What Will Speaker Boehner Say to Wall Street Monday?

House Speaker John Boehner (R-OH) will address the Economic Club of New York over dinner next Monday. His remarks come at a crucial time as world money managers assess whether the U.S. will get its fiscal house in order. Here’s what I expect to hear.

  1. Default is not an option. There won’t be any voting down of a clean debt limit just to prove an increase can’t pass without spending cuts and budget process reforms.
  2. Media portrayals of House Republican Freshmen as Tea Party crazies willing to risk economic disaster are inaccurate caricatures. House Republicans are determined to change the path of runaway government spending and to focus on effective growth oriented policies.
  3. President Obama and Democrats have to get serious about cutting spending.
  4. Tax increases are not an option, although tax reform that lowers rates on a revenue neutral basis is.
  5. If Medicare vouchers aren’t acceptable, then some other means of ratcheting down federal health care spending must be found. If not, Medicare will run out of money by the end of the decade with worse consequences.
  6. Even a $4 trillion deficit reduction plan may not be enough to restore budget balance within 10 years, so there has to be process that produces repeated spending cuts until balance is achieved.
  7. Enacting a $4 trillion deficit reduction plan by August 2, the latest deadline for a debt limit increase offered by Treasury Secretary Tim Geithner, is not feasible. It would be feasible to agree upon a set of annual deficit targets and broad outlines of how to get there. That could be enacted in time with a debt limit increase through the end of this year. The $4 trillion plan in detail would be enacted by the end of this year on a debt limit increase that would last until early 2013. After the election, another deficit reduction effort would be mounted to insure we hit the targets.
  8. We can do this.

If that’s what Mr. Boehner says, I expect world money managers to come away encouraged, but wary until they see results.

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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