Wednesday
Nov052014

Election Results Restore Hope and Change 

Vaughn Cordle, CFA / November 5, 2014

Given that the American people have spoken with yesterday's elections, the Republicans now have the opportunity to streamline and cut out the pork that has accumulated during Obama's time in office.  This government is ripe for restructuring.  I've been going over the cash inflows and cash outflows of the federal budget and agencies and it's painfully clear that it is too big; bloated would be a good description of the situation.    

It's realistic to assume that several hundred billion a year can be cut from the budget, and contrary what liberals believe, this will be a positive for job creation and economic growth. The election, in short, has repudiated the progressive liberals' agenda, which dampens economic growth and job creation via too much regulation and wealth-redistribution schemes that taxes both capital and labor. This is also true for states and local governments that have massively underfunded pension and healthcare programs for public sector unions that have been too successful at electing public officials who become beholden to their demands; taxes have gone up significantly over the years in these states.  This has resulted in no or negative growth in jobs and the Democrats have been thrown out of office as a result of citizens’ displeasure with these negative trends.

Obama's government measures its success in how many people sign up for entitlement programs and there has been little effort in terms of boosting the middle class and their standards of living, including creating private sector jobs. The data demonstrates that the opposite has occurred, especially for blacks and low-income earners. This has been a major strategic mistake for the progressive liberals who wrongly believed that they could get out the votes with gender- and race-baiting tactics. Obama has vilified business and Wall Street with constant demagoguery and he has been the most divisive president in history. 

The war on women and racism was a false narrative to scare folks into voting. It didn't work and this reflects an awakening of the majority of Americans who now understand that Obama's policies are not working and that the country must take a different path. This path includes a reduction in taxes, especially corporate taxes, and a repeal, or at the very least a major restructuring of ObamaCare.  The wave of Republican wins should restore confidence in how government is managed and, hopefully, restore the hope and change that Obama promised as a candidate but could not deliver because of his progressive liberal agenda.  In short, big government has become a major drag to our country's health and wealth, and it is obviously not the solution to our anemic economic growth and falling standards of living.

Some may wonder what all of this has to do with the airline industry. The answer is simple: faster growth and job creation boost revenue for the airlines directly because passengers will have higher after-tax incomes and lower healthcare costs when government is smaller and more efficient. With the proper policies, this will result in lower taxes and fees the airlines must pass along to air-traveling consumers.  This is why I have been focusing on fiscal policies that impact these critical drivers.  Reagan had it right when he said government is the problem, not the solution.