Romney wants smaller government with spending topping out at 16-17 percent of GDP but taxes closer to 15 percent of GDP. That means larger deficits.
Obama wants bigger government with spending near 25 percent of GDP, but he's only willing to raise taxes for those earning from then $250,000 a year. Government spending now is a little over 24 percent of GDP.
"The gap between the two is where we want to be," Kotok tells the Daily Ticker's Henry Blodget. "The United States can run very effectively at 19 percent or 20 percent of GDP. We spend 20 percent of GDP; we tax at 20 percent of GDP; we have a balanced budget."
Kotok, who manages more than $2 billion in assets at the Sarasota-based Cumberland Advisors, says neither Romney nor Obama is providing details on their economic plans but Paul Ryan "may up the quality of the debate" on the economy. Ryan's budget plan calls for massive cuts in government spending, lower corporate tax rates and lower and fewer personal income tax rates. It would also eliminate the Health Care Affordability program and Medicare as it's currently structured.
"In this election, on this issue, the usual posturing on the left isn't going to work. Mitt Romney and I know the difference between protecting a program and raiding it. Ladies and gentlemen, our nation needs this debate. We want this debate. We will win this debate," Ryan said last night after accepting his nomination for the Republican candidate for VP.
Still with Republicans opposing tax increases and Democrats trying to protect spending, is compromise possible? It didn't happen during President Obama's first term, when Democrats were the majority in both the House and the Senate, and Kotok isn't optimistic it will happen in the future. Even if Romney wins the presidency, he may not have enough votes in the senate to alter budget policy the way that he wants, says Kotok.
"We may have another round of impasse…unless legislative chambers change sufficiently," Kotok says. But this time the impasse could have more dire consequences.
"The sequester will crunch spending," says Kotok, referring to the $1 trillion in across-the-board budget cuts that Congress passed when it last extended the Bush tax cuts. "I see a big fight," says Kotok. "I don't think we can call how this one is going to sort out."
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