I have to go back to the parrot in Disney's Alladin - "why am I not surprised?" Washington is being held hostage. In the old days, the wheeling and dealing was done by trading pork barrel projects and committee chairmanships. This week we learn the the arm twisting is hostage to extreme views. And so we are subject to a charade which takes us to the brink of economic upheaval. But I'm not surprised.
If we stepped back to 1/1/2000 and recognized that the demographics meant a tsunami wave of gray and asked what we could do to wreck the baby boomers' retirements, we would have come up with a list of what actually was done. The first thing we would have thought of would be to drive interest rates as close to zero as possible. Thank you Bernanke and Greenspan. Check one.
We would have thought of destroying the housing market. Again, thank you Greenspan and Bernanke with a tip of the hat to rating agencies, lax regulators, Congress pandering to Fannie and Freddie, et.al. Check 2. We would have thought of taking a long-projected surplus and turning it into a massive deficit. Then we could threaten cuts in Medicare, Social Security, etc. Thank you Congress and Bush. Check 3. We would have spent the annual surplus on Social Security collected by an extremely regressive tax. Thank you Congress. Check 4.
Today, this ineptness is extended and actually possibly being outdone. The House is voting on a bill that is held hostage by the extreme right and is dead on arrival as a day of reckoning approaches, whereby America won't pay its bills. One of the speakers on the House floor noted the hit to the nation's retirement funds during the past week of wheel spinning and blatant posturing and asked whether Congress was waiting for a 700-point down day before coming to its senses ala TARP.
IMHO, the failure to govern is obvious and means that the system needs drastic changing.
The failure to govern and be financially responsible has been a slow train coming for at least 50 years. It is a recent phenomenon only in the sense that we've had 10 years of absolute blowout spending, and new and ever increasing entitlement commitments taking us to point of losing our AAA credit rating (this decision is inevitable IMHO). The business as usual type of solution that will be eventually worked will do nothing but kick the can down the road again, like every debt ceiling raise in the past. The terrorists in the Tea Party are a real buzz-kill for the special interest spending orgy that is Washington, DC.
ReplyDeleteThe real battle now is over whether we will commit the government to spending 25% of GDP long-term or 20%. If our legislators decide the number is going to 25%, we will have become just like the slow-growth economies of Europe and should expect diminished economic growth in the foreseeable future.
In the end, there are probably enough country-club Republicans and socialist Democrats to force a deal through. But it is not Armageddon if the government shuts down for a few days or a few weeks. The US will only default on its obligations if that is what the President and the Treasury Secretary decide to do.
As an aside, all the failures you cite above are market distortions created by government meddling and government shenanigans. Why on earth should we give these self-serving bozos more money and more power to screw things up on an even grander scale? Maybe the right approach is to diminish their power and get them less involved in the private economy so they have less opportunity to wreak havoc and create crises for their own political gain.
I believe that on the surface the situation could be fixed. In fact, I believe it was fixed in 2000 but we made some really bad choices involving taxes, social security surplus, wars etc. With some belt tightening now and revenue increases and economic growth ( growth does amazing things!) we get on the right path again.
ReplyDeleteThe problem IMHO is in the incentives. If we corrected the situation we would back in the same boat down the road. Spending other people's money is the way to get votes and the politicians ranting and raving about D.C.'s spending will be the first ones (Republicans, teapartyers, and Democrats a like) to start up the runaway spending.
Also, a big part of the problem is the American people. There was a lady in the Wash. Post complaining because a post office 1 minute from where she lived was being closed. She no longer would be able to walk to the post office! Huh?
I certainly agree lots of bad decision have been made by the current and former President that have hurt the country's economy and overall finances. It's hard to say at the moment that the current Washington crowd has a pro-growth agenda. Economic justice seems to be their thing, which is the low to no growth agenda. And wittingly or unwittingly, they are pushing more jobs overseas. Even master crony capitalist, Jeff Immelt, head of the President's Council on Jobs and Competitiveness is relocating entire divisions of GE to China. You can't make this stuff up.
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