The Independent Market Observer

9/18/12 – The U.S. and the Rest of the World

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Sep 18, 2012 12:57:18 PM

and tagged Politics and the Economy, Yesterday's News

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Apart from China, which gets its own post today, the U.S. election led the headlines. The New York Times (NYT) started with “In Video Clip, Romney Calls 47% ‘Dependent’ and Feeling Entitled” on the front page, the Financial Times (FT) had “Romney refocuses amid poll gloom” on the front page and “Romney’s chances hit by mixed messages” farther back, and the Wall Street Journal (WSJ) had “Romney Video Surfaces Just as Campaign Vows Specifics” on page A4. For anyone who missed this, there is a video that shows Romney saying he will not even try for the votes of the 47% of the population who are dependent on government, as they would never vote for him. Romney acknowledged making the comments, which were, of course, seized on by the Democrats.

The tone of class conflict in the comments, though, is at odds with the general disappearance of Occupy Wall Street. The FT had a picture on the front page, “Keeping occupied: March marks movement’s anniversary,” and the NYT had “Occupy Wall Street: A Frenzy That Fizzled” on page B1. The WSJ, interestingly, had nothing. Think about it—when was the last time you thought about Occupy Wall Street? Romney’s comments, though much more blatant than others he has made, are also consistent with public remarks he has made, to no criticism. Bad politics, perhaps, but incorrect?

And even the bad politics may be in question. I have written before about how health care politics may not be as clear-cut as people expect, and I would argue that this is the case for many cost/benefit issues. Cities are now cutting pensions and paychecks for police and firefighters—San Jose is the poster child for this—and the Chicago teachers’ strike, started by a Democrat mayor, is front-page news on this very issue (see the NYT and WSJ p. A2). I think the lines on what the public demands are moving much faster than most of us realize. Matching spending to revenue is in the process of becoming a consensus issue, not a partisan one.

Most tellingly, I highlighted a story a couple of weeks ago titled “Are Entitlements Corrupting Us?” As I said then, the fact that this story appeared in a major newspaper meant the world had changed. More evidence for change came today, with “Should the Eligibility Age for Medicare Be Raised?” (WSJ, p. B6). People get it, and the discussion has started. You can also see this in the WSJ’s “States Seek a Middle Ground on Medicaid” (p. A6). Even Romney himself has gone back and forth, saying he would repeal Obamacare, then would keep parts of it, and now is back to full repeal.

The reality is that current policies are not sustainable, and we will be making changes, either the easy way or the hard way. Politicians are now trying to figure out exactly what that means; no wonder everyone is confused.

As a side note, I find www.intrade.com a good way to handicap various political and other outcomes. Take a look—it is very interesting. And as I have mentioned before, Nate Silver at the NYT is a great political analyst; you can find his blog here: http://fivethirtyeight.blogs.nytimes.com/author/nate-silver/

Elsewhere in the world, the situation was generally confused. Anti-U.S. riots continued around the world, as covered in the NYT (p. A6), the WSJ (p. A1 and p. A11), and the FT (p. 4). Angela Merkel reaffirmed her support of the Draghi plan, in case there was any doubt, as reported in the WSJ (p. A12) and the FT (p. 7).

We live in interesting times.

Have a great day!

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