Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Read My Lips: No New Stimulus

By

The first package has yet to be spent.

PrintPRINT
If you've ever wondered why President Obama seems to spend so much time in the media, perhaps it has something to do with the politics of distraction.

To understand what this means, let's begin with Vice President Joe Biden.

No doubt you've noticed that Mr. Biden has been wondering aloud (he does that a lot) whether a second stimulus package will be needed.

Given the economic data, especially the employment data, it's understandable why there might be a certain anxiety regarding the impact of the first stimulus package -- at least among those unwilling to probe a little deeper. Upon further inspection, you find that much of the first stimulus package -- as disjointed as it may be -- remains unspent.

In light of the rising unemployment data, and given how sensitive politicians are to the feelings of their constituents (employed and unemployed), one has to ask why that might be.

The standard answer is that much of the spending targeted for infrastructure projects isn't "shovel-ready." Such projects, we're told, will be shovel-ready in 2010. Now, let's put on our thinking caps and -- at the risk of sounding more cynical than skeptical -- look at this a little more critically.

Earlier this year, a bill providing for massive sums of money to be spent on infrastructure projects was ratified. Interestingly, much of it won't be spent until next year.

Our lawmakers know that there are virtually no meaningful elections being held this year. Whereas 2010 is the second-most-important election year in the 4-year national election cycle. So virtually no stimulus money is being spent this year; the lion's share will be spent next year -- just in time for the all-important 2010 Congressional elections.

If you're with me thus far, then let's take it one final step further.

There's an adage in sales: "If you can't sell the numbers, sell the story." With the general economic data improving but still quite dismal, the numbers -- especially employment numbers -- are nothing anyone would brag about. So, what's a crafty politician to do? How about take to the airwaves and sell the story over, and over, and over again?

Investment Strategy Implications


The far more important investment story today is the earnings reports for the second quarter. However, investors are well served if they appreciate the political dimensions of economic public policy.

As in a magic act, the politics of distraction is all about misdirection. That's risky, but reasonable -- at least from a political perspective.

The bottom line is: No second fiscal stimulus package is wanted or needed.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE