Remember when I said we would see more volatility as the negotiations played out in the press? Today’s front-page article in the Wall Street Journal (WSJ), “Obama Sets Steep Tax Target,” discusses how the President is using his proposed budget, with $1.6 trillion in additional revenue, as a starting bid. This is twice the additional revenue that he and Boehner were talking about in their last set of negotiations and is a nonstarter from the Republicans’ point of view. Surprise—stocks are down again this morning.

Obama is also reported to be under pressure from the left on the budget. Yesterday’s WSJ had “Labor Pressures Obama on Budget” on page A6, which was confirmed in today’s New York Times (NYT) with “Obama Tells Labor Chiefs He Won’t Yield on Budget.” Earlier this week, we saw the Republicans playing to their base; now we see the same with the Democrats.

Nothing concrete to report on today, but the discussion continues to get more interesting. One article in particular that is worth a look is an op-ed piece on page 9 of the Financial Times (FT), “How the US should avoid falling off the fiscal cliff.” It was written by Glenn Hubbard, current dean of Columbia Business School, former chairman of George W. Bush’s Council of Economic Advisers, and an economic consultant to the Romney campaign. He has some credibility when it comes to representing the Republican economic point of view.

And his points are both largely typical of that point of view and economically sensible—raising revenue is about raising average tax rates, not marginal rates; spending cuts should be a larger part of the solution than tax increases for growth reasons. It’s when you take a closer look at the details that it gets interesting. Let’s go to some direct quotes. Hubbard writes:

• “There are ways to raise revenue without increasing marginal rates. Tax deductions should be scaled back, especially in the areas of mortgage interest, charitable giving, and employer provided health insurance.”
• “The first step is to raise average (not marginal) tax rates on upper-income taxpayers. Revenue increases should come first from these individuals. This means closing loopholes.” He then goes on to discuss limiting deductions overall.

The good news on the real economy continues, with consumer confidence hitting a five-year high, per the New York Times (NYT) over the weekend. We are now at a level that is pretty close to the historical average, which illustrates just how bad things have been from a consumer point of view. A five-year high just gets us back to the average? Much of this is due to improvements in the current conditions index, which is mostly about the labor market, and improvements in expectations.

Bob Woodward is known for writing books that let readers imagine that they are first-hand witnesses at critical political events. With a depth of reporting and access matched by few, he specializes in telling the stories that affect our lives as played out in Washington, DC.

Now that the election results are in, it is time to think about what they mean for your financial future. Even though the government will remain pretty much the same for at least the next two years, taxes will be changing substantially next year, and we can make some educated guesses about how they will be changing after that. Finally, we need to consider what the pending fiscal cliff might mean to our financial health and how to prepare for its effect.

So, here we are, pretty much exactly where we were yesterday, but now it all looks different. Democrats are happy, Republicans are depressed, and the government will look the same for the next four years as it has for the past four.

So here we are, Election Day, and the uncertainty will soon be resolved. Right?

Financial markets react to uncertainty

Today’s post will be a short one, as I’m finishing up at Commonwealth’s National Conference before traveling home—and also, frankly, because there’s not a lot of news.

The papers are focusing on the final day before the election, with the candidates and campaigns dashing around trying to do the one last thing that might make a difference. Recovery from Sandy is the other big story: human-interest components, details on specific problems, and speculation about the storm’s overall and long-term effects.

The papers today are all about elections, and with five days to go, both sides are pushing as hard as they can. Group dynamics are one focus—women had their day in the sun last week; this week, it seems to be Latinos, per the front-page story in the Wall Street Journal (WSJ), “Election May Hinge on Latino Turnout.”

The focus also continues to be on the swing states, where Obama still seems to have an edge. The WSJ has “Polls: Obama Ahead in 3 Key States” on page A9, the Financial Times (FT) has “Obama and Romney vie for every last vote in a handful of states” on page 4, and the New York Times (NYT) has a good explanation of the situation from Nate Silver on page A12: “When State Polls Differ from National Polls” lays out the pros and cons of how his models incorporate both. Bottom line from Silver is that Obama probably has a sustainable national lead, on top of the lead reported in swing states, and that, based on his numbers, a Romney popular vote win and an Obama Electoral College win seems unlikely.