Wanniski put clients on notice Monday about some vitally important political movements that are only being reported in the mainstream press Wednesday morning. The basic idea is to put the tax cuts that do not have widespread Democratic support into the reconciliation bill, as these can be passed with only 50 votes in the Senate. Outside the context of the reconciliation bill, any wholly new tax bills would require 60 votes in the Senate to block possible Democratic filibusters. There would be yet another bill to get this done, but the details are being held back while business lobbyists work on getting the Bush tax bill out the door, which they hope they can do by mid-June. The kind of tax cuts that Wanniski is hoping for would be the catalysts for turning the current bear-market rally into a real bull market.
Capital gains tax cuts especially are economic super-stimulants.
But they're not in the bag yet. A lot of senators and lobbyists will be spending a lot of time behind closed doors over the next few weeks. We don't know yet what will emerge when those doors are finally opened. Second, an update on the Russell 2000 index of small-cap stocks and its attempt to break out above technical resistance. The Russell 2000 closed back below the line Monday, but then struggled back up above it Tuesday, scoring new recovery highs in the process.