, Iran and the U.S.
The High Cost of a Single War-Like Remark
By DAVE LINDORFF
http://www.counterpunch.org/lindorff06072008.html

Published on Saturday, June 7, 2008 by The Telegraph/UK
Israel Threatens War on Gaza and Iran
Israel Braced Itself for Conflict on Two Fronts Against Militants in Gaza and an Iranian Government Persisting with Its Nuclear Programme.
by Tim Butcher
http://www.commondreams.org/archive/2008/06/07/9473/
and at the end of this article there are about 198 opinions for your perusal.

Published on Weekend Edition June 7/8, 2008 of CounterPunch
Something's Afoot
Iran and Rumors of War
By CONN HALLINAN
http://www.counterpunch.org/hallinan06072008.html

[davidslane]

Let me start off by saying one of my closest friend has indeed been made the head of Obama's Economic policy.  This means he'll most likely lead Obama's economic policy at the White House after Obama wins!

I'm hoping this will give me a nice insight to what to expect for the next 4 to 8 years.

Economist Jason Furman joins the Obama campaign

Jason Furman has joined the Obama campaign staff as its Director of Economic Policy, campaign spokesman Bill Burton said.

Economist Austan Goolsbee -- who has been an unpaid advisor throughout the campaign and, unlike Furman, has not previously worked in Democratic electoral politics -- will join Furman on an 11:45 conference call kicking off Obama's two-week economic tour.

Furman played a similar role for John Kerry during the 2004 campaign, and then went on to work at NYU, where played a role in the fight against Bush's 2005 Social Security reform efforts. He then became the director of the Hamilton Project, a center-left economic policy shop at Brookings overseen, among others, by former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers. He is a veteran of the Clinton White House.

I do know that Jason is a big proponent of free trade (fair trade under Obama).  You can read his views over at the Hamilton Project.  (http://www.brookings.edu/experts/furmanj.aspx)

As for Obama, he wants to raise the long term cap gains taxes to be the same as short term --- basically where it was under Clinton, not Bush.


WhatsUpDoc says Obama won't get this through Congress.


Here's two points on that concept for the group:

1) Congress doesn't have to pass anything.  The Bush tax cuts expire in 2009 so the long term cap gains tax rate will reset without congress doing anything.

2) When the Bush tax cuts were passed, the Republicans had a huge majority in the House of Representatives and the Democrats had a 1 seat majority in the Senate --- the Dems were in a weak position.  From 2003 through 2006, Bush has had large majorities in both houses of the US Congress and got everything he wanted.  Come 2009, the Democrats will have huge majorities in both houses of Congress (remember, the Republicans have 23 of 35 senate seats to defend), so Obama will get what he wants, especially if he reaches out across the aisle and his policies are center-left and not full on left.


I'll keep the group up to date on feedback I get from my friend.

[jjj000]

david... get him a user name and have him join the board!!!

Just read some of his stuff... "tax neutrality"... he favors a flat tax?!?!  Well we know that will never happen... but interesting nonetheless...

[davidslane]

"Flat tax" --- actually no


I asked Jason about that.

Tax neutrality does not mean a flat tax.
(I thought it did too initially.)


Tax neutrality means not biasing the tax code to counter-act market forces.
Meaning, don't try to tax something to try to change economic behavior.

For instance, don't tax gasoline like crazy to try to get consumers to use less gas.
Let market forces correct the situation.


The exception is if you are talking about sin taxes, like taxing cigarettes to control and lower consumer demand.


But to be clear, Jason and Obama both believe in a progressive income tax system where those making over $250k are taxed at higher rates.

[jjj000]

Progressive taxation... don't get me started.  Off-topic from your friend's beliefs... but I can't control myself...

They really need to increase tax bracket limits by a real inflation number rather than the BS 2% number they are using every year.  Something like 15% instead... even M2 would be better.  That would make that $250K limit much more bearable... heck by now it might be like $500K even...

[davidslane]

They really need to increase tax bracket limits by a real inflation number rather than the BS 2% number they are using every year.

I'll mention it to him the next time we e-mail.
Of course, the higher the CPI, the more the government has to spend in entitlements (social security, govt raises, etc.).  Not saying I agree, but its hard to get the govt to increase the inflation guage as it costs them money.

[whatsupdoc]

davidslane, do you have a link on the details of the Bush Tax Cuts
that are set to expire in 2009?  Obama has been saying that he
will propose to raise the capital-gains tax.  I don't recall him
mentioning that he is going to achieve this by doing nothing,
i.e. just let the Bush Tax Cuts expire in 2009. By saying he will propose
to raise capital taxes he is implying that he plans to pass legislation to increase
capital-gains tax rates. Here is a question for Jason Furman. I know that up
to 250K(500K for couples) capital gains from the sale of a principal residence/home 
is excluded from taxes after meeting ownership requirements per IRS Publication 523.
Therefore only gains above 250K(500K for couples) are  taxed at the capital gains rate.
Are the gains in excess of 250K(or 500K) for principal residences also going to be
taxed at the proposed high rates? Or is the increase on capital-gains tax rate only
applicable to financial investments?

BTW,  your friend Jason Furman popped up in an article in
the New York Sun. If it is true that he was a Wal-Mart Defender he
will be a controversial addition to Obama's team because as noted
in the article below Obama  criticized Clinton for being on the
board of Wal-Mart.  During the primary campaign,  Obama was
sharply critical of the company. He has said he will not shop there
and that Wal-Mart should pay “a living wage.” In the article below,
an Obama spokesman says that Obama and Mr. Furman have not
discussed Wal-Mart. Huh?
There are 46 comments so far at the end of the article at
http://www.commondreams.org/archive/2008/06/10/9534/

Published on Tuesday, June 10, 2008 by The New York Sun
Wal-Mart Defender To Direct Obama’s Economic Policy
Appointment of Jason Furman Immediately Meets With Skepticism
by Josh Gerstein

Just days after clinching the Democratic presidential nomination, Senator Obama is naming as his economic policy director an economist who has clashed with critics of Wal-Mart by defending the company as a boon to poor Americans.

The appointment of Jason Furman, 37, a former Clinton administration official who is a visiting scholar at New York University, immediately met with skepticism from some who have faulted Wal-Mart for being stingy toward its workforce.

“It’s surprising because this guy seems to feel that Wal-Mart’s low-wage, low-benefit business model is good for America. That’s just flat-out wrong,” the executive director of Wal-Mart Watch, David Nassar, said. “This guy helped to lend credibility to the Wal-Mart business model. That was disappointing then and it’s disappointing now given this position,” said Mr. Nassar, whose group is backed by a board that includes the president of the Service Employees International Union, Andrew Stern. Mr. Nassar quickly added that he was “not critiquing the Obama campaign.”

A New York-based labor organizer and writer, Jonathan Tasini, said he was puzzled by the selection of Mr. Furman. “It’s legitimate to give you pause,” Mr. Tasini, who ran an unsuccessful primary challenge to Senator Clinton in 2006, said. “There have been concerns raised about where Obama’s economic policies will trend,” the writer said.

Mr. Tasini noted that, while Mr. Obama spurned labor groups by voting for a free-trade agreement with Peru, his past suggests he would be an ally of labor. “It’s hard to believe that during his community organizing work in the poorest neighborhoods of his own city he didn’t have something sink into him about income inequality. There’s no way to read anything he has put out there as anything but rejection for the Wal-Mart model,” Mr. Tasini said.

As the company became a pariah in Democratic circles, Mr. Furman stepped out on the issue in 2005 by publishing a 16-page paper titled, “Wal-Mart: A Progressive Success Story.” He argued that the huge cost savings the company has delivered to its customers, who tend to have low incomes, far outweighed any impact the chain may have had on wages.

In a debate on Slate.com in 2006, Mr. Furman took on the tactics of the anti-Wal-Mart movement, which include trying to block new stores in places like New York. “If I heard that Wal-Mart was coming to my neighborhood, New York’s West Village, I might rush for my mouse. But I wouldn’t kid myself into thinking that my opposition had anything to do with helping the poor. If anything, I would feel guilty that I was preventing moderate-income New Yorkers from enjoying the huge benefits that much of the rest of the country already knows so well,” he wrote.

“The collateral damage from these efforts to get Wal-Mart to raise its wages and benefits is way too enormous and damaging to working people and the economy more broadly for me to sit by idly and sing ‘Kum-Ba-Ya’ in the interests of progressive harmony,” Mr. Furman added.

A spokesman for Mr. Obama, Joshua Earnest, said the candidate and Mr. Furman have not discussed Wal-Mart.

During the primary campaign, Mr. Obama was sharply critical of the company. He has said he will not shop there and that Wal-Mart should pay “a living wage.”

At a January debate, Mr. Obama seemed to play to Wal-Mart’s critics when he suggested that Senator Clinton’s six-year stint on the company’s board paled in comparison to his record as a community organizer in Chicago. “While I was working on those streets watching those folks see their jobs shift overseas, you were a corporate lawyer sitting on the board at Wal-Mart,” Mr. Obama said, in one of his sharpest jabs at Mrs. Clinton.

One economist who has disputed some of Mr. Furman’s findings on Wal-Mart said the disagreement shouldn’t disqualify him. “That’s small potatoes. Jason’s economic agenda goes way beyond that,” Jared Bernstein of the Economic Policy Institute said. “That’s not anything close to a deal breaker.”

Mr. Furman had been affiliated with the Brookings Institution as director of its Hamilton Project, an economic policy project whose advisory council includes executives of Citigroup, as well as prominent hedge fund executives such as Eric Mindich of Eton Park Capital Management, Richard Perry of Perry Capital, and Thomas Steyer of Farallon Capital.

© 2008 The New York Sun

[Bottomfeeder]

  

Anybody who believes anything that any of these people say are just naive, IMO.

They are just trying to get better paying jobs and more power, a total sham.  The sad thing is that there are people out there who actually beleive this uhhumm stuff.

[Croaker]

Bottom line. 
Obama wins, your taxes go up and up. He is the most liberal Senator in Congress.
McCain wins, nothing but grid lock. Since the Dems control both houses.
Choose your poison, in the end it all the same.  Bend over, because here it comes.

GO MICKEY MOUSE!!!!!!!!!!

[davidslane]

Wow, where do I start.

1) Jason and Walmart.

Jason wrote a article about Walmart from a purely economic standpoint saying that Walmart's business model brought lower prices to millions of Americans helping shoppers maintain a standard of living (not necessarily the employees).  He is correct.  He also mentioned in the article that Walmart has a bad record in terms of labor and healthcare practices, but that part of the article never gets mentioned.  But the article was economicly oriented, not politically oriented.  Jason sent me the following link on this topic:

http://whippersnapper.wordpress.com/2008/06/09/obama-picks-furman-i-celebrate/


2) I'm not sure about specific policies of Jason and Obama (I discovered to my dismay that while Jason is heading up Obama's economic policies for the election he would probably only be a number 2 or 3 in the chain of the President's economic advisors command should Obama win).

I do know that both Jason and Obama are free-traders and free-market types.  Relative centrists actually.  They both believe that when you get huge disparities in incomes, you don't have a strong middle class with the disposable income to consume goods and without strong consumers (70% of the US economy), the US economy will sufer.  So, when Bush's tax cuts expire at the end of 2010 (I got the dates wrong), Obama plans on requesting to Congress that they not renew SOME of the tax cuts while keeping some others.  For instance, for people earning over $250k, they will still see better tax rates and tax deductions than they did under Clinton, but not as good as under Bush.  For those earning under $250k, they'll make out better than they have under Bush II.

I don't have a clue about the real estate deductions.

As for cap gains, I heard Obama wants 20% cap gains (I assume he means on long term) and possibly implemented gradually.

You can read more on Jason's thinking at:
http://www.brookings.edu/experts/furmanj.aspx (site's down right now)

And Obama has good policy write-ups on his site:
http://www.barackobama.com/issues/fiscal/


3) As for Croaker and Bottomfeeder's comments:

I know Jason believes in his work.  He (and I suspect other policy wonks) really believe that their theories will help people.  Now, whether or not politicians screw his ideas up upon implementation is another story.

He's not in it for the money.  He's truly an econ geek who loves studying statistics and economic models.

The Democrats tend to be for tax redistribution onto the uber wealthy away from the middle class, but not for overall tax raising.  In fact, Jason and Obama are actually for less corporate taxation, getting rid of the AMT, and bringing down the debt.  Curious if they will be successful.


Did I mention that Jason's freshman year roommate at Harvard was Matt Damon and that Jason used to perform street juggling shows in Greenwich Village in NYC.  He used to make a lot of cash on weekends during high school juggling to tourists.  He was quite good.  I got to watch his equipment.

[jjj000]

I got to watch his equipment.

I bet you enjoyed that, didn't you?? 

sorry, couldn't resist.

[davidslane]

At least I didn't say I got to watch his juggling balls and his unicycle.


To clarify, we're both grown up and happily married to two wonderful women with two kids each. (Am I paranoid what others might think?)

[Bottomfeeder]

"I do know that both Jason and Obama are free-traders and free-market types.  Relative centrists actually."

Sorry DSL...."relative centrists"?  relative to who, Mussolini(sp?)....LOL

I am not aware of anyone in the Senate who is left of Obama....doesn't mean there isn't one, I am just not aware of one.

All the chatter on Obama, is the same democratic message (for over 30 years now) , villify corporations and wealthy individuals, redistribute wealth from the wealthy to the poor.  It is always the wealthys fault that the poor are poor.  Only difference this time is Obama's ability to communicate to the "masses".

Question.  If Obama didn't know that Wright was a hate monger for 20 years, and we buy that, should we feel better that he was snookered by someone for 20 years, unable to see who he was?  Personally I think that Obama was there to learn how to be a better public speaker to advance his political aspirations.  He is a very smart person obviously.

Funny, I had commented to my girlfriend (long before Wright news) that he speaks like a minister.  His problem is that when he goes "ranting" he stirs the masses, but also creates records of positions that are in direct conflict with "prepared statements" which are also current.

As for the Republicans, same stuff, lower taxes, for small government, blah blah blah....government almost always grows....

The poor will always be poor, unless THEY individually take action to change that, education, hard work, etc....The rich will always be rich because they focus on education and work hard.  No government led by anyone can ever change that.

I just about always vote for gridlock.  Open checkbooks are not good.  The issues that need to be resolved can still be resolved with gridlock, as it becomes imperative to do so under public pressure(populism), which of course is necessary to get re-elected.  An unfortunate aspect of our system.

GDP is just like any other business, it runs in cycles.

[davidslane]

Hi BottomFeeder,

I must of hit a nerve.

I don't want to turn the forum into political banter --- granted I do think considering future economic policy is important here.


Just to set a few things clear though:
1) One newsletter counted Obama with the most liberal record in the Senate, but that was because he missed a number of votes because he was campaigning (now was that intentional, don't know)

2) In past years, he did not hold the most liberal label (I'm sure he was top 15).  But heck, he's pro-nuclear

3) The Dems (and Clinton in the 90's) believe in pay-as-you-go policies, so that should keep the debt under control and the dollar stronger

4) Obama and Clinton were actually quite pro-business. In fact Labor has issues with Clinton on how pro-business he was in the 90's

5) Under Clinton, the stock market plowed higher, under Bush, it tanked and we got lots of war and deficits


The question to ask, after taking the emotions out of the issue, is will grid lock be better than letting the Democrats get control and try and fix things.

Not sure if we want to answer that question on this forum.


But, I will say this, all the polling numbers I see (and I read a lot of them) calls for a Democratic landslide in November, so we may want to start thinking about how that may affect our investments.

Just my 2 cents as always.


BTW: Obama joined his church in Chicago for political reasons and left it for political reasons.

Not much unlike why McCain cheated on his crippled first wife after Vietnam and married a 17 year younger than he beauty queen with access to a beer distribution fortune so McCain could become a politician.  Remember, it was wife #2, Cindy, who kept the books during the Keating 5 scandal and mysteriously lost much of the paperwork for the investigation --- and then she became addicted to pain killers due to the stress and then stole painkillers and then got a slap on the wrist (it's great to be rich if you can get the gig).  Can't always get there [rich] by just hard work alone!

[Bottomfeeder]

no nerve hit at all.....I was numbed out on politics a very long time ago, and frankly do not expect much change regardless.

I had mentioned in an earlier post, that I am an independent.  Incidentally raised in a "Democratic" household.

My vote is always for gridlock as mentioned earlier, as it has also been a component present when we have had our most prosperity as a nation.  Its not based on idealism.

As far as who is elected, it should definately cause the wise to look at its strategies.  As I mentioned earlier, should short term capital gains taxes increase, I will alter my plans (risk) to take on less short term high specualtive risk investments, at least from a percentage of my portfolio.

Certainly, I think that dollar valuations are probably alot more pressing immediately for the investments that you and I are heavily involved in.