Mitt Romney vs Barack Obama: Are you Better off Today?

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Mitt Romney vs Barack Obama: Are you Better off Today?

Ugh.  I have learned over the years that posts that verge onto politics give me the most negative mail.  My politics are more complex than most, and I can tell you I am not voting for Romney or Obama.  So please, do not take what I say as advocacy for either party.

As this article from Bloomberg points out, it’s not easy to answer whether you are better off.  Like the article, I also think of Ronald Reagan in 1980 posing the same question.  Now a Vulcan would have said, “Of course I am better off.  1977 & 1978 were great years, more than offsetting the problems of 1979 & 1980.”  A human says, “I’m uncertain about the future, things don’t seem good now, so no, I am not better off.”

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Note the difference: forward-looking vs backward-looking.  It is not a question of how income has changed, but how prospects for income have changed.

Thus the question should be: “Do you feel better off?”  But the politicians don’t say that because it is too touchy-feely.

Both I have learned over the years that posts that verge onto politics give me the most negative mail.  My politics are more complex than most, and I can tell you I am not voting for Romney or Obama. are unsustainable.  That does not engender a sense of confidence about the future, and as such many of those that think about this end up saying they are not better off, even if their income is higher over the last four years.

There is another way to view it, which I know is unpopular, but I think people implicitly deduct the growth in government debt from GDP growth, because they realize that much of what the government spends money on does not grow the economy.

This is another way of being forward-looking.  When people are asked if they are better off, they do not look at past improvement, but whether the future looks better than it did four years ago.  Now that you know what Obama is like, do you really have any confidence that the future will be better if he is re-elected?

Don’t get me wrong, I think the Republicans are full of hot air.  I don’t think they would deal with entitlements the way they should be reduced.  Further, I don’t even see them making any dent in current budget imbalances.

But if you feel less certain about your prospects now than four years ago, odds are when someone asks you if you are better off than you were four years ago, your answer will likely be “No.”   We look forward, not backward.

By David Merkel, CFA of alephblog

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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.