Over The Cliff
Unfortunately it appears that Obama and the Democrats are really only interested in trying to destroy the Republican party by making it appear that they are protecting the so called rich, on the backs of the poor, middle class and old ladies. The well being of the country and the dollar are simply not a concern to them. It is all partisan politics. They refuse to Rise Above, as CNBC and the rest of us are pushing for. Boehner offered $800 billion of higher taxes on most of us who are reading this item. Revenue is revenue. It is twice what is generated by raising rates. Schumer and the others state they are not even willing to talk about anything until the Republicans concede everything. What utter nonsense. Everyone who is objective knows unless we substantially deal with the entire entitlement burden, raising rates on a few people means almost nothing. It generates a measly $400 billion over ten years. All the photo ops of meetings with business leaders and others was nothing more than photo ops. Obviously the White House paid no real attention to what attendees said. They were only interested to try to damage the Republicans so badly they will get control of the House in 2014, and then be able to do more things like Obamacare.† That is what this is really all about. Obama said he wants to transform America, and he can only do that by getting control of the House.† Keep in mind, at the meeting in the White House a few weeks ago with the unions and Move On, the White House told them they had no intention to give on entitlements.
Like most everyone else, I really thought Obama and the Democrats would be serious about cutting the deficit and reform of entitlements, but this week Durbin and Pelosi said publicly there is no way they will agree to any reform of age or other adjustments to Medicare or Social Security. Harry Reid has said there is no problem with Social Security right now so we are not going to make any changes. One is left to wonder what country they are talking about. Other than Krugman, who has no credibility left except with the media, everyone else knows we simply cannot keep spending our way out of the economic morass we are in. If Obama would embrace real changes as outlined in Simpson Bowles, his own commission, and if the business community and the markets saw there was a serious effort on the part of the US government to change direction and to cut the deficit, reform the insane tax code, and end the excessive and potentially dangerous growth of the Fed balance sheet, then growth in the US would ramp up rapidly, the dollar would strengthen, markets would take off, and the job market would come alive. That would do vastly more than new stimulus spending which will go into another hole to support the unions and the friends of Obama, who learned this way of doing things from the Daly family. It would give not just clarity, confidence and certainty so we could all forecast with some level of predictability, but it would give the world renewed confidence in America and the dollar as the reserve currency. It probably would also help motivate Europe to better deal with its issues. If we go over the cliff as now seems highly likely, there is no way to know what damage may be done to the dollar and to the economy. Even if the Republicans give in and say OK to higher tax rates, that is meaningless to dealing with the real issues.
Whatever happens now is highly unlikely to show the markets, or business overall that Obama is serious about entitlement reform and deficit reduction. Pelosi and Schumer can claim all day that they already cut $1 trillion form spending in 2011 and the end of the war is another $1 trillion, but anyone who understands anything knows these are 1. Not true and 2. Just more political spin. The $1 trillion of supposed cuts has never been enacted and is separate and apart from the $4 trillion more we need, and not spending on the wars is completely specious. You donít save what you were never spending in the first place. It is the same as your wife saying I saved $500 by spending $2000 on a new dress I did not need and had no plan to buy, but that was on sale.
While some deals are closing now to beat the tax rise, there are many I am aware of that stopped dead because the buyers simply had no idea where taxes or regulation were headed. They had no way to forecast. Hiring has pretty much stopped in the past couple of weeks. Capital investment has declined because nobody has any idea what to forecast. Consumer spending other than on autos is muddling along. Christmas will not be as good as it should have been had Washington done what was needed and reached agreement. The damage to Q1 is now done, and that damage is irretrievable. It will very likely continue into 2013 later quarters.
The world has huge problems in Syria, Egypt and Iran, and the European debt crisis, and the last thing the world needs is a weak American economy, and a continuation of the partisan battles. As an old guy, I remember being so proud to be an American and American exceptionalism. For the first time in my life I really fear that Americaís time as the beacon of hope and leadership is slipping away. I have always believed that in time it can all be figured out and solved, no matter what the problem in my personal life or the country, but I no longer think that is the case for the country. Winston Churchill may be wrong this time, in the end we may not do what is right.
Where are markets heading? Register for RealShare National Investment and Finance on June 24-25 for the latest intelligence. Our detailed agenda and information on accommodations are online.