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Monthly Archives: April 2013

Pfizer, which is based in New York, reported first-quarter net income of $2.75 billion, or 38 cents a share, up from $1.79 billion, or 28 cents a share, a year earlier. Excluding one-time items, adjusted income was 54 cents a share, a penny less than the forecast of analysts surveyed by FactSet.

Results were helped by a $490 million gain from the transfer of some product rights to its joint venture in China. In the year-ago quarter, Pfizer took charges totaling $1.66 billion for litigation, acquisition and other costs.

Revenue in the latest quarter was $13.5 billion, down 9 percent from $14.89 billion a year earlier and below analysts’ expectations. Sales rose 5 percent to $2.42 billion in emerging markets like China, a crucial growth market for the industry as American and European health programs try to hold down costs.

Pfizer also lowered its earnings forecast by 6 cents to $2.14 to $2.24 a share and its revenue forecast by $900 million to $55.3 billion to $57.3

The current quarter showed the company continued to struggle after losing patent protection in the United States on some of its blockbuster drugs. The biggest hit has come from generic versions of Pfizer’s cholesterol fighter Lipitor, which was the world’s best-selling drug for nearly a decade until it lost exclusivity in 2011 in the United States and in much of Europe last year. Sales of Lipitor, which once brought in about $13 billion a year, dropped 55 percent to $626 million in the first quarter.

The company also has been selling off nonpharmaceutical assets and using the proceeds to repurchase more shares. Indeed, Pfizer noted on Tuesday that it has returned about $8 billion to shareholders so far this year in dividends and share repurchases.

“They’re having trouble hitting their sales goals, so they need to make up for it with financial moves, like buying back shares, that help prop up the stock price,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan, wrote in an e-mail.

Even so, sales also fell for some big sellers still protected by patents, including the erectile-dysfunction drug Viagra, which was down 7 percent at $461 million.

The bright spots during the quarter were Lyrica, for fibromyalgia and other pain, up 12 percent at $1.07 billion, and the anti-inflammatory pain reliever Celebrex, up 3 percent to $653 million.

4:55 p.m. | Updated

Despite persistent unemployment, malaise and continuing debt problems, one sector in Europe seems to be benefiting: European banks.

After years of painful job cuts and moves to make portfolios less risky, several large European institutions reported strong first-quarter results in recent days, helped by cost-cutting and better performance of major units.

On Tuesday, the Swiss bank UBS and the Lloyds Banking Group of Britain surprised investors by reporting better than expected earnings for the first quarter, sending shares of both banks up.

The British banks Royal Bank of Scotland and HSBC, along with the French bank BNP Paribas, are among those still scheduled to report first-quarter figures in the coming days. But so far, the first-quarter results paint a somewhat encouraging picture of banks that have managed to limit losses from bad loans linked to the credit crisis, while reducing costs and returning to their core banking operations: credit and mortgages for some and wealth management for others.

UBS, for instance, reported on Tuesday a first-quarter profit of 988 million Swiss francs ($1 billion). Those results were down slightly from 1 billion francs in the period a year earlier, but far exceeded the 412 million francs predicted by analysts surveyed by Bloomberg News. Shares of UBS soared 5.67 percent in trading in Zurich on Tuesday.

Sergio P. Ermotti, the chief executive, cautioned that it was “too early to declare victory,” but said the earnings showed the company’s “business model works in practice.”

Some investors note that the continuing difficulties in the euro zone and weak demand for loans mean that many European banks remain in trouble despite relatively good earnings in the first quarter.

“They are doing their utmost to have a decent banking model and the numbers across the board were very good, but going forward we now have the issue of where the growth is going to come from,” said Florian Esterer, a fund manager at the MainFirst Group in Zurich.

Still, European banks are moving actively to address their problems, including by slashing costs in the face of changing regulations and a sluggish European economy. Deutsche Bank reported on Monday after the markets closed that its first-quarter profit rose as cost-cutting offset a decline in revenue from investment banking. Deutsche Bank’s stock also rose 4.7 percent in Frankfurt on Tuesday on the news that it would issue new shares to bolster its capital reserves.

“There are still some headwinds, but banks are pretty much there when it comes to reaching the right level of capital and that is helpful,” said Cormac Leech, an analyst at Liberum Capital.

UBS has been eliminating 10,000 jobs, reducing bonus payments, scaling back its investment banking trading business and focusing more on its successful wealth management operation. Those steps helped the bank’s first-quarter results.

UBS, its Swiss rival Credit Suisse, and Barclays of Britain all benefited from higher revenue at its investment banking operation. At Credit Suisse, pretax profit in its investment banking division rose 43 percent, the bank said last week. Barclays, which also reported earnings last Wednesday, said pretax profit for its investment bank rose 11 percent in the quarter.

Reducing costs and shedding assets also helped Lloyds report a first-quarter net profit of £1.5 billion ($2.3 billion). Those results were a sharp turnaround from the £5 million loss Lloyds posted in the first quarter of 2012.

Analysts say European banks are also starting to recover from the fallout from numerous financial scandals that have hurt their reputations.

UBS, for example, has sought to rebuild trust among clients after it uncovered a $2.3 billion trading loss in 2011 connected with the activities of a former trader, Kweku M. Adoboli, who has since been sentenced to seven years in jail. In December, UBS said it would pay $1.5 billion in fines to settle a case related to the manipulation of the London interbank offered rate, or Libor.

Many of the other large European banks have also been ensnared in the rate-rigging scandal. Deutsche Bank has set aside 2.4 billion euros ($3.2 billion) to cover the potential cost of proceedings that include a tax evasion inquiry in Germany and an international investigation into accusations that its employees and those at other investment banks colluded to fix benchmark interest rates.

While financial institutions will continue to address such issues, there is a cautious optimism now about bank performance.

“There is a new appetite for banks among investors. There’s a confidence that wasn’t there two years ago,” Mr. Leech said.

Jack Ewing contributed reporting.

Masayoshi Son, the chief of SoftBank, the Japanese telecommunications company.Yuya Shino/ReutersMasayoshi Son, the chief of SoftBank, the Japanese telecommunications company.

Earlier this month, Charles W. Ergen’s Dish Network made a bold bid to pre-empt Softbank’s $20 billion bid for Sprint Nextel with its own offer.

But SoftBank‘s outspoken chief executive, Masayoshi Son, said on Tuesday that his proposal would prevail — unmodified.

It is the first time that the Japanese telecommunications mogul has spoken out since Dish surprised many with a $25.5 billion offer for Sprint, the country’s third-biggest cellphone service provider.

Dish has said that its cash-and-stock bid for all of Sprint, valued at $7 a share, would create a new wireless titan whose phone, data and video services would rival those from Verizon Wireless and AT&T.

For now, Mr. Son insists that his proposal, a two-step process that would leave 30 percent of Sprint publicly traded, is straightforward and can be closed by mid-July. (The first part of the process, in which SoftBank invested $3.1 billion in the American company to keep it afloat, has already been competed.)

“Charlie’s proposal does not provide any new cash into the company, and it provides heavy burden of debt,” Mr. Son said in a telephone interview. “I believe our deal will go through.”

Mr. Son insisted that he was not surprised by the arrival of Mr. Ergen, who has publicly amassed a cash hoard that many assumed would finance some sort of acquisition. Though Dish had already made a play for Clearwire, Mr. Son said he guessed that the satellite-TV company had even bigger ambitions.

“My guess was right,” he said.

He repeatedly attacked Dish’s bid as unworkable and his rival’s numbers as misleading. By his own reckoning, factoring in both cost savings and potential costs like delays, SoftBank’s offer was worth $7.65 a share, while Dish’s was valued at $6.31.

Chief among Mr. Son’s criticisms was the amount of debt that the interloping offer would pile on to Sprint, which he estimated at $50 billion. In a long presentation to SoftBank’s shareholders, Mr. Son argued that his proposal would increase Sprint’s debt by three times, while Dish’s would do so by nearly six times.

“It would be prohibitively high debt,” he said.

Dish has proudly trumpeted the amount of wireless spectrum the combined company would control, but Mr. Son said that the holdings would be wastefully excessive and expensive to maintain. And it would still require spending what he estimated was $6 billion to upgrade Sprint’s network.

And Mr. Son contended that Mr. Ergen, a wily deal maker whose net worth Forbes estimates is more than $10 billion, is an amateur when it comes to the mobile industry. By contrast, he pointed repeatedly to SoftBank’s rise over the last seven years to become one of Japan’s three biggest wireless companies.

Still, much of SoftBank’s hopes are tied to Sprint’s bid to buy the remainder of Clearwire, an offer that has drawn significant shareholder opposition.

Mr. Son dismissed concerns about the proposal’s fate, saying that Sprint has not signaled any desire or need to raise its offer of $2.97 a share. The company can’t raise its bid without the blessing of its benefactor, SoftBank.

In the worst-case scenario, Sprint will raise its ownership in Clearwire to about 65 percent from 50 percent through agreements to buy out partners in the company, including Intel and Brighthouse.

Speaking of dissident investors who think Sprint’s offer is too low, Mr. Son said, “They can stay as shareholders for however long they want. We are happy with just 65 percent.”

Timothy Cook, the chief of Apple.Eric Risberg/Associated PressTimothy Cook, the chief of Apple.

With a $145 billion cash hoard, Apple could acquire Facebook, Hewlett-Packard and Yahoo — and still have more than $10 billion left over.

Despite its uncommonly flush balance sheet, Apple borrowed money on Tuesday for the first time in nearly two decades. In a record bond deal, the company raised $17 billion, according to a person briefed on the deal, paying interest rates that rival those of debt issued by the United States Treasury.

Apple’s corporate-finance maneuver raises a riddle: Why would a company with so much cash even bother to issue debt?

The answer has a lot to do with the frenzied state of the bond markets. Companies are issuing hundreds of billions of dollars in debt to exploit historically low interest rates and strong investor demand for bonds as an alternative to money market funds and Treasury bills that paying virtually nothing.

“If you look at these big companies like Apple and Microsoft doing these big, low-cost bond offerings, it’s a way for them to raise money in an effort to create better returns for their shareholders,” said Steven Miller, a credit analyst at S&P Capital IQ. “The bond markets are practically begging these corporations to issue debt because of how cheap it is to raise money.”

But Apple’s move also reflects the challenges of a highly successful business with a flagging stock price. In an effort to assuage a growing chorus of concerned and disappointed Apple investors, the company is issuing bonds to help finance a $100 billion payout to its shareholders. It will distribute most of that amount over the next two and a half years in the form of paying increased dividends and buying back its stock.

While Apple’s shareholders and analysts welcome the company’s financial tactics, they say that the maker of iPhones, iPads and iMacs must continue to innovate and fend off increasing competition.

“This is a substantial return of cash, and it’s the right thing to do on many levels,” said Toni Sacconaghi, an analyst at Bernstein Research. “But, ultimately, the company has to execute. This is no substitute for that.”

By raising cheap debt for the shareholder payouts, Apple will also avoid a potentially big tax hit. About two-thirds of Apple’s cash — about $102 billion — sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, the company could have significant tax consequences.

“We are continuing to generate significant cash offshore and repatriating this cash would result in significant tax consequences under current U.S. tax law,” said Peter Oppenheimer, Apple chief financial officer, during an earnings call last week.

In some ways, the bond issue on Tuesday was made necessary by Apple’s tax strategies.

“They have been so successful with their tax planning that they’ve created a new problem,” said Martin A. Sullivan, chief economist at Tax Analysts, a publisher of tax information. “They’ve got so much money offshore.”

The $17 billion debt sale by Apple is the largest on record, surpassing a $16.5 billion deal from the drugmaker Roche Holding in 2009. Apple joins a parade of large companies issuing debt with astonishingly low yields. Last week, the shoe company Nike sold bonds that mature in 10 years that yielded only 2.27 percent. Last July, Bristol-Myers issued five-year debt yielding 1.06 percent. In November, Microsoft set the record for the lowest yield on a five-year bond, issuing the debt at 0.99 percent.

Despite Apple’s $145 billion cash pile, the credit-ratings agencies did not award the company their coveted triple-A rating, citing increased competition and a concern that its future product offerings could disappoint. Moody’s Investors Service gave the company its second-highest rating, AA1, as did Standard & Poor’s, rating the company AA+. (The four companies awarded the highest credit ratings by both Moody’s and S.&P. are Microsoft, Exxon Mobil, Johnson & Johnson and Automatic Data Processing.)

“There are inherent long-run risks for any company with high exposure to shifting consumer preferences in the rapidly evolving technology and wireless communications sectors,” wrote Gerald Granovsky, a Moody’s analyst.

Apple’s less-than-perfect rating did not drive away bond investors on Tuesday. The offering generated investor demand well in excess of the $17 billion raised, according to person briefed on the deal. Goldman Sachs and Deutsche Bank led the sale of the issuance.

Desperate for returns in a yield-starved world, all types of investors — including individual, pension funds and mutual funds — are snapping up corporate debt. The demand appears to be insatiable: this year, through last Wednesday, a record $55 billion has flowed into mutual funds and exchange-traded funds that invest in corporate debt with high-quality ratings, according to the fund data provider Lipper.

The last time Apple sold debt was in 1996, when the Internet was in its infancy and sales of Apple’s niche computers were struggling. Facing an uncertain future and struggling with a weak balance sheet, Apple had a junk credit rating and was paying 6.5 percent on its debt.

Opinion »

Draft: The Power of ‘I Don’t Know’

As a writer, my only possible claim to anyone’s attention is honesty. Or maybe I’m wrong.

António Horta-Osório, chief executive of the Lloyds Banking Group.Leon Neal/Agence France-Presse — Getty ImagesAntónio Horta-Osório, chief executive of the Lloyds Banking Group.

LONDON – The Lloyds Banking Group said on Tuesday that first-quarter net profit rose to £1.5 billion ($2.3 billion) from the period a year earlier, as it continued to reduce costs and shed assets.

The result, which beat analysts’ estimates, was a sharp turnaround from the £5 million loss Lloyds posted in the first quarter of 2012.

The bank’s performance was driven by higher revenue in its main retail banking business, falling costs as it sold assets and a reduction in money set aside to cover delinquent mortgages, Lloyds said in a statement.

“We made substantial progress again in the first quarter,” the chief executive, António Horta-Osório, said in the statement.

Shares in Lloyds, which is 39 percent owned by the British government after it received a bailout during the financial crisis, rose almost 5 percent in morning trading in London on Tuesday.

In recent years, Lloyds and other local lenders have had to pay billions of pounds for inappropriately selling insurance products to British customers who did not require them. The bank said it had not set aside additional money to cover the costs for that inappropriate activity.

As British regulators push banks to shore up their capital positions, Lloyds has been increasing its reserves through a series of disposals.

On Monday, Lloyds sold its Spanish operations to Banco Sabadell of Spain. Lloyds is also planning an initial public offering of part of its branch network to meet conditions of its government bailout in 2008. The bank made £394 million last month from selling a 20 percent stake in the wealth management firm St. James’s Place.

In March, regulators said British financial institutions would have to raise an additional £25 billion of capital. Many analysts expect that Lloyds will have to raise additional funds, though it said on Tuesday that it was still waiting to receive guidance from the local authorities.

The bank’s core Tier 1 ratio, a measure of a firm’s ability to weather financial shocks, remained at 8.1 percent under the accountancy rules known as Basel III.

During the first quarter, Lloyds said it had continued to reduce costs and cut the amount of money set aside to cover delinquent loans. Impairment charges fell 40 percent, to £1 billion, from the period a year earlier, while noncore assets fell 6 percent, to £92.1 billion.

Lloyds also said on Tuesday that Matthew Elderfield, deputy governor at the Central Bank of Ireland in charge of financial regulation, would become its new group director of conduct and compliance beginning in October.

PARIS — The euro zone jobless rate rose to a record 12.1 percent in March, a sharp reminder that unemployment remains among the region’s biggest problems.

The unemployment rate in the 17-nation currency union ticked up by one-tenth of a percentage point from February, when the previous record was set, Eurostat, the statistical agency of the European Union, reported from Luxembourg. A year earlier, euro zone joblessness stood at 11 percent.

A separate report Tuesday from Eurostat showed inflation dropping sharply in the euro zone, well below the European Central Bank’s target of 2 percent a year. The annualized rate of inflation for consumer prices was just 1.2 percent in April 2013, down from March, when inflation stood at 1.7 percent.

The reports, along with other recent data suggesting that the economy is healing more slowly than many had hoped, could prompt the European Central Bank to take action at its policy meeting on Thursday. The central bank could cut its key interest-rate target, already at a record low of 0.75 percent, by a quarter point, economists say, though the impact of such a move would probably be slight, because banks remain less than eager to lend.

“Stabilizing the peripheral euro zone countries will take at least until the end of 2013,” Ralph Solveen, an economist with Commerzbank in Frankfurt, said. As a result, he said, unemployment would probably keep rising “until next spring.”

For the 27-nation European Union, the March jobless rate was unchanged, at 10.9 percent. Eurostat estimated that 26.5 million men and women were now unemployed in Europe, including 5.7 million young people.

Both the euro zone and European Union jobless figures are the highest Eurostat has reported since it began keeping the data in 1995 in the days before the euro. In comparison, the unemployment rate in the United States was 7.6 percent in March.

Six years after Wall Street’s bad bets on the United States housing market began to sink the global financial system, the European economy remains trapped in torpor with little relief in sight. Governments have tightened the screws on public finances to meet deficit targets, and companies remain extremely reticent about hiring. The euro zone’s gross domestic product is widely expected to decline for a second consecutive year in 2013.

Manufacturers are largely dependent on demand from outside Europe for growth. Carmakers, which employ about two million people in Europe, anticipate sales in the European Union this year to fall back to levels last seen in the early 1990s. In that dismal landscape, PSA Peugeot Citroën, the French automaker that ranks No. 2 in Europe behind Volkswagen, said Monday that its unions had agreed to a plan to close a plant near Paris and to reduce its French work force by more than 11,000.

While a decline in energy prices helped to push the inflation rate lower, Jennifer McKeown, an economist in London with Capital Economics, argued that the jobless problem was probably itself part of the reason for the downward pressure on prices. She said in a note that it would be “a disappointment” if the E.C.B. failed to ease rates and “announce further unconventional policies to boost bank lending.”

Two nations are staggering under depression-level jobless rates: Greece, where the European sovereign debt crisis began, had a rate of 27.2 percent in January, the latest month for which data are available; Spain had unemployment of 26.7 percent in March. Portugal was next at 17.5 percent. Germany, which has the largest economy in the European Union, was at just 5.4 percent, with only Austria, at 4.7 percent, lower. Britain’s rate stood at 7.8 percent, while France’s was at 11 percent.

Mr. Solveen forecasted that the euro zone economy would shrink by 0.2 percent this year, but he pointed to progress in some countries, including Italy and Spain, in addressing problems that he said would eventually help turn things around. Still, Spain’s “catastrophic” unemployment rate is a reminder that its burst housing bubble is still sapping the economy.

“The correction there has to go on,” he said, “because there is still a huge number of unsold homes.”

Mr. Solveen said that Germany had reduced its dependence on its euro zone neighbors, and the key to its economic growth was now tied to the global economy.

The company said on Tuesday it earned $2.75 billion, or 38 cents per share, in the first quarter. That compared with $1.79 billion, or 24 cents per share, in the year-earlier period, when Pfizer took charges to boost productivity and address legal matters.

Excluding special items, Pfizer earned 54 cents per share. Analysts, on average, expected 55 cents per share.

Global revenue fell 9 percent to $13.5 billion, below Wall Street expectations of $13.99 billion, hurt by wholesaler purchasing patterns that led to lower demand for its Prevnar vaccines against pneumococcal bacteria.

Pfizer expects full-year 2013 earnings of $2.14 to $2.24 per share, down from its previous forecast of $2.20 to $2.30. It noted that the falling Japanese yen was hurting company sales in that important market.

The stock dropped nearly 5 percent to $29.01 in premarket trading.

(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn and Jeffrey Benkoe)

The Swiss bank UBS in Zurich.Michael Buholzer/ReutersUBS is based in Zurich.

LONDON – The Swiss bank UBS, buoyed by strong performances in its wealth management and investment banking operations, reported first-quarter earnings on Tuesday that sharply exceeded analysts’ expectations.

Although the bank said profit fell to 988 million Swiss francs ($1 billion) from 1 billion francs in the period a year earlier, the results were much better than the 412 million francs predicted by a group of analysts surveyed by Bloomberg News.

Sergio P. Ermotti, the chief executive, said in a statement that he was very pleased with the performance. He cautioned that it was “too early to declare victory,” but said the earnings showed the company’s “business model works in practice.”

UBS announced a far-reaching overhaul of its business in October to adjust to tighter regulations and the effect of a sluggish European economy. The bank started to eliminate 10,000 jobs, reduce bonus payments, scale back its investment banking trading business and focus more on its successful wealth management operation.

It also sought to rebuild trust among clients and investors after its involvement in some recent scandals. The bank uncovered a $2.3 billion trading loss in 2011 connected with the activities of a former trader, Kweku M. Adoboli, who has since been sentenced to seven years in jail. In December, UBS said it would pay $1.5 billion in fines to settle a case related to the manipulation of the London interbank offered rate, or Libor.

UBS said pretax profit at the investment banking operation rose 92 percent, to 977 million francs. Stronger demand for its equity capital markets services offset a drop in its advisory and debt capital markets business, it said.

Net new money at its global wealth management business was 23.6 billion francs in the first quarter, compared with 10.9 billion francs in the period a year earlier. Pretax profit at wealth management outside the Americas fell 28 percent, to 664 million francs, while earnings at wealth management in the Americas rose 19 percent, to 251 million francs.

UBS has been cutting back more at its investment banking operation than Credit Suisse, its main rival in Switzerland. Mr. Ermotti, who took over UBS at the end of 2011, hired Andrea Orcel from Bank of America Merrill Lynch last year to help overhaul the unit.

Last week, Credit Suisse posted a profit of 1.3 billion francs in the first quarter, up from 44 million francs in the first quarter of 2012, when it booked a loss of 1.6 billion francs on the value of its own debt. The results were helped by a better performance of its investment banking operation.


Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform — Why We Need It and What It Will Take.”

A crucial question in the debate over income and wealth inequality is whether its growth necessarily leads to a growth in the inequality of political power. If it does, then this is a powerful reason for the federal government to take active measures to reduce income and wealth inequality — even if it comes at an economic cost to the nation.

Today’s Economist

Perspectives from expert contributors.

Conservatives and libertarians generally do not believe that increased inequality is a political or economic problem. To a large extent, I think that is because they fear that acknowledging the problem would require the adoption of policies they find distasteful, immoral and economically counterproductive.

That is, income and wealth would have to be redistributed — taken via taxation from the wealthy and given to the poor. The higher taxes will reduce the incentive to work, save and invest among the wealthy, conservatives and libertarians believe, which will reduce economic growth and lead to the expatriation of the wealthy from the United States, while fostering a culture of dependency among the poor that will reduce their incentive to better themselves and escape poverty.

Insofar as the political dynamics are concerned, conservatives and libertarians are generally fearful of democracy. That is because, in principle, there is essentially no constraint on the ability of the majority to take from the minority and reward themselves in a pure democracy. The founding fathers very much shared this concern and intentionally enacted numerous restraints on the majority to protect the rights of the minority to their wealth. Among these are the federal system, with relatively strong states and a weak national legislature, as compared to parliamentary systems, and a Senate where small, sparsely populated states, per capita, have more influence than large, populous states; a written constitution with strong protection for property rights; and an Electoral College instead of election of the president by pure popular vote.

One reason that conservatives and libertarians obsess over the large percentage of the population that pays no federal income taxes, often put at 47 percent, is the political concern that the nation is very close to a tipping point where the have-nots can take from the haves almost at will.

The simple solution to this problem, to the extent there is one, would be to extend the tax net to some of those now living free of federal income taxation. But this is practically impossible because Republicans, who mainly complain about the large numbers of nontaxpayers, enacted most of the tax policies that removed them from the tax rolls. These include the earned income tax credit and the refundable child credit.

Secondly, almost all Republican legislators have signed a tax pledge promising never to raise taxes for any reason. Most Republicans are also ideologically opposed to a value-added tax, which would be the simplest way of getting everyone to pay some federal taxes to cover the government’s general operations. The payroll tax, which is more broadly based than the income tax, is earmarked to pay Social Security and Medicare benefits only.

Because the simple and obvious solution to their problem is off the table, conservatives and libertarians have concentrated on cutting benefits for the poor. They believe that programs such as unemployment compensation and food stamps subsidize laziness and undermine the work ethic. If such programs were cut, then those now benefiting would be forced into the labor force, where they would become taxpayers and cease being tempted by politicians promising them something for nothing.

The liberal view, by contrast, is that the poor are relatively powerless. They vote in lower percentages than the well-to-do and often suffer from policies to reduce their political influence, such as onerous voter registration requirements, demands for government identification at the polls and long waiting times to vote on Election Day. There is also evidence of growing pressure by employers to force their employees to vote against their own interest and for the employer’s.

Liberals believe our political system is generally more responsive to the interests of the wealthy. The poor, after all, are not major sources of campaign contributions.

But that is only part of the story. The well-to-do are far more likely to be engaged in the political process and to bring their concerns to bear on their elected representatives through direct contact.

Thus we have seen that while the recent budget sequestration has brought hardship to both the poor and the wealthy, Congress has taken no action to relieve the burden on the poor but acted with amazing speed to relieve a key concern of the wealthy — furloughs for Federal Aviation Administration personnel that created airline delays.

A new study by the political scientists Benjamin I. Page, Larry M. Bartels and Jason Seawright presents strong evidence that the wealthy are more aggressive and more successful than the poor at influencing the political system in their favor. This study is based on interviews with 83 wealthy people in Chicago.

The authors contrast the views of those in their survey with those of the general public based on national public opinion polls. They find that the wealthy are much more concerned than the general public about budget deficits, much more in favor of cutting social welfare programs, much less in favor of government jobs programs and much more opposed to government regulation, among other things.

Professors Page, Bartels and Seawright were unwilling to draw firm conclusions about whether the wealthy have disproportionate influence in American politics, owing to the small size of their survey sample. But it is at least obvious that the economic policy preferences of the wealthy strongly overlap with those of the Republican Party.

On the other hand, research by the political scientist Martin Gilens in his book “Affluence and Influence: Economic Inequality and Political Power in America” shows that the wealthy tend to be more liberal than the Republican Party on social issues. By and large, the wealthy are not religious, favor abortion rights and support gay rights.

The best hope for liberals in the future may be to emphasize social issues, which split the Republican Party between the interests of the wealthy and those of religious and social conservatives who dominate primary elections.