I have to say this was a good day for the President. Not only was his health care plan declared constitutional, but also some signs of a true long lasting economic recovery are beginning to fall into place.
First to the Affordable Care Act. I think Roberts’ vote was the true mark of a great Chief Justice. He saw that his court was deeply in danger of becoming totally politicized and a tool of the Republican Party. I think he truly believe Congress has the power to tax and since Obama had made that as a back up argument to the Commerce Clause, he seized on it. Beyond that, I think it secures Obama’s place in history besides FDR (Social Security) and LBJ (Medicare).
Beyond healthcare I was struck by two articles in this morning’s paper. The first was on housing.
But roughly six years after the housing market began its longest and deepest slide since the Great Depression, a growing number of experts and people who actually put money into housing believe the end has come.The trend is clear in the data. The widely respected S.&P./Case-Shiller index reported earlier this week that sales prices for existing homes rose in April for the first time this year. Several other measures, including a seasonally adjusted version of the index, show that price increases began in February. The pace of housing construction has increased. And the National Association of Realtorssaid Wednesday that pending home sales climbed to the highest level since the end of a federal tax credit for first-time buyers in September 2010.
It may be anecdotal, but you certainly feel in LA that the market has turned around. This would be a critical part of a sustained recovery.
The second piece of good news came in an article on Google’s decision to build it’s consumer electronics products in the U.S..
Harold L. Sirkin, a managing director at Boston Consulting Group, said, “At 58 cents an hour, bringing manufacturing back was impossible, but at $3 to $6 an hour, where wages are today in coastal China, all of a sudden the equation changes.”
The firm reported in April that one-third of American companies with revenue greater than $1 billion were either planning or considering to move manufacturing back to the United States. Boston Consulting predicted that the reversal could bring two million to three million jobs back to this country.
Obviously I have been talking about this for the last couple of years and despite the Libertarian view that making products here has no consequence, I believe it does. It is a pipe dream to think there are only two kind of jobs in America: those requiring a college education and then retail service jobs for the rest of the workers. Manufacturing jobs can pay really decent wages and create a middle class life for people without a college degree. This is incredibly important. If Boston Consulting is right in their estimate of the number of manufacturing jobs returning to the U.S., the recovery could be moving forward in a way that could make Obama’s second term a real turnaround.
But of course to get to a second term is going to be a major fight. A close associate who is an investment banker told me that his firm believes that it will be very hard for Obama to win a second term because of three factors. First is the Euro crisis which clearly will continue into the fall. Second is the voter suppression bills passed in most states that have Republican legislative majorities. Third is the $1 Billion that will be spent by Republican Super Pacs in the weeks before the election. It’s pretty clear Obama will be outspent big time in the campaign. He will have to run an even more populist campaign against the Republican oligarchs. In that sense the three Presidential Debates in October could be the key to the race.
update Friday June 30the animal spirits are definitely returning. Not only would a smart equity portfolio have 2% gains today the High Yield ETF went up 1.7% today (HYG)