[FoRK] JPMORGAN: We're Not Far From A 'Picture-Perfect World', Re: Obama wins? Deficit now cut by $4 trillion

Stephen Williams sdw at lig.net
Sat Mar 9 10:41:10 PST 2013

Ouch.  What happened to the predicted doom and gloom and FUD?

> JPMORGAN: We're Not Far From A 'Picture-Perfect World'
> Matthew Boesler    | Mar. 8, 2013, 12:31 PM | 3,494 | 17
> This is one of the more bullish takes we've heard lately on the way things are shaping up across global markets, courtesy of 
> the equity derivatives team at JPMorgan (led by Michiro Naito).
>> In the picture-perfect world: We are all aware that the equity market looks "overheated" and that there are many stumbling 
>> blocks ahead, as we argued last week. The uncertainty surrounding the US sequestration and Italian election looms large, not 
>> to mention potential oppositions to Abe's TPP drive from within his own party.
>> What we might have learned in the past week, however, is that as long as economic recovery stays in its track, the equity 
>> market, albeit subject to short-term corrections, will likely steam ahead.
>> So let us assume that sequestration will become less of an issue and US economic growth remains intact. We will also assume 
>> that Italy will not abandon Euro and Abe’s economic agenda will receive approval from inside and out.
>> While this may sound all too picture-perfect, it is by no means unrealistic, in our view. And if we are right, comparing the 
>> current levels to the levels seen from 2005 to 2007 may become much more reasonable.
> Sequestration, Italian elections, and Abenomics.
> Coincidentally, notably pessimistic PIMCO bond manager Bill Gross just doubled his U.S. GDP forecast today.

Ah, here they are, sort of:
> Wall Street's Brightest Minds Reveal The Charts That Worry Them Most
> Matthew Boesler    | Mar. 1, 2013, 8:06 PM | 359,264 | 5
> Laenulfean / Flickr
> With optimism resurfacing over the global economy and the perception that major tail risks in the United States, the euro 
> zone, and China have been mostly squared away, what's left to worry about?
> We posed the question to our favorite analysts, economists, and traders across Wall Street – and we were surprised at the 
> number of people who declined to give an answer, telling us that they just couldn't really think of anything too worrying 
> right now.
> However, we still got plenty of responses.
> While general developments in the world's largest economies seem encouraging, there may be several reasons to be concerned 
> lurking just beneath the surface.

I don't think that French competitiveness is a big issue.  What's your favorite scary chart here?


On 3/3/13 8:22 PM, Stephen Williams wrote:
> President Obama "had to" sign the sequestration cuts into law last night.  I can hear it from here: "Oh please don't make me 
> do it!" "If you don't like any part of this, blame the GOP."
> So, Obama wanted and promised $4T reduction over 10 years, everyone said it couldn't be done, and now he's done it, barely 
> into his second term.  Were the GOP (and some Dems too maybe) just gamed?  He has plausible deniability for painful cuts with 
> Dems and pulled off major cuts in defense etc.  Managed not to cut anything for Medicare, Medicaid, and Social Security.  
> Obamacare is still in place.  Game over?
> Or you could assign success to Congress, but that's probably not how it will play.  Maybe they all colluded to have plausible 
> deniability for responsibility for decisions or shirking principles.
> If Obama quit now and played obstructionist from now on, would he be the most fiscally successful president for decades past 
> (and probably future)?
> Probably won't hold or hold to scrutiny, but it's an interesting prospect.
> To work well, we'd have to come up with a solution for creating jobs, improving quality and efficiency of education, reducing 
> health care, etc.  But we have those problems anyway, although this is expected to cause 700,000 job losses.
> I could work with this.  There is plenty that could be done to spur jobs and increase various efficiencies.  There is plenty 
> of Federal land, plenty of things states could be pushed into doing with the right support.  Plenty of foreign related 
> opportunity. Re: Federal land: Many options, but for instance: where things could be built with Makerville-like arrangements 
> that wouldn't necessarily cost anything in Federal dollars, using a long-term lease and special status.  You could start with 
> Indian reservations even.
> http://www.news-journal.com/news/nation/congress-obama-cut-deficit-by-trillion-on-paper/article_d1438876-5361-5d0a-85e6-99fcb66147c5.html 
>> Carolyn Kaster
>> Congress, Obama cut deficit by $4 trillion — on paper
>> President Barack Obama gestures Friday as he speaks to reporters in the White House briefing room in Washington. On paper, 
>> President Obama and Congress have reduced projected deficits by nearly $4 trillion through 2023.
>> Posted: Sunday, March 3, 2013 4:00 am
>> By JACKIE CALMES New York Times News Service
>> WASHINGTON — The latest budget impasse ushered in a new round of austerity Saturday, with the nation facing reduced federal 
>> services, canceled contracts, job furloughs and layoffs.
>> But lost in the talk of Washington’s dysfunction is this fact: On paper at least, President Barack Obama and Congress have 
>> reduced projected deficits by nearly $4 trillion over a decade — the widely embraced goal for stabilizing the national debt.
>> The spending cuts that began to take effect Friday, known as sequestration and totaling about $1 trillion through 2023, come 
>> on top of $1.5 trillion in reductions that Obama and Congress committed to in 2011, mainly from the accord that averted the 
>> nation’s first debt default.
>> Nearly $700 billion more will come from tax increases on wealthy Americans, the product of the brawl in December over 
>> Bush-era tax cuts, and another $700 billion is expected to be saved in projected interest on the reduced debt.
>> If the latest cuts stick, the two parties will have achieved nearly the full amount of deficit reduction over the next decade 
>> that economists and market analysts have promoted. Yet the mix comes with substantial downsides.
>> It does not add up to the “grand bargain” that the two parties had been seeking, because it leaves virtually untouched the 
>> entitlement programs — Medicare, Medicaid and Social Security — that are responsible for projections of an unsustainably 
>> rising federal debt in coming decades.
>> “This is not a result that deals with our long-term debt problem,” said Vin Weber, a Republican former congressman. “The fact 
>> we’ve gotten to a $4 trillion deficit-reduction deal without tackling entitlements is almost a bad thing,” he added, if it 
>> lulls the public and the politicians into thinking the problem is solved.
>> Job creation hampered
>> The progress on deficit reduction during the past two years will also probably hamper job creation and the economic recovery. 
>> Private and government forecasters project that sequestration alone will cost about 700,000 jobs this year and will shave at 
>> least a half percentage point from economic growth. The Congressional Budget Office now forecasts a falling deficit but high 
>> unemployment.
>> For Democrats, at least, the mix of spending cuts and tax increases in the package is another reason for disappointment. The 
>> deficit deals to date would yield $4 in spending cuts for every dollar of new revenue. Obama, as well as several bipartisan 
>> groups, including the commission led by Erskine Bowles and Alan K. Simpson, call for $1 of tax increases for every $2 to $3 
>> in spending cuts.
> http://www.politifact.com/truth-o-meter/statements/2012/oct/04/barack-obama/obama-says-he-will-cut-deficits-4-trillion/
>>  Obama says he’s "put forward a specific $4 trillion deficit reduction plan."
>> Barack Obama on Wednesday, October 3rd, 2012 in the first presidential debate
>> Obama says he will cut deficits by $4 trillion
>> In the first presidential debate, President Obama and Mitt Romney disagreed sharply over who had the best way to rein in 
>> federal deficits.
>> Romney relies on spending cuts and reshaping the tax code. The first would make it easier to reach fiscal balance and the 
>> second would spur growth that would fill the government coffers with higher tax revenues, he says.
>> Obama favors what he calls a balanced approach. It uses a mix of spending cuts and a variety of tax and fee increases to curb 
>> the deficit .
>> "I've put forward a specific $4 trillion deficit reduction plan, Obama said. "You can look at all the numbers, what cuts we 
>> make and what revenue we raise. And the way we do it is $2.50 for every cut, we ask for $1 of additional revenue."
> http://www.washingtonpost.com/blogs/wonkblog/wp/2012/09/06/is-obamas-4-trillion-deficit-reduction-plan-for-real/
>> Is Obama’s $4 trillion deficit-reduction plan for real?
>> Posted by Ezra Klein on September 6, 2012 at 11:21 am
>> In his fact check of the second night of the Democratic National Convention, my colleague Glenn Kessler zeroed in on Bill 
>> Clinton’s claim that “[Obama] has offered a reasonable plan of $4 trillion in debt reduction over a decade.”
>> Are Obama’s budget proposals for real?
>> Kessler has three problems with this comment. First, he says, it is “counting some $1 trillion in cuts reached a year ago in 
>> budget negotiations with Congress.” Second, “the administration is also counting $848 billion in phantom savings from winding 
>> down the wars in Iraq and Afghanistan, even though the administration had long made clear those wars would end.” Third, “the 
>> administration also counts $800 billion in savings in debt payments (from lower deficits) as a ‘spending cut,’ which is a 
>> dubious claim.”
> http://www.weeklystandard.com/blogs/abc-obama-falsely-claims-he-has-plan-cut-4-trillion-deficit_653574.html
>> ABC: Obama Falsely Claims He Has a Plan to Cut $4 Trillion from the Deficit
>> 12:43 AM, Oct 4, 2012 • By JOHN MCCORMACK
>> "I've put forward a specific $4 trillion deficit-reduction plan," President Obama said during his debate with Mitt Romney on 
>> Wednesday night. "It's on a website. You can look at all the numbers, what cuts we make and what revenue we raise."
>> ABC's Jon Karl correctly calls Obama's claim "mostly fiction."
>>     Does President Obama have a plan to cut the deficit by $4 trillion?
>>     No.  The “$4 trillion plan” he is referring to includes about $1 trillion Congress has already agreed to and $1 trillion 
>> in savings from ending the wars in Iraq and Afghanistan, which are already ending.
>>     This would be Mostly Fiction.
>> The Washington Post’s Glenn Kessler has also noted Obama's claim is "simply not accurate," and pointed out that “virtually no 
>> serious budget analyst agreed” with the administration’s accounting. Andrew Stiles of the Washington Free Beacon has more on 
>> Obama's false budget claim:
> http://www.americanprogress.org/issues/budget/news/2013/01/08/49137/the-deficit-reduction-we-have-achieved-so-far/
>> The Deficit Reduction We Have Achieved So Far
>> President Obama fiscal cliff speech
>> SOURCE: AP/Charles Dharapak
>> President Barack Obama gestures as he speaks about the fiscal cliff, Monday, December 31, 2012, in the South Court Auditorium 
>> at the White House in Washington.
>> By Michael Linden and Michael Ettlinger | January 8, 2013
>> Since the start of fiscal year 2011, President Barack Obama has signed into law approximately $2.4 trillion of deficit 
>> reduction for the years 2013 through 2022. Nearly three-quarters of that deficit reduction is in the form of spending cuts, 
>> while the remaining one-quarter comes from revenue increases. (see Figure 1) As a result of that deficit reduction, the 
>> projected rise in debt levels from today through 2022 has decreased by nearly 10 full percentage points of gross domestic 
>> product. In fact, under today’s policies, debt levels in 2022—as a share of GDP—will be only slightly higher than they are 
>> expected to be by the end of next year. That doesn’t mean there is no more work to be done, but it does show we’ve come a 
>> long way already.
> Stephen
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