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What Wall Street wants from Obama in State of the Union address

President Obama has responded to recent setbacks by striking a more populist tone, and his primary target has been Wall Street. Bankers are hoping he takes a more inclusive line in his State of the Union address Wednesday.

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Cool to a spending freeze

Even before the speech, the administration has floated the idea of a freeze on federal discretionary spending, representing about 17 percent of the budget. But “Wall Street," Kleintop says, "sees right through a freeze.”

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Indeed, Scott Brown, chief economist at stockbroker Raymond James & Co. in St. Petersburg, Fla., says the bigger problem is entitlement programs, such as Medicare, Medicaid, and Social Security.

“A three-year freeze on discretionary spending – as Obama is proposing – does not leave you with a lot,” says Mr. Brown.

Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Ore., travels a lot in the Pacific Northwest. He says he would like Obama to soothe the fears of businesses that they are facing “massive tax increases for health and energy.”

“Everywhere I go, I hear people say they could start to throttle up hiring and increase work hours but they are afraid they will get hit with a massive tax increase.”

No new taxes

At the same time, many Wall Street economists would like to see the president suggest rolling back the tax increases that kick in with the expiration of the Bush tax cuts for relatively well-to-do wage earners, whose highest marginal tax rate will rise from 35 percent to 39 percent.

“Raising taxes is the last thing you want to do in an economic environment like this” says Robert McIntosh, chief economist at Eaton Vance, a mutual fund group in Boston. “Along with this, I don’t think it makes sense to raise the dividend and capital gains tax rates.”

Mr. McIntosh, like others on Wall Street, would also like to see Obama reduce the budget deficit. On Tuesday, the Congressional Budget Office said the budget deficit for 2010 would fall slightly, to $1.395 trillion.

“We must get it well under a $1 trillion,” says McIntosh.

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