Protesting private equity monster points menacingly at Alphavillain. The scene at Bain Capital’s NY outpost, Madison Ave and 57th, ahead of tonight’s starring role for the firm in Romney’s convention speech.
Gawker on Thursday unloaded some 950 pages of filings from Bain Capital-affiliated offshore funds in which Mitt Romney has invested his fortunes over the years. We’re still reading through the docs, though Dan Primack (who’s already read through them) thinks there’s not much to the issue. Read more
The fiscal cliff and “Taxmageddon” are terms for what might happen at the end of this year, when various US tax cuts and benefits expire, and the automatic “sequestration” spending cuts agreed as part of last year’s debt ceiling/Super Committee deal are due to kick in. (Cardiff explained it in more detail back in November if you want a refresher on the scale and messiness of it all.)
There have been several estimates of how this might play out — Nomura for example forecast that the expiration of the Bush tax cuts alone would reduce GDP in 2012 by 1.5 percentage points. Now the Congressional Budget Office, a non-partisan agency, has published its own analysis, which paints a picture of all of the fiscal restraint measures and expiring tax cuts shaving a massive 4 percentage points off GDP growth in 2013, making for a recessionary first half: Read more
The seventy richest members of China’s National People’s Congress accumulated more wealth last year than the combined net wealth of the US President, his cabinet, all 535 members of the US Congress and the nine Justices of the Supreme Court, Bloomberg reports. The NPC delegates earned $11.5bn in 2011, compared to the $7.5bn worth of America’s top officials, according to findings from the Hurun Report. The riches of some NPC delegates reflect Jiang Zemin’s push a decade earlier to include more entrepreneurs within the body’s ranks. It also shines a light on growing social inequality in China, WSJ Wealth Report writes.
Barack Obama has sharpened the divisions with his Republican rivals ahead of this year’s presidential election, the FT says, with a 2013 budget proposal that more than doubles tax on the dividend incomes of high-earners. Mr Obama’s budget lifts the levy on dividends from 15 per cent to the top marginal rate, which will stand at 39.6 per cent in 2013 if all of the tax cuts introduced by George W. Bush expire as scheduled by the year’s end. The plan to tax dividends as ordinary income applies to individuals earning more than $200,000 or married couples who take in over $250,000. The budget proposes lifting the capital gains tax rate from 15 per cent to 20 per cent. The budget also includes extra spending on education and infrastructure, which the president plans to pay for with additional higher taxes on the energy industry, mutual funds and also estates. It contains no new proposals to tackle the long-term drivers of the US deficit, most notably Medicare, which covers medical treatment for the elderly, and Medicaid for the poor. With little chance of getting through Congress, Mr Obama’s budget proposal is a political document that sets forth the fiscal platform he will campaign on ahead of the November election.
The White House will unveil $350bn of jobs measures and $1,500bn in tax increases in its budget proposal for the 2013 fiscal year later on Monday, Reuters reports. The budget projects a $901bn deficit in 2013, 5.5 per cent of GDP, compared to $1,330bn, or 8.5 per cent of GDP, this year. It will be the first Obama budget to incorporate a deficit of less than a trillion dollars, Bloomberg says. House Republicans are likely to put up strong resistance to the budget in Congress, having already attacked tax hikes in the plan, which would mostly target the rich, in previous deficit reduction packages.
The chairman of the House Financial Services Committee is being investigated over possible violations of insider trading laws, the Washington Post reports. The Office of Congressional Ethics began the probe into trades by Rep. Spencer Bachus late last year. Bachus made a slew of stock options bets in 2008, executing the trades around major policy decisions over the financial crisis, the WSJ says. House Representatives have just passed Stop Trading on Congressional Knowledge Act to improve financial disclosures by politicians, the WSJ adds.
Senators have voted overwhelmingly to pass the Stop Trading On Congressional Knowledge Act, a bill to remind legislators that insider trading is illegal, the WSJ reports. Abysmal approval ratings inspired the Senate into action, especially after media coverage questioning stock trading by its members, the Associated Press (via the Washington Post) says. The STOCK Act will require public disclosure of recent securities trades. Current insider-trading laws probably cover Congress, but an explicit confirmation within legislation would be helpful, SEC officials have previously said.
Mitt Romney has stormed to a 46 per cent share of the vote in the GOP Florida primary, although Newt Gingrich shows no signs of dropping out of the race, says Politico. But Romney’s superior funding and campaign organisation could pummel Gingrich’s chances before long, the FT reports. But although Florida is a key swing state, the fact that only five per cent of GOP nomination delegates have been chosen leaves Gingrich with the hope of sweeping Southern state primaries on March 6 — Super Tuesday, the NYT adds.
Newt Gingrich has turned up the heat on Mitt Romney, his rival GOP presidential candidate, over the frontrunner’s tax returns, the FT reports. “You have to live in a world of Swiss bank accounts and Cayman Island accounts and making $20m for no work, to have some fantasy this far from reality,” Gingrich told Univision TV. Even Karl Rove, George W. Bush’s electoral mastermind, has called for the Republican infighting to stop. Nevertheless, Gingrich retains polling momentum ahead of the Florida primary, taking 34 per cent in one poll, just behind Romney’s 36 per cent, Bloomberg says.
US president Barack Obama warned the nation Tuesday that the decades-old promise of a secure and rising middle class is under threat because of growing wealth disparity, says the Washington Post, in his election year State of the Union address which is expected to serve as a template for the campaign ahead. Mr Obama outlined a series of steps that he believes will reinforce the tentative economic recovery, including proposals to eliminate tax incentives for companies to move jobs overseas, to make college more affordable and to expand help for credit-worthy homeowners looking to refinance mortgages at historically low interest rates. Many of his proposals centered on changes to the tax code, including limiting deductions for companies that move jobs overseas, rewarding companies that return jobs to the US and increasing taxes on wealthy Americans, says the NYT. The US president said tax reform and budget reduction should be guided by the principle that anyone with annual income of more than $1m should pay a minimum effective tax rate of 30 per cent, the FT reports. The text released before the speech also pushed drilling for shale gas as a potential boost to the economy, reports Bloomberg. Hydraulic fracturing, which injects a mix of water, sand and chemicals underground to free gas trapped in rock, could create 600,000 jobs by the end of the decade, Mr Obama’s prepared remarks said.
Jon Huntsman will leave the race to be the Republican presidential candidate and endorse Mitt Romney later on Monday, Politico reports. Huntsman, a former Utah governor who also served as Barack Obama’s ambassador to China, managed third place in last week’s New Hampshire primary but faced humiliation in polls in South Carolina later this month, the FT says. The Romney campaign would have faced the prospect of Huntsman taking away centrist and fiscal-conservative South Carolina voters, had the former Utah governor ploughed on, the WSJ reports.
In December of last year, we read a few posts suggesting 2011 would see above average returns for the S&P 500 since it was the third year of a presidential term, which has historically proved lucrative for equity investors (chart from Credit Suisse):
President Barack Obama will lend his weight to the nomination fight for Richard Cordray to head the Consumer Financial Protection Bureau, in advance of a Senate vote this week, Bloomberg reports. Without a full director, the CFPB’s ability to regulate non-banks, including pay-day lenders, is limited. The campaign to induce Senate Republicans to accept Cordray, former attorney-general of Ohio, will also bolster the White House’s push to present the president as an economic populist ahead of the 2012 election, Reuters says. Newt Gingrich’s rise to the top of the Republican presidential race has benefited from his insistence to voters that he will be the “paycheck president” to Obama the “food-stamp president”, notes the Economist.
CBS didn’t allege any illegal behaviour — Congressmen aren’t subject to the same legal rules around the use of material non-public information as the rest of us — but it did refer to circumstantial evidence that members of the House may have taken advantage of confidential information they received. Read more
President Barack Obama will aim to cut $3,000bn from the federal deficit over a decade in a plan to be unveiled later on Monday, says Politico. The plan, which includes $1,500bn in revenues from a tax overhaul, is an opening gambit to a congressional super committee charged with fixing the US government’s finances. It is his fourth deficit plan this year, the WSJ says. President Obama has conceded to his Democratic base in declining to raise the eligibility age for Medicare as part of the plan, Reuters reports. A “Buffett Rule” to target millionaire taxpayers within the plan is unlikely to pass Republican muster, says the FT.
President Barack Obama will send his $450bn jobs plan to Congress later on Monday, setting his administration for another test of wills with House Republicans, the FT reports. The GOP House leadership has said that it will ask the Congressional Budget Office to score the plan for affordability. The plan will cut payroll taxes for Americans although the White House will not announce until next week where savings will be found to pay for it. Republicans may pass parts of the plan, such as tax breaks for small businesses, but are wary of its effects on the national debt, Politico says.
Thomas Jefferson, fresh from his stint as American minister to France, had the day before literally bumped into Alexander Hamilton, who looked “somb[er], haggard, and dejected beyond comparison,” according to the future President’s writings. Read more
The Fed is readying detailed guidance for banks for contingencies if Congress does not raise the debt ceiling by August 2, Reuters says. Officials are awaiting the Treasury’s own operational plan, which is expected to appear on Friday evening. Investors have felt kept in the dark over matters including whether payments to bondholders would be prioritised, and over the support for repo markets in a default or ratings downgrade, the FT’s Gillian Tett says. Money market funds have already restricted repo lending largely to overnight terms and begun selling ABS, the WSJ reports. Investors in a Treasury bill that matures on August 4 have also sold holdings off, the WSJ adds.
House Speaker John Boehner has delayed a vote on his plan to raise debt limits until Friday, after failing to secure a “handful” of the 217 votes necessary, the Washington Post says. A core of South Carolina lawmakers is proving particularly difficult to crack, reports Politico. Back-channel negotiations with the White House are likely to become more important if Congress remains in an impasse five days ahead of the hard deadline for the debt ceiling, the FT says. While Democrats plan to vote on an alternative plan in the Senate on Saturday, they might also struggle to gain the 60 votes necessary there, reports the WSJ.