by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Jim Paulsen, chief investment officer of Wells Capital Management, is a “glass is half-full” kind of guy, known as Sunny Jim by some on Wall Street. But he has generally been a forecaster worth listening to, especially when so many so-called market pundits let their political ideology and saturnine predispositions cloud their judgment.
Take the looming “fiscal cliff” that has so many investors on tenterhooks. In a report last week, he declared it a “molehill.” Sure, there would be some fiscal contraction next year if the nation were to plunge over it, but not nearly enough to cause a recession. In any case, he predicts, agreement will eventually be reached to phase in budget cuts over many years. And offsetting much of the fiscal drag from any spending reductions next year will be a host of factors, including “rapid money growth, record-low mortgage rates, lower gasoline prices, a weaker dollar and a lowered inflation rate,” he adds.
Optimists believe that with a month left to avoid automatic tax increases in the new year, the parties will come together before Christmas. Chamber of Commerce CEO Tom Donohue told about 100 corporate chief executives gathered in Washington Thursday that he expects a deal sometime around the week of Dec. 16.
I would rather bet on Powerball.
The warring politicians have been arguing intensely about how to reduce the unsustainable federal deficit since Nov. 7, the day after the presidential election. Since then, Israelis and the Palestinians have engaged in a shooting war and reached a cease-fire; rebels in the Congo have taken, and then agreed to withdraw from, the key commercial city of Goma; and President Obama has broken bread — make that turkey chili — with former adversary Mitt Romney.