Political  Calculations

On Sunday, December 30 2012, President Barack Obama claimed that financial markets would be negatively affected by the failure of the U.S. Congress and his administration to reach a rushed, last-minute deal to extend President Bush's 2001 and 2003 tax cuts for the middle class:

Low income tax rates first put in place under Republican former President George W. Bush are due to expire at the end of the day on Monday - the last day of 2012. Obama said that failing to reach a deal would have a negative impact on financial markets. "If people start seeing that on January 1st this problem still hasn't been solved, that we haven't seen the kind of deficit reduction that we could have had had the Republicans been willing to take the deal that I gave them ... then obviously that's going to have an adverse reaction in the markets," he said.

The problem with this statement is that U.S. markets have already adversely reacted to going over the so-called "fiscal cliff". Following the outcome of the November 6, 2012 national election, which ensured that President Obama would remain in office and the higher tax rates he seeks to impose upon investment income would go into effect on January 1, 2013, major shareholders at several hundred U.S. companies have acted to avoid those higher taxes by either moving up dividend payments into 2012 or by paying out special dividend payments before the end of the year.

To be able to make those dividend payments, companies have tapped the funds they were setting aside to pay out dividends in 2013. The chart below reveals how much money per share has been moved into 2013 for just the 404 companies of the S&P 500 that pay cash dividends to their shareholders:

Expected S&P 500 Quarterly Cash Dividends per Share for Future Quarters, 2013-Q1, Q2 and Q3, as of 28 December 2012

Political Calculations

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