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The Legitimator!

Posted By Barry Ritholtz On August 14, 2003 @ 7:10 am In Finance,Politics | Comments Disabled

WSJ: Schwarzenegger Enlists Buffett To Supply Financial Muscle [1]
Whether the pun was intended or not (Ah-nold being a bit muscular himself) that headline likely spells a knock out punch for Davis.

Yesterday, Schwarzenegger scored an enormous coup landing longtime Dem Warren Buffet [1]as his economic advisor. That turns what was going to be an electoral circus into a legitimate race; It likely spells a knock out punch for Gov. Davis. Buffett is not only one of the most respected investors of all time, he is something of a Deity to his followers. Down to Earth, straight-talking Buffet turns Schwarzenegger into a very credible candidate – who also happens to have the best name recognition in California.

Ironically, this weeks Barron’s cover, Buffett’s Last Chapter [2] declared Warren’s focus would remain maximixing the firm for the rest of his days . . . Apparently, that pronouncement was a bit premature.

Buffett’s move has significant implications for the 2004 Presidential race. The WSJ [3] noted:

Mr. Buffett is often identified with Democratic causes, however, and his campaign role may raise more questions than it answers for California Republicans. He has been a critic of GOP fiscal policy, denouncing President Bush’s dividend tax cut and leading the charge against favorable tax treatment for stock options. Though he has supported Republican candidates in his home state of Nebraska, he has contributed to the campaign of Sen. Hillary Rodham Clinton of New York and the presidential bid of Florida Sen. Bob Graham, both Democrats.

Buffett commands respect in the financial world, but his critique of the White House economic plan fell on mostly deaf legislative ears. He is potentially one of the most devastating critics of the present economic policies. In our opinion, Buffet’s joining Schwarzenegger has less to do with California politics, and everything to do with ascending to a national political platform. The lack of traction his economic observations received in the political world had to be part of his motivation for joining the California circus.

Buffet’s unbelievably success has been about making the difficult calls. Buffet is all about postponing fun, and taking your medicine now. He has a very, very long time horizon. We can expect to hear about Buffett’s own economic agenda of value, moderation, anti-tax giveaways over the next 12 months. That likely means spending cuts, tax hikes and service cut backs for California. And because he’s Buffett, he may very well get a free pass on them. If Warren says we need a tax increase, well then, Hell, we must need a tax increase. California may not realize it yet, but they are staring down the barrell of some bad tasting fiscal medicine. Don’t expect Warren to sugar coat the nasty stuff (They’ll be healthier for it in the long run),

California just got religon, and I’ll betcha they don’t even know it yet.

This makes Schwarzenegger a key pivot in the rhetorical arguments leading to the 2004 Presidential race. Yesterday, the WSJ [3] discussed the Dems tactic of charging political “Mulligan [4].” I still don’t know how that plays out in he centrist hearland. But the California races now has national implications. The WSJ’s Gerald Seib (deputy chief of WSJ Wash D.C. bureau) notes:

How the two parties handle popular anger at California’s big budget deficit, and the question of whether taxes need to be raised to deal with it, may shape the national debate over the similarly burgeoning federal deficit. -In the California Recall Mess, Democrats See National Message [3], WSJ.

With Warren involved, that’s even truer today than it was yesterday. Stay tuned . . .

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2003/08/the-legitimator/

URLs in this post:

[1] Schwarzenegger Enlists Buffett To Supply Financial Muscle: http://online.wsj.com/article/0,,SB106080231977369400,00.html/

[2] Buffett’s Last Chapter: http://online.wsj.com/barrons/article/0,,SB106038257173862800,00.html/

[3] WSJ: http://online.wsj.com/article_print/0,,SB106072293183189400,00.html/

[4] Mulligan: http://bigpicture.typepad.com/comments/2003/08/political_mulli.html

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