Tags: Kotok | Romney | Obama | deficit

Cumberland’s Kotok: Election Unlikely to Help in Cutting Deficit

By    |   Friday, 31 August 2012 08:16 AM

David Kotok, chief investment officer of Cumberland Advisors, doesn’t see much hope for budget deficit reduction, regardless of who wins the presidential election.

The deficit totaled $1.3 trillion in the fiscal year ended Sept. 30, 2011.

Republican presidential nominee Mitt Romney wants government spending to total 16 to 17 percent of gross domestic product, while taxes register 15 percent. That, of course, means higher deficits, Kotok tells Yahoo.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

President Barack Obama wants government spending at about 25 percent of GDP, but is unwilling to raise taxes enough to counteract that spending, Kotok says.

"The gap between the two [Romney and Obama] is where we want to be," he says. "The United States can run very effectively at 19 or 20 percent of GDP. We spend 20 percent of GDP; we tax at 20 percent; we have a balanced budget."

Kotok isn’t optimistic that target can be met after the election. It’s unclear whether either Obama or Romney would have enough votes in Congress to gain approval for whatever budget plan he adopts.

"We may have another round of impasse,” Kotok says. “I expect it unless legislative chambers change sufficiently."

To be sure, University of Chicago economist Casey Mulligan think that worries about next year’s so-called fiscal cliff are overdone.

“With their Keynesian analysis, the Congressional Budget Office and others have exaggerated the effects of the fiscal cliff on the labor market and the economy,” he writes in The New York Times.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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