One on One with Chuck Gabriel, Senior Political Analyst at Prudential Equity Group
Wednesday, January 24, 2007
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SUSIE GHARIB: A setback today for congressional Democrats hoping for a quick increase in the minimum wage. The Senate rejected a House bill that would have gradually raised the minimum wage from $5.15 an hour to $7.25. Both Republicans and some conservative Democrats voted against the measure, because it didn't include tax breaks for small businesses like restaurants that rely on low wage workers. The Senate is now working on a new minimum wage legislation including those tax breaks.
Joining us now to talk more about that minimum wage bill and Wall Street reaction to President Bush's state of the union address last night, Chuck Gabriel, senior political analyst at Prudential Equity Group. Hi Chuck.
CHARLES GABRIEL, SR. POLITICAL ANALYST, PRUDENTIAL EQUITY GROUP: Hi, Susie.
GHARIB: Well, let's first talk about this minimum wage bill. What are the chances it's going to eventually get passed?
GABRIEL: Very high, probably 80, 90 percent. As a matter of fact, the Senate defeat of that motion to actually pass the House passed version stripped down bill with no tax relief actually is a positive for final passage because you could never finally get a bill through without some tax cuts attached and the president would veto it.
GHARIB: All right.
GABRIEL: So we're likely to have some delay here while we figure out a strategy to get over House objections, but we'll ultimately get a bill.
GHARIB: Let's talk about the president's state of the union address last night. Overall did Wall Street like what it heard?
GABRIEL: For the most part, but for the most part what it saw was a president who is a bit diminished because of the war and Democrats who weren't particularly receptive to his proposals with the big exception of some of his energy proposals relating to alternative fuels and ethanol. So they're not going to hour hurry up and worry or get excited about the president's proposals because they really realize he doesn't have the political capital to make them come true.
GHARIB: Well, let's talk about those energy proposals. What was the reaction to it and how realistic is it that something can get enacted?
GABRIEL: Well, the first reaction was a very sharp increase in oil prices yesterday. It kind of seemed to mark an up-tick and a bottoming from the recent downward price pressure based on the president's proposal to double the strategic petroleum reserve purchase of oil. So, that's very real. The second aspect is you know, the president has proposed to really massively increase the demand -- the -- I should say the supply of ethanol and particularly cellulosic and corn-based ethanol and the gasoline consumption based on the blended gasoline with those ethanol and alternative fuels in the next 10 years, basically increase it five times as much as currently scheduled. So that's very positive for the ethanol sector even though the economics there -- we actually have the equivalent of a gold rush that's going to be very tricky in the years ahead.
GHARIB: What about health care proposals? Is there anything there that can get through Congress or is this just the beginning of a debate?
GABRIEL: Probably the beginning of a debate and a debate that conservatives bemoan the fact that the president might have had more traction on had he had asked for the same thing a couple of years ago. It's a very interesting and innovative proposal, to make all employer- provided tax of health care plans now taxable but to provide a major $15,000 standard deduction. The problem is that the labor unions don't like that. The Democrats don't really like the movement towards -- additionally towards consumer directed health care. So it's probably not going to go anywhere, but you know, it really does kind of advance the debate a bit and it was a pretty good effort on the president's part.
GHARIB: Let's talk a little bit about Iraq because a big chunk of the state of the union last night was about Iraq. Has Wall Street become less worried about Iraq?
GABRIEL: I would just say that, you know, Wall Street found a way to insulate itself from concerns about friction in the economy with all the additional security measures and terrorism in general just on the basis that we haven't had another terrorist attack in the United States since September 11, 2001. And you know, the costs of the war, the major -- you know, half trillion dollar costs and counting not for the Federal government and taxpayers, but not to count the costs of human lives and political costs, have really proven to be quite containable or absorbable in this very strong economy and deficits continue to come down. So Wall Street for the most part is inoculated against concerns about Iraq and if it looks as though the reaction outside the room to the president's second pitch and effort to sell his new way forward in Iraq, you know, this effort to surge, if it looks as though they're going to fail again, the message there is that the days of blank checks for both the president's policy and funding costs -- funding requests for Iraq are numbered, that we may be heading towards a bit of a peace dividend in the years ahead and the markets would love that.
GHARIB: It's a subject that we could talk at length but we're going to have to leave it there. Chuck, thank you very much for coming on the program.
GABRIEL: Thank you, Susie.
GHARIB: We've been speaking with Chuck Gabriel, senior political analyst at Prudential Equity Group.
