10/10/2012 7:27 PM ET|
Vote for the Romney economy?
Why Medicare must change
Romney has some ideas here too: using the power of competition and the free market to force things like price transparency and cost-benefit analyses into an industry that's been sheltered by government largesse and the public's reluctance to address issues of morality and mortality. It will require patients to do more legwork, shopping for insurance and subjecting their health care providers to more scrutiny. And they will bear the burden of fighting the relentless rise in health care costs. But it must be done.
Medicare costs are expected to double, to $1 trillion, over the next eight years. Yet according to the Urban Institute, the average couple turning 65 in 2010 had paid $109,000 in Medicare taxes but would receive $343,000 in benefits. Simply raising taxes on the wealthy to close the funding gap -- combined with the Affordable Care Act's bureaucratic and limp-wristed attempt at cost control -- is a terrible idea.
Not only will that make the short-term, cyclical portion of the deficit worse by impeding growth, it will also further damage the economy's long-term vitality by additionally weighing on capital investments and productivity gains. This will lower the economy's potential rate of growth and its ability to create prosperity.
I'll say it like this: I don't want more tax dollars forced from the hands of society's most productive members to be reallocated, by the rule of law and penalty of imprisonment, into one of the economy's most inefficient sectors to pay for benefits that were overpromised and underfunded. Instead, let's allow entrepreneurs and innovators to spend that money on ways to lower the cost of care and increase the quality of life for everyone via things like new DNA sequencers and research-and-development spending, while consumers demand better services at lower costs.
That's because the only way to create U.S. jobs is to increase the demand for American labor. And the only way to do that is to make small and midsize enterprises feel comfortable investing and hiring again and to give them a source of financing -- via retained earnings from lower taxes -- to fund that investment in lieu of limited bank lending. (Large enterprises, for their part, are sitting on a ton of cash and can borrow at extremely low rates in the corporate bond market.)
This is what's needed if America is going to take advantage of jobs coming back from China.
Obama's focus on more onerous regulatory burdens, tax hikes and wealth redistribution toward the middle class isn't working: Growth of the gross domestic product has been slowing steadily since 2010, industrial production has stalled, durable goods orders are falling hard (shown below), and CEO confidence has crashed as corporate profits come under pressure. Companies have cut capital expenditures so deeply that the country's industrial capacity is roughly where it was a decade ago. And hiring and capital investment plans, based on a recent Business Roundtable survey, have fallen back to levels seen when the jobs recession was raging in late 2009.
This is a problem I've talked about in past columns. In the context of Romney's gaffe about the 47%, I noted that the Organisation for Economic Co-Operation and Development warned that "taxing more and spending more" won't solve our problems. Back in August, I wrote that our economy won't roar back to life unless we persuade CEOs to open their wallets and start taking risks.
We've been here before
Don't think our current predicament is unique. Barry Knapp at Barclays Capital sees eerie similarities between the current situation and President Harry Truman's 1948 re-election. Truman's Fair Deal campaign has much in common with Obama's platform. Indeed, in his closing statement in last week's debate, Obama reiterated his desire to see that "everybody's getting a fair shot" and that "everybody's getting a fair share." Both have emphasized things like universal health care, increased education spending and pro-union legislation.
Economic conditions were also similar -- with the government deeply indebted, the Federal Reserve capping the Treasury's borrowing costs and housing recovering from a national decline.
And then, like now, capital spending started to fall ahead of the election before dropping sharply in the early part of 1949 after Truman won a surprising upset over Republican challenger Thomas Dewey, thanks to his attacks against a "do-nothing" Congress and Dewey's lack of policy specifics. What followed was an 11-month recession and a 19% drop in the stock market between November 1948 and June 1949.
(To be fair, stocks are up nearly 120% from their March 2009 low under Obama. But it's hard to know how much of this was driven by Federal Reserve policies rather than those of the president.)
The late market historian Robert Sobel wrote of the Truman period in his work "The Big Board: A History of the New York Stock Market":
"Wall Street prepared for the year-end rally in late October, as volume and prices both rose. Then came the shock of the Truman victory, shattering dreams of a pro-business administration in Washington. The next day opened with a rush of sell orders, and trading was held up as specialists tried to establish an orderly market."
It's possible that the reverse of this could play out in the weeks to come as Romney's chances rise. But so far, I'm not seeing signs of optimism from Wall Street. Maybe there needs to be another strong debate performance before Wall Street reacts.
Cummins was hit with selling pressure earlier this week after the company downgraded its forward guidance. It is now looking for third-quarter revenues of $4.1 billion, compared with a consensus estimate of $4.42 billion, and 2012 fiscal year revenue of $17 billion, compared with a $18.1 billion consensus. Management cited heightened uncertainty, delayed capital expenditures, lower demand and weak conditions in China for the move.
In response, Cummins is taking actions including planned workweek reductions, manufacturing facility shutdowns and layoffs of as much as 1,500 people by year end. This is a perfect example of the negative ramifications of a drop in corporate investment.
At the time of publication, Anthony Mirhaydari did not own or control shares of any company mentioned in this column. He has recommended a short position in Cummins to his newsletter subscribers and money management clients.
Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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Romney has been a businessman all his career, where Nobama has never had a job. Nobama has 6 tillions more in debt as pres.
Why would anyone vote for a career politition over someone who has built many successful businesses and knows what it takes for business to succeed. If you would like to keep your job or want to find a job or provide for your family in any way... we need to send Romney to the White House.
Mitt Romney made BILLIONS bringing companies back to life.....
Barrack Obama smoked/dealt drugs, produced NOTHING more than hate and anger as a Community Organizer, and sponged off of the rich his whole life!
Hmmmmm, I wonder who has the best recipe to fix our pathetic economy?
There is one easy way to grow jobs for our citizens and that is to take any and all tax breaks and subsidies for companies and corporations that are having their products produced in foreign countries with cheap labor.
There is no way tax breaks should be given companies that are helping to destroy our Country.
Build our products and jobs in North America to save our land.
Colorado, Fuel at $1.86 a gal when Obama was inaugurated, today over $4.......
House prices 15% LOWER than when Obama took office.........
Stock market flooded with devalued dollars and America buying its own debt........
Nations refuse to buy our bonds, and we are stuck buying our own........
An AMERICAN AMBASSADOR DIED and Obama LIED about it being a terrorist attack.......
Domestic and foreign terrorism has exploded under Obama...........
STFU and put back on the velcro gloves and wrangle you some sheep cowgirl!
LMFAO! Colorado you no clue what you are even talking about!
Romney LEFT Bain decades ago, yet you claim their struggles today are associated to him.......
Romeny didn't even create Bain, he was a high level employee, not a creator nor owner! He was a CONTRACTOR that made the right choices and made BILLIONS for the comapny and its investors, whom by the way are union pensions, federal pensions and teachers', police and firefighter pensions!
So when Romney turned $25 Million into $125 Million or $50 Million into over $1 Billion he EXPANDED those pensions and ended up paying MORE to those beneficiaries.......
What did Obama do again? Oh yea he graduated Columbia, moved to NY with a few guys tried to be part of the "hood". Became a community organizer, quit, went to Law School, graduated worked for a firm unitl he was FORCED to give up his license then ran for politics......... Sounds like a resume of a LOSER that can't run a McDonalds let alone a nation!
I was hired for my dream job when Pres. Reagan's in office.
The company closed down 22 years later while O' Bama in that same office.
Now, I am 60+ out of luck.
Guess who will I vote for?
Obama has NOTHING. Romney has been CONSISTENT. What has been INCONSISTENT is Obama. Romney addresses and talks about problems and how to SOLVE them. Obama just talks and goes around acting like an entertainment celebrity.
Those that have paid attention know what Romney has stated and the truth is he has NOT "flip flopped" or "lied" about anything.
Liberals have a Reality Deficiency Disorder. (RDD).
I LOVE THE LEFT WING NUTJOB LIBERALS! ROMNEY LIES! ROMNEY WILL SAY ANYTHING!
ROMNEY'S PLAN WILL FAIL! THAT'S EXACTLY WHAT OBAMA DOES! LIES! SAY ANYTHING!
AND FAIL! I THINK MOST AMERICANS REALIZE HE HAS NO EXPERIENCE AND NEVER SHOULD'VE
BEEN ELECTED AND THEY ARE GONNA TAKE BACK THEIR VOTES AND ELECT SOMEONE WITH EXPERIENCE!
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