A political liberal’s gloomy outlook for 2015

By Markets Covestor

Maybe was the dip under $50 for oil or maybe it is the realization that Republicans are taking control of Congress that leads me to be gloomy. Or perhaps it is just the cold in Wisconsin where we are getting wind chills about -20 F that is doing it.

Continue Reading Below

But I am not feeling good about the market or our economy in general as we head into 2015. Damn the torpedoes and full steam ahead I guess.

I confess I am a political liberal. So my own bias colors my own assessment of our nation’s direction.

 

Income inequality

But we know that stock markets do better when Democrats are in control and the Republicans have now solidly taken control of both houses of Congress.

Continue Reading Below

Why should that be? We know that many rich people tend to be conservative and affiliate with Republicans.

The problem is that the rich are getting richer, the poor are growing in numbers, the middle class is disappearing and this is all bad for the economy.

And a bad economy ultimately means relative under-performance for the stock market when not enough people buy cars, buy houses, and go out to eat at restaurants.

 

Fiscal stimulus

As most Economic 101 students learned, government spending can offset a weak economy and stimulate growth. This is called a fiscal stimulus.

When fiscal policy is inadequate or quite frankly is obstructed, the economy can be stimulated by monetary policy that reduces interest rates and expands the money supply by a Central Bank like the Federal Reserve.

So after a financial collapse that nearly brought down our economy, threatened to put banks and the automobile industry into bankruptcy, Republicans remained intent on their goal of shrinking government.

The Affordable Care Act, an idea out of the Conservative Heritage Foundation, was rejected by Republicans and pushed through by Democrats in a period of time where they were able to pass legislation.

 

Obamacare

Ironically, the Affordable Care Act turned out to be a large fiscal stimulus, creating jobs and boosting the economy just as it needed help in my opinion.

Republicans opposed the ACA and sought endless to repeal this legislation that was stimulating business while helping those in need of access to healthcare. They did manage, with the Conservative Supreme Court influence to undermine some of the help to the poor by making it optional for States to expand Medicaid Coverage to the working poor.

This continued to help polarize wealth in America by keeping the poor poorer and reducing the tax burden on the very wealthy.

Conservatives are working hard at undermining this legislation as we speak pleading to the Supreme Court to end federal subsidies for the working poor who get assistance in buying health insurance in states where the federal government had to set up health insurance exchanges.

Republican governors and their Republican legislatures did their best to interfere with the ACA by refusing to help those without health insurance access it through State-run Insurance Exchanges.

It would seem obvious that reducing the burden of accessing healthcare to the working poor would help stimulate the economy by freeing them up to spend money on things.

 

Minimum wage

There are many in America who advocate for raising the minimum wage. Again we are back to the question of wealth disparity in America. Certainly raising the wage—or better put—simply adjusting it with a cost of living adjustment to reflect inflation—would help fight poverty by putting more money in the pockets of the poor.

Meanwhile wage gains continue to accrue to the top 1% while the middle class and the working poor continue to lag the rest of the population.

Probably the largest force helping the middle class in America this past Century has been the effect of Unions increasing wages for workers.

Republicans again seem to be more concerned with protecting the wealthy and the corporations that support them than working to raise wages of workers.

Certainly so-called ‘right to work’ laws have recently proliferated in Republican-controlled State Legislatures that work to undermine unions.

 

Unions

Whether you like unions or feel more enamored with corporations as an investor, the effect of undermining workers is to put a damper on wage growth and again add to the growing disparity of wealth in America.

Simply put busting unions is making wage and wealth distribution in America worse and harming our economy.

If we accept that closing the income and wealth gap or at least stabilizing this gap is good for growth and good for the economy, then continued attacks by Republicans on medical assistance, public programs for the poor and public schools and food stamps is all out of sync with doing what is right for those in need and thus helpful for all of us by stimulating the economy.

So there are reasons to be gloomy when looking forward to 2015 with Republicans in control of the House of Representatives, Senate and state legislatures. They reject fiscal stimulus when stimulus is needed.

 

Fed policy

Many have opposed the Federal Reserve which has been successfully fighting the obstruction to fiscal stimulus with unorthodox monetary policy. They advocate for austerity and closing the budget deficit when spending is needed.

Worst of all they deny the effect of greenhouse gases threatening the existence of the planet even while the icecaps and glaciers are melting.

And what is the most important legislative agenda for the Republicans in 2015? As oil prices are collapsing, the Keystone XL pipeline, to bring more oil from the dirty Canadian Tar Sands onto the market is their first priority.

What is wrong with these legislators who are so tone-deaf that they find it important to bring more oil onto the market when prices are in a free-fall?

I am gloomy about the coming two years as the Republican Congress and President Obama continue to face-off with sharply divergent goals for the nation and for our economy.







Like what you read?

Subscribe to our once-weekly email newsletter and get the best posts delivered to you in one convenient place, to browse at your leisure:

Photo Credit: Quinn Dombrowski via Flickr Creative Commons

DISCLAIMER: The investments discussed are held in client accounts as of December 31, 2014. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.