A missive from my financial manager:
… investor confidence was rattled by the partisan wrangling that took place over the issue and the apparent willingness of some parties to push the U.S. to the brink of a technical default.
“Some parties.” Really, you can’t be more specific? You can’t say “Republicans” or “Tea Party caucus” ?
By using the word ‘partisan,’ however, RBC suggests that everyone is equally guilty of failing to compromise.
The strategy of the Right – using the division-of-powers’ American legislative system to hold the majority hostage to extreme demands is, from their point of view, working effectively. They get what they want, and can blame the Democrats for any fall-out, leading to an expected electoral victory.
What they want is savage cuts, with absolutely no tolerance for tax increases. And how has that worked out?
RBC:
Late last year, the U.S. extended all of the Bush-era tax cuts and added a payroll tax cut, which most viewed as adding fuel to the U.S. growth picture for 2011. Unfortunately, this thesis has not played out, growth has disappointed, and forward-looking indicators foretell a cloudy story.
In other words, tax cuts alone don’t work, and won’t. So the ‘compromise’ has led to a cuts-only strategy for government expenditure and entitlements – the basis of the health and economic security of the middle class. Which generates in turn its own extremes:
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Even by conventional economics, a cut-only strategy, leading to decreased demand combined with increased and permanent umemployment, can, argued Keynes, re-set the economic equilibrium at a new low – what we once called The Depression. Leading to a Lost Generation of disaffected youth, with Blackberries.
RBC:
Faced with high debt levels, a dwindling list of fiscal and monetary tools, and a difficult political climate in which to enact them, there is a risk that the global economy and by extension global equity markets may have to weather the current storm without much aid.
“Weather” “storm” – that suggests economic climate change. And boy, are those words unmentionable. Completely off the table. Best, while we cutting government expenditure to reduce the debt, to make sure of that.
I disagree with the Tea Party and Republican policy as much as the next guy, but I have to say that the Democrats didn’t take the best course on the debt ceiling legislation, either. They could have raised the debt ceiling before the last mid-term elections when they had the House and the Senate, but chose to make the Republicans wear some of the blame by setting up the brinkmanship.
I’m not convinced there is much separating mainstream Republicans and Democrats (setting aside the Tea Party).
These are fascinating times in history. I do believe we are witnessing the decline of an empire – I just don’t see how the USA can turn things around, given the widespread corruption in government (see: lobbyists, funding from) and popular cynicism towards any type of policy that values long-term gains over short-term pains.
I hope that Canadians can see this before we head too far down the same path. (See: political party funding, Conservative policy for.)
It’s raised, on average, pretty much annually, so the idea that they could have avoided this is a little silly. Dems just hiked it in Feb 2010; could have waited, could have hiked it more, sure, but doing it any time in that fall would have affected the election, and then they’d still have to hold it in for two years. It’s not supposed to be partisan, happens all the time.
This whole thing is a big mess. First they vote in the programs. Then they refuse to borrow the money to pay for the programs.
But America needs a financial wake-up call, something akin to a sharp blow to the side of the head. Perhaps this is the start of it. If so, then it’s a good thing.