The Independent Market Observer

11/23/12 – Recovering from a Tryptophan Overdose

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Nov 23, 2012 8:06:28 AM

and tagged Fiscal Cliff

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Today is a slow day news-wise. I expect everyone is doing pretty much what I am: recovering from an overdose of good food and wine.

What coverage there is largely consists of discussions of the fiscal cliff negotiations. Since there is no actual news to report, the papers are looking around for ways to create value/fill column inches, and in a couple of cases, they actually succeed.

The pile-on of lobbyists looking to get their clients’ interests represented in any tax legislation is well presented in “Higher Gas Tax Idea Joins Fiscal Cliff Talks” on page A4 of the Wall Street Journal (WSJ) and also plays into “Seeking Ways to Raise Taxes but Leave Tax Rate As Is” on A14 of the New York Times (NYT).

The NYT article does a good job of laying out some of the trade-offs associated with the proposed solution of taxing the rich without raising tax rates, providing an illustration of what that might look like as well as some historical backup. An accompanying piece on the same page, “Tax Reform Might Start With a Look Back to ’86,” also offers a good history lesson. All of these articles are worth reading for some context on the current debate.

Another article worth a look is on the front page of the NYT: “One-Party Control Opens States to Partisan Rush.” The GOP took more governorships this past election cycle, and the partisan sorting at the state level has left more states with undivided governments. As an example, this will lead to very different state-level implementations of Obamacare—something we are already seeing—and also to very different economic environments over time. But the states are the laboratory of democracy, as the saying goes, and the situation may offer opportunity as well as risk.

The larger picture here is that government will continue to matter more than it has over the past 20 years or so. This is a trend that shows no sign of stopping, and we had better get used to it.

I hope everyone had as wonderful a Thanksgiving holiday as I did, and that you make your way home safely if you traveled. Happy Black Friday! May the bargains be many and the parking spaces obvious.

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