Capital Commerce
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Political Gridlock May Not Be So Good
Continue reading… 2 CommentsA month ago at this time, political analyst Mark Melcher was "moderately confident" that the Republicans would hold the House and Senate. Today, Melcher, who for years tracked politics and policy for a major Wall Street investment firm and now puts out the Political Forum newsletter (a must-read for the big-money crowd), thinks the Democrats will probably take the House next week. Not that he's thrilled about that prospect–he admittedly leans to the right. But Melcher's not in a panic, either.
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A Bad Time to Return to Rubinomics?
Continue reading… 0 CommentsDemocratic candidates have been running as fiscal hawks this election season, lambasting Republicans as a bunch of free spenders who mismanaged the Clinton surpluses into the Bush deficits. It seems as if they are arguing for a return to Rubinomics, the economic theory named after President Clinton's second treasury secretary, Robert Rubin.
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Ask Sallie Who Will Win the Midterms
Continue reading… 3 CommentsToday's GDP number was the last big economic report before the election. But that top-line number showing that growth slowed to 1.6 percent from May to September vs. 2.6 percent in the previous quarter isn't the one to watch–at least not if you are trying guess what voters will be thinking on November 7. Drill a little deeper and you'll find that:
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Wall Street's Take on the Midterm Elections
Continue reading… 0 CommentsWhat is Wall Street's perspective on what might happen November 7? Here are the key takeaways from a Prudential Securities conference call held yesterday by the firm's Washington research term.
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Bernanke's 12 Big Words
Continue reading… 0 Comments"Going forward, the economy seems likely to expand at a moderate pace." Those dozen words constitute almost the entire difference in the Federal Reserve's policy statement today and the one issued last month. (This statement also downplays energy prices as a source of inflation.) And like last month, the Fed's Open Market Committee decided to leave short-term interest rates alone.
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Is Good Economic News Good for Democrats?
Continue reading… 3 CommentsSo which game is the chairman of the White House's Council of Economic Advisers playing? In a newspaper interview published today, Edward Lazear said that the housing slowdown will affect "a very significant chunk" of the economy's growth in the third quarter–3Q GDP comes out Friday–and that the slowdown is "going to hit us."
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The Budget's Missing $240 Billion
Continue reading… 0 CommentsBy all accounts, Republicans—including President Bush—are going to start talking up the economy big time as a way of improving their chances of holding on to one or both houses of Congress. And there's a lot of meat to their argument, what with the Dow Jones industrial average climbing to new highs and unemployment at the lowest levels of the Bush presidency. But if there is one area that even die-hard Republicans kvetch about, it's spending. As budget expert Brian Riedl of the conservative Heritage Foundation points out, federal spending has jumped 45 percent since 2001, with defense and homeland security accounting for less than one third of the increase. Education has increased 137 percent, international spending 111 percent, and health research and regulation 78 percent.
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A GOP Surprise Courtesy of Investors?
Continue reading… 1 CommentIf you go by the political betting markets—not to mention those devastating polls—the GOP has about the same chance (30 percent or so) of keeping House of Representatives under Republican control as the United States does of catching Osama bin Laden or of bombing Iran by the end of next year. (But it has twice as good a chance as Joey Lawrence does of winning Dancing With the Stars, natch!) Yet there goes White House political adviser Karl Rove this week predicting the GOP will hold both the House and the Senate. (A veteran Washington watcher and money guy snarked to me, "I wonder if this is the same version of Rove that predicted an easy victory for Bush in 2000 and had him taking a victory lap in California.")
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Why Wall Street Doesn't Fear Speaker Pelosi
Continue reading… 0 CommentsIt seems ever more likely that the Democrats will capture one or possibly both houses of Congress. But the Big Money crowd on Wall Street seems as if they couldn't care less. The Dow Jones industrial average is up 2.3 percent since the Mark Foley scandal broke, an event reversing a monthlong buildup of GOP political momentum. That, even though studies show investors–including this new one out of Stanford and Wharton business schools–tend to prefer Republicans over Democrats.
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An Economic Agenda for Republicans
Continue reading… 0 CommentsNo matter what happens on November 7, America is going to end up with a de facto divided government. Even should the GOP keep control of the House and Senate, it would likely be by the narrowest of margins. Most analysts think voters should expect nothing but gridlock for the next two years. So for the heck of it, I asked a couple of pretty smart guys–one on the left, one on the right–what their dream economic agendas would be for the Democrats and Republicans, within broad political reason.
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An Economic Agenda for Democrats
Continue reading… 0 CommentsIf the public-opinion polls and online betting markets are correct, Democrats will be running one or both houses of Congress come Jan. 3, 2007. But if that moment does arrive, will their congressional leaders find themselves repeating the famous question asked at the end of the 1972 Robert Redford film The Candidate, "What do we do now?" Let me quote from an E-mail I recently got from Jacob Hacker, a Yale political science professor and author of The Great Risk Shift, a new book in which he identifies growing income volatility as the prime cause of widespread worker angst. His bleak take on the Dems' economic agenda in the upcoming 110th Congress: "One thing that's clear is that Democrats are focusing right now on taking down the GOP and very little on what they might do once elected–which may work as an electoral strategy but is going to leave them with a pretty blank slate if they actually win one or both houses."
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Should Uncle Sam Help Domestic Manufacturers?
Continue reading… 2 CommentsA recent study from the National Association of Manufacturers claims that the competitiveness of domestic companies is being hurt by rising "structural costs." Problem areas include taxes, employee benefits, litigation expenses, and energy prices. As the NAM figures it, U.S. manufacturers are at a 31.7 percent cost disadvantage vs. foreign rivals. That's up from 22.4 percent in 2003. "The sharp rise in these nonwage costs represents a significant and long-term problem for our nation's manufacturers and America's economy," said John Engler, the NAM's president and former Republican governor of Michigan, when the report was released.
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October Surprise for the Investor Class
Continue reading… 3 CommentsHow will investors affect the midterm congressional elections on November 7? (That was the cogent question asked of me by Lawrence Kudlow when I appeared on yesterday afternoon's edition of CNBC's Kudlow & Company.) To even begin to tackle the issue beyond a sound bite, you first have to understand what the "investor class" is. Slightly more than half of all U.S. households own stock, either directly or through retirement accounts such as 401(k)'s and IRAs, according to the Investment Company Institute. In the early 1990s, that fraction was only about a third. And in the early 1980s, just a fifth of all households invested in stocks. During the 2004 presidential election, about 46 percent of investors, according to polling by Zogby International, identified themselves as members of the investor class. And this group voted for President Bush in a landslide over Sen. John Kerry, 61 percent to 39 percent.
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Those Strange Jobs Numbers
Continue reading… 1 CommentIt was the big twist in last week's so-so jobs report. Labor Department number crunchers said they had–oops!–undercounted by a whopping 810,000 the number of jobs created by the U.S. economy for the 12 months ending in March 2006. That means nearly 3 million new jobs were created instead of just over 2 million. So what does the megarevision–the biggest ever in terms of absolute numbers–really mean? To get some insight, I shot an E-mail to Diana Furchtgott-Roth, a former chief economist at the Labor Department and currently director of the Hudson Institute's Center for Employment Policy in Washington, D.C.
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Is '70s-Style Stagflation Next Up for the U.S. Economy?
Continue reading… 4 CommentsGail Fosler, chief economist of the Conference Board, came out with her stagflation call this morning. Oh, and the Fed is also going to resume raising rates, she added. Ugly stuff. The global research organization's index of leading economic indicators has turned downward of late, leading to Fosler's prediction of a slowing economy. But she also thinks inflation will remain stubbornly high. Slow growth plus inflation equals stagflation. Here's her two cents:
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Job Numbers: Good But Not Good Enough for GOP
Continue reading… 0 CommentsToday's new jobs numbers from the Labor Department were a missed chance for President Bush and congressional Republicans to slightly nudge the national conversation away from Mark Foley and E-mails and instant messages. The headline — Jobless Rate Drops to 4.6 Percent — is certainly positive news for them, but it wasn't coupled with the sort of boffo job-growth numbers needed to create a clear, unambiguous picture of a powerful, pro-incumbent economy. (According to the Intrade political betting market, the GOP has just a 44 percent chance of keeping the House, though the economy is obviously not the only factor in voters' minds.)
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A Surprise in the Job Numbers?
Continue reading… 0 CommentsWill tomorrow's September payroll numbers from the Labor Department provide a big surprise? That's certainly been the case in recent years. Economists have been unable to predict with any accuracy how many jobs this economy creates on a monthly basis. Usually the pros are overly optimistic, predicting, say, 250,000 new jobs when it turns out that only half that many had been generated. This time around, economists are looking for payrolls to increase by around 120,000.
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Bernanke Speaks! (On Housing, Energy, Entitlements)
Continue reading… 0 CommentsSince chatting up Fed policy with CNBC anchor Maria Bartiromo at a dinner in April–sending stocks plunging–Federal Reserve Chairman Ben Bernanke has kept his public utterances formal. But speaking at the Economic Club of Washington today, Bernanke did take some audience questions after his prepared remarks on America's entitlement problems.
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Fed may slash rates to save the economy
Continue reading… 1 Comment"Apocalyptic."
That's how a Wall Street economist described to me the attitudes of south Florida homebuilders to whom he recently gave a speech. The economist might have gotten a similar earful had he chatted with homebuilders in the Northeast or California. Same dreadful story in all the formerly hot markets. But how much will a housing slump infect the rest of the economy? One look at the severely inverted yield curve–often a predictor of coming recessions–sure hints at coming nastiness (though the elevating stock market tells a different tale).
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Why Bernanke should be smiling
Continue reading… 0 CommentsAnother sign that the economy may be headed for a soft landing, rather than a hard one: today's September manufacturing report from the Institute of Supply Management–which showed the sector slowing a bit but still expanding. It was seen by economists as a sort of a tiebreaker after a series of mixed manufacturing reports. Stocks tumbled after the recent negative survey from the Federal Reserve Bank of Philadelphia, but both the Empire State and Chicago purchasing managers index reports last week were rosier. So all eyes turned to the ISM report for a mountaintop view of things.
