Friday, August 31, 2012

Rope-A-Dope

To make a bold prediction: Romney will see a mild ~3% boost after the GOP convention. He will then -- and this is not usual -- likely see another 5% boost after the *Democrat* convention.

Romney's general campaign -- as opposed to his primary one -- has been built on a very defensive strategy. He has to win the votes of people who voted for Obama, and so is reluctant to attack Obama in a manner that criticizes their choice in '08. His choice of VP, the convention focus on his compassion and his strong support for the women in his life, was crafted not so much to convince swing voters directly to vote for him, rather to convince them that negative attacks on his business record, and attitude towards women, are dishonest. If Obama chooses now to make such attacks the centerpiece of his convention -- and what else can he do? -- he will squander his likeability advantage boosting Romney in the polls.

To make another bold prediction: I don't see how a President who wants to win re-election doesn't drop Biden from the ticket. A new, surprise, VP candidate could be a game-changer.

Friday, August 17, 2012

Social Security

While Medicare Reform is now politically front and center, Social Security is only slightly less in trouble.

Factor in the Fed's recent embrace of inflation, and it's impact on both Social Security costs, and retiree's defined benefit pensions (those retiring at 60 now -- in a best case scenario -- should expect their pension, if not inflation indexed, to lose 75% of it's value if they live to 100) and the PBGC's looming insolvency, and our retirement system is in dramatic need of repair. And that is before you question the honesty of government reported inflation numbers...

Private accounts are not sensible reform: Pushing unsophisticated investors into the arms of Wall Street doesn't end well either for retirees (who lose their shirts) or capital markets (which require informed and competent investors to rationally function).

A more sensible reform would be the proposal posted previously: Instead of [individuals] holding [bank] accounts that are, in effect, loans to Chase, subsidized by the government [/FDIC] individuals should be able to open accounts that are, in effect, loans to the Government. With the tweaks that accounts ought be capped at $250K, max account size and account interest ought be indexed to inflation and individuals ought to be able to deposit pre-tax dollars and defer all taxes until they withdraw the money.

This would go a long way to protecting the middle class as people could more effectively save both for retirement and economic downturns. It would also, likely, be a safer way to finance debt as domestic individual savers have proven themselves a more stable financing pool than alternatives. Finally, it removes a systematically risky wall street subsidy.

It likely wouldn't please democrats who want to conflate a middle class, savings based, retirement system with a "safety-net" entitlement for the poor.