Mid-terms and Uncertainty

Barry Glassman joins Congressman Paul Ryan and Greg Valliere, Chief Political Strategist as they debate the changes that could happen in the upcoming election, the expiration of the Bush tax cuts and what it means to investors.
“The uncertainty is not going to go away on November 2” said Barry Glassman. “What November 2 means is that our out-of-shape, obese, unhealthy, but yet, somewhat recovering economy may or may not get a new set of personal trainers.”

 

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Time to talk midterms. Wall street and looking past november here now. Barry glassman. And chief political strategist at potomac research. Also a cnbc contributor. And guest host congressman paul ryan from wisconsin, ranking member of the budget committee. I want to start with you, greg, because you just always say this — you throw these bombs. They’re so incendiary. I’m trying to figure out the thing you say that really got me. Tell me the state of — the state of this upcoming election at this point. How do you read it? Is the house gone and the senate a possibility? Where are you in.

exactly, joe. I think the house is gone. This morning’s politico has a story about pelosi going if the house falls which I think is quite likely. No, it’s a tidal wave. No question about it.

what do you mean pelosi going where?

stepping down. Maybe steny hoyer becomes the minority leader. It’s going to be that big of a deal.

because she’s going to win another — going to win another 70%, right?

yeah. Her district. I think as leader, I mean, she’s such a lightning rod. Steny hoyer I think would be, perhaps, he turned down temperature just a little bit.

greg, I want to talk to congressman ryan about this again, but it made sense. Let’s set up the republicans as blocking a middle class tax vote. Boehner says, no, I would never do that. Now it’s like, wait a minute, we’re going to own this, if we do it, if things don’t improve that’s going to be — that was a pretty swift move by boehner, wasn’t it?

two very quick points. Number one, he had to soften the impression the white house was creating he just wanted tax cuts for the rich, and he did that. Number two, more importantly, he said it because he knows he has the votes. I think in both houses, returning member, returning democrats are saying to the leaders, we have to vote for tax cuts for everybody.

that’s right. Oh, you mean — boehner knows that it won’t — he’s, like, saying something he won’t be forced to do anyway —

really?

he has the votes.

he’s right about that. It’s up to pelosi. If you put this on the floor extending all of the tax cuts we will win that vote. We’re on vinceconvinced of that. Boehner said have all tax rates go two more years on everybody. We think we have the votes for that in the house and senate. The question is will pelosi and the president let that vote happen or not? That’s up to them.

why would they do that if boehner has now said, you know, the only option I have —

he was asked, we don’t want taxes to raise on anybody. We want to make sure all these tax rates stay where they are for all tax rate payers because of growth.

why would pelosi do that if she knows she can get her way, why would she put a different bill in front of them?

we’ll have democrats already in the campaign came out on record as being in favor of extending the tax cuts for everybody. We’ll knowhey have the votes. She’ll be the one to deny the extension of tax cuts for small businesses, income earners which is going to hurt growth. They’re going to be in a slow growth cycle. They’re worried about the politics of this more than the growth of this.

they’re worried about what happens if they go ahead with the tax cuts for 97% or 98% of americans. They’re worried about what happens to the economy?

that’s the talking point. 97% versus 3%. Half of all small business income is going to get a 13% t increase. This is going to hit jobs. This is going to hit the economy. Keynesians say you should not be doing it at this time. It is good economic redistribution policy, good class warfare policy, meaning it’s good politics. Even their own economists are telling them confidentially we believe it’s not good economics.

barry, you have interesting points that if this uncertainty doesn’t end with november?

no. Greg’s great at handicapping the races and outcome and so forth. On november 2nd we may understand which way policy goes and so forth. November 2nd isn’t y 2 k. We’re not going to wake up the next morning and knoif everything’s great or not. In essence what november 2nd means is our out of shape, obese, unhealthy but somewhat recovering economy may or may not get a new set of personal trainers. It’s going to take a long while of training and changing and behavior for us to heal this economy.

barry, what about animal spirits? What about self-fulfilling prophecy? We have CEOs that come in here and we argue with themm and say there’s no more uncertainty now than there ever has been. They insist there is. Th’re the ones — it’s their ball. They can leave with the ball and say, i’m not hiring anybody, i’m not spending any cash because i’m worried about the commercial paper market. Ll never be that dependent again. They’re the ones that seem — if that uncertainty for the house and senate were to go away in november, why wouldn’t the animal spirits return for CEOs?

we might have a better idea of what way tax policy might g we might get that in january, a year from january. Tax policy, alone, wili not rid ourselves of uncertainty about inflation, deflation, whether jobless claims are going to go up or down and a whole variety of other things.
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