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Guggenheim Analyst Looks Into Political Crystal Ball

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Chris Krueger, an analyst at Guggenheim Partners, gave attendees at the 2013 NAAIM Annual Conference his insights on various topics playing out in Washington today, including tax reform, the sequester and debt ceiling, immigration and the 2014 and 2016 elections.

On tax reform, Krueger suggested lowering the corporate tax rate from 35% to a rate in the “high 20s.” The lower rate would be paid for by broadening the base and closing some loopholes, he said.

Any reform must be “revenue neutral,” he added, noting that each percentage point the tax rate is lowered is equivalent to $100 billion.

It’s likely that the more than $85 billion in cuts made as part of the sequester for 2013 will stay the same, Krueger said, but some flexibility could be given to agencies about where to make those cuts.

The debt ceiling fight will continue in July, according to Kreuger, but he expects a deal is likely in order to avoid default. The House will likely pass a debt prioritization bill in coming weeks, he said.

Krueger suggested there are four aspects of immigration that take priority. In addition to border security and enforcement, he expects H1B visas for STEM workers (those with a background in science, technology, engineering or mathematics) will increase. He also anticipates an increased focus on guest workers and a path to citizenship or amnesty for the approximately 11 million workers who are here illegally.

Krueger also offered his predictions for the 2014 elections. The House will likely remain in Republican control, he said, as the Democrats need to win 17 seats to take the majority. In the Senate, there will be 35 seats up for grabs. “Republicans have a huge mathematical advantage,” he said.

But the biggest impact will likely come from gubernatorial changes, Krueger said. Governors in 36 states will be up for re-election in 2014.

For the 2016 presidential elections, Krueger said Hillary Clinton was almost guaranteed to be considered. If not, he suggested Joe Biden was one of the “routinely most underestimated” politicians. Other contenders include Govs. Andrew Cuomo of New York and Martin O’Malley of Maryland.

On the Republican side, he considered Sen. Marco Rubio of Florida, Gov. Chris Christie of New Jersey or Rep. Rand Paul of Kentucky as the most likely contenders.

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