state spending

Follow The Smart Money: Falling Obama Popularity And Political Rebuff Reflected In Stock Market Rise?

Kent Engelke is the chief economic strategist and managing director at Virginia-based Capitol Securities Management, and is one of the most quoted market experts in the country. His forecasts largely get it right. I get his daily Early Morning Commentary and today's had some compelling statistics that should alarm everyone. People, take heed. Using the stock market as the predictor it is, he asks why equities have experienced a rally of late. He posits a theory that investors think socialized medicine will not occur. He cites President Obama's own economic team's warnings of financial disaster if the deficit is not reduced substantially. (Of course, they always say that and spend and tax and print money anyway.)

But take this with more than a grain of salt:

The 2009 fiscal deficit was an astounding $1.4 trillion as spending increased from $3 trillion to $3.5 trillion while tax revenue fell from $2.5 trillion to $2.1 trillion. The debt is now at $12 trillion and is expected to grow by another $9 trillion over the next decade. [Dow Jones]

CBO is estimating spending on Medicaid and Medicare will grow over $700 billion over the next 10 years while health care legislation is conservatively estimated to add another $900 billion to the deficit. [Dow Jones]

But most alarming is this:

Incidentally and as per the Organization of Economic Corporation and Development today 42% of U.S. GDP is comprised of federal, state and local spending. Wow! We all know the efficiency of the government.

Mr. Engelke doesn't pontificate political often in his writings, so a letter devoted almost exclusively to our current situation is remarkable. He also notes that since the Obama administration, by general agreement (and even Saturday Night Live) "is steep in hype but low in accomplishments" and asks rhetorically whether the stock  market rally suggests "a backlash in government spending, perhaps even a reduction, because the President’s approval ratings are plummeting?"

According to the Rasmussen Report:

40% strongly disapprove of the president’s job performance. 27% strongly approve. Overall 47% approve of his actions while 53% disapprove, the second lowest ratings for this President. Fifty four percent oppose health care legislation while 42% approve it.

When a normally non-plussed and widely respected market strategist and economist goes to this length, something is up. The stock market often is an indicator of things not only financial, but societal, technological and political, among other trends. Looking at it strictly from a personal stock-holdings point of view doesn't paint the entire picture. You know what they say: Follow the money. Especially if it's smart money. Expect political changes shortly.

Update: Governor's Substitute Transparency Bill Accepted

Earlier today, during the General Assembly's veto session, the House and Senate concurred unanimously to accept Governor Tim Kaine's substitute version of HB 2285, a state spending transparency bill, patroned by Delegate Ben Cline (R-25, Amherst). This substitute, at first look, and based on conversations with some legislators and staffers, appears to be even stronger than SB 936, patroned by Senator Ken Cuccinelli (R-37, Fairfax), and signed last month by Governor Kaine. The language of the bills was identical when they reached his desk.  Although neither bill received one dissenting vote in several sub-committee, committee and floor votes in both chambers, and now today's veto session — after each got unceremoniously dumped last year in committee (Senate) and sub-committee (House) — it wasn't as easy as it sounds getting them passed and signed into law. Each had to deal with the dreaded fiscal impact statement, which many times attributes bogus costs to bills as an unassailable hurdle in the money committees, often to thwart reforms. In this case, each bill had duty in front on the money committees and HB 2285 even had to go to the Senate Rules Committee.

In essence, we started with two great bills last year and again this year, that changed form, but not function, though perhaps not as comprehensive as we might have liked after several amendments, and ultimately got something more than what we thought after the regular session ended. Not bad. What a difference an election year makes.

Now a huge window has opened up on state spending, with a massive spotlight to boot. Soon, citizens — be they media, grassroots activists, policy wonks or even (for Heaven's sake) bloggers — will be able to closely examine exactly how Virginia government spends the hard-earned tax money we send it, and with which vendors it contracts for services, as well as other open government features. It simply is not enough to say a department spends this much money; we need to know down to the line how much, on what and with whom. That, in turn, will let us know if the purpose was worthy or wasteful, duplicative or duplicitous. You get the picture.

Despite what would seem broad interest in government spending transparency, many self-proclaimed "open government" groups were noticeably absent form the debate. The  Mainstream Media, for example, which touts its annual "Sunshine Week" each March, was nowhere to be found. No doubt, however, in years to come, it will, as we all should, tout this new found access to the otherwise indecipherable bureaucratic nuances of state government.