Advisers on SOTU: Not enough 'meat and potatoes'

Say President's speech was short on details; no basis to alter client strategies

Feb 13, 2013 @ 2:55 pm

By Mark Schoeff Jr.

obama, state of the union, advisers
+ Zoom
(Bloomberg)

President Barack Obama started his national address last night talking about fiscal issues, but investment advisers are disappointed that he didn't provide details on how he will tackle the nation's burgeoning federal debt and spur economic growth.

“I didn't see as much meat and potatoes as I would have liked,” said Kevin Berenzweig, an adviser at Retirement Strategies Group. “There wasn't enough focus on those two areas. At the end of the day, the needle will not move until we see a point-by-point plan.”

Barry Glassman, president of Glassman Wealth Services LLC, said Mr. Obama did not offer any significant proposals to address the deficit, taxes or entitlement spending.

“There's nothing from last night's speech that's likely to change the way we invest or advise clients,” Mr. Glassman added.

Advisers are worried about the approximately $16 trillion federal debt, which is expected to grow by another $7 trillion by 2023, according to the Congressional Budget Office. If Washington doesn't curb that trajectory, the economy will be hammered when interest rates start rising again, they said.

Democrats and Republicans have worked together during his administration to reduce the deficit by more than $2.5 trillion, half of a $4 trillion goal, according to Mr. Obama. He urged Congress to achieve further cuts through “modest reforms” of social-insurance programs such as Medicare and by “getting rid of tax loopholes and deductions for the well-off and the well-connected.”

As Mr. Obama pushed for more taxes from the wealthy, he failed to explain how his policies would energize the economy, according to Frank Fantozzi, president and chief executive of Planned Financial Services.

“What's kind of missing in the discussion is that if you want to raise tax revenue, you have to grow the economy,” Mr. Fantozzi said. “He didn't lay out a clear picture on that.”

The centerpiece of Mr. Obama's State of the Union address was a series of federal programs — in manufacturing, energy, infrastructure, education and housing — that he said would create jobs and better prepare Americans to attain those jobs.

“It is not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth,” Mr. Obama said.

But it sounded like a familiar call for bigger government, according to Michael Masiello, president of Masiello Retirement Solutions.

“I'm no more comfortable today than yesterday in terms of his guiding the country,” Mr. Masiello said. “You can't continue to spend money the way he's spending money. You have to cut spending. It's that simple.”

Mr. Obama promised: “Nothing I'm proposing tonight should increase our deficit by a single dime.”

On that point, Mr. Glassman is sort of in agreement.

“That's absolutely true, given that none of [the president's package] is likely to be passed,” Mr. Glassman said. “The plans are either going to be watered down or blocked by the Republican House.”

Mr. Obama appeared hopeful about the political atmosphere and what could be accomplished on big issues, such as overhauling the tax code.

“Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit,” Mr. Obama said. “I realize that tax reform and entitlement reform will not be easy. The politics will be hard for both sides.”

One adviser, however, said Mr. Obama didn't offer enough in his speech to show that he is willing to meet Republicans halfway in the debate over taxes and spending.

“He didn't come to the center,” said Jeff Leventhal, managing director of HighTower Bethesda. “We have a divided Washington that is killing the economy. I don't just blame the president; I blame both sides. I saw it more divided” Tuesday night, he said.

Mr. Berenzweig said the Republican response to Mr. Obama's address last night, given by Sen. Marco Rubio, R-Fla., also was politically charged.

“We're going to see a partisan response moving forward, which is my concern, rather than actually fixing the problems,” Mr. Berenzweig said.

The likelihood of continued stalemate has Mr. Masiello cautiously watching Washington.

“What will be telling is what happens over the next 30 to 45 days,” Mr. Masiello said. “Then I might revise what I tell clients.”

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