The two lead stories today are no surprise. Romney’s acceptance of the Republican nomination made two of three front pages: “Republicans Anoint Romney” in the Wall Street Journal (WSJ) and “Romney Secures GOP Nomination After Long Quest” in the New York Times (NYT). The story did not make the Financial Times (FT); the British paper did include election analysis but did not report on the Republican convention.
The second big story today is Hurricane Isaac, which also made two of three front pages—“Hurricane Gains Power and Hits Louisiana Coast” in the NYT and “Obama warns gulf residents not to ‘tempt fate’ as hurricane Isaac nears” in the FT. Isaac only made it to the second page of the WSJ with “Hurricane Isaac Roars Ashore.” Good luck to everyone in Isaac’s path.
Kind of a slow day from an economics and market perspective, but there were several stories deeper in the papers that are worth a look.
The first stories of note cover the emerging regional tensions in Spain. I have talked in several past posts, most notably in the Europe special series, about how the European countries themselves are not as unified as the word implies in the U.S., and how that adds another layer of complexity to any actions taken by European institutions. The Spanish conflict hit the front page of the FT with “Catalonia seeks €5bn Madrid bailout,” page A10 of the WSJ with “Spain’s Catalonia Adds to Aid Requests,” and page B6 of the NYT with “Shut Out of the Debt Markets, Catalonia Asks Madrid for Emergency Aid.” Think of this as if Texas were actively seeking to secede from the U.S. while asking for a bailout from Washington, DC. Many of these regional conflicts have been papered over in the recent past by money from central institutions, but the money has run out. While Spain itself is trying to negotiate a bailout from the European Union, its regions are digging the hole deeper and making resolution at the Spanish level even more difficult. This could be the crack that ends up sinking the boat.
I normally don’t hit op-ed pieces, and certainly not two in one day, but what the heck—today there are two excellent ones. First, as we get closer to the election, when voters will have to make a real choice, both sides are rolling out more specifics. In today’s WSJ (p. A15), Martin Feldstein, Reagan’s chair of the Council of Economic Advisors, breaks down why he thinks the Romney tax plan is credible. The most interesting thing about the Feldstein piece, however, is that even though it states that the tax plan can raise revenue, it bases that conclusion on cutting overall rates and eliminating tax deductions for those earning more than $100,000. The money has to come from somewhere, and taxing the rich more—which is what this is about—is not that different from what Obama is proposing. Although I certainly don’t dismiss the notion of a fairer tax base, that is not the same as an overall lower tax base. The rubber keeps getting closer to the road.
The second op-ed piece worth a look today is Stephen Roach’s article in the FT, “How Romney could go wrong from day one . . .” (p. A9). This is essentially a meditation on how protectionist measures—which Romney has pledged in the campaign—could play out to everyone’s detriment. In light of my comments yesterday, I thought it was a good follow-up. Mr. Roach, a senior fellow at Yale and a former chairman of Morgan Stanley Asia, is worth listening to on matters like this.
Let’s close with some good news. “US Home Prices Ticking Upward” in the WSJ (p. A8) and “Hard-Hit Cities Show a Housing Rebound” in the NYT (p. B1) show that the housing recovery may be gaining more traction, something I called several months ago; a housing recovery is a foundational component of any sustainable recovery. “Bank Loan Growth Resumes” in the WSJ (p. C3) suggests that the wider economy may be starting to gain some traction as well, and “Deal Reached to Overhaul California Pensions” in the WSJ (p. A8) shows that even while problems continue to cook, some progress is actually being made in resolving them.
Have a great day!