by Monika Mitchell
Hallelujah! Salvation is here. Or so we are supposed to believe. The 3 Ring Circus that is two branches of Congress and the Administration is finally close to an accord on debt mania madness. What a surprise. Not…
We all knew this would happen—very simply because it had to. First and foremost, if the debt ceiling was not raised, 100 senators and 435 congressional reps would be on the unemployment lines with the rest of America. (Not a bad thought). So to save their jobs and to save face, the government by the self-serving, for the self-serving, of the self-serving finally got something productive done and stopped pushing the world’s largest economy to its knees.
The question was how much peacock posturing between politicians would we have to endure to get here? It was high drama in DC this past month with the Tribe of Orange (Boehner) and the Tribe of Peely Wally (Reid) going head to head in the battle of bungling economics. There is simply no excuse for the dangerous debt ceiling dance these power plays forced the nation and the world to endure. My thoughts? Get yourself a Reality TV Show and save us some precious time and money. We could call it: Pork and Politics.
This past week, the words of founding father, Thomas Jefferson came to mind: “The credit and fate of the nation seems to hang on the desperate throes and plunges of gambling scoundrels.” That was 1792 and over two centuries later, we are still held hostage to the throes and plunges of scoundrels. Shocking as it may be to contemplate, America has been levered up since its inception. Somehow we have become the world’s greatest economic power despite this. Alexander Hamilton believed that debt was actually good for the nation and banked our future on it.
The years after the Revolutionary War, the little upstart nation had virtually no economy and was mired in debt to foreign governments like France and Holland who bankrolled the war against England. By issuing debt, in the form of the first United States Treasury bonds, Hamilton transformed an economically devastated rag tag nation into an emerging global superpower in a decade. He also emphasized that our credit worthiness as a global economy was essential to that prosperity. In his view, the U.S. financial future was dependant on honoring our debts—this is a fundamental principle that our nation’s economic system stands on.
Conversely, the result of the current debt debate has created doubt of U.S. reliability in the minds of American and foreign bondholders. A massive exodus from T-bills has been led by none other than the world’s largest bond manager, PIMCO, CEO Bill Gross revealing the serious concerns the political debate has created in the investor community.
Investment virtually came to a halt last week in new and growth businesses as the financial markets pulled in their sails to wait for the United States Congress to get its act together. The credit and fate of Main Street and Wall Street hung in the balance as the debt dance continued.
It was all about winning and gaining Street Cred. Who would come out looking rosy? Who would come out emasculated? Whatever the mainstream media reports this week, it does not matter. They can tell us over and over according to their partisan belief “who won,” but we will never believe them. Because the American public sees most of our lawmakers as puffed up partisan fools who care nothing for any of us and only for their own reelection. American politics seems to have dwindled from genuine intellectual ideology of the distant past to political self-interest on steroids.
In all the conversations about cuts for this program or that, none of it revolved around how to help long-suffering citizens. The discussion centered on the selfish interests of the political parties without any thought to how all of this cost cutting would affect the devastated job market, the wounded credit markets, and the struggling-to-stay afloat business and unemployed communities.
Everyone I have spoken to inside the financial industry and out on Main Street has said the same thing: why are these reckless managers charged with protecting the American people and economy not doing their job? A stay-at-home mom from Connecticut sums up the popular sentiment regarding the debt ceiling circus: “Fire the whole lot of them.” The CEO of multi-million dollar broker dealer in New York says: “These politicians don’t understand the havoc they are causing our financial system.” No they don’t.
Thursday July 28, 2011: From the Wall Street Journal:
- · Debt debate is causing stress in the repo-market.
- · Worst one-day US stock market decline in two months
- · European debt crisis worsens over concerns US debt default.
- · Investors bail out of US Treasuries and US stocks.
- · Investors put their money in gold, silver and Swiss Francs.
All this might be good for Switzerland, but bad for America. Big business can’t grow and small business is caught in the trap. The New York Times reported that the debt dance was “causing jitters from Beijing to Brussels…The world’s largest economies are anxious for compromise” for fear of collateral damage. The minions stateside are worried as well!
As JPM’s Jamie Dimon put it: A U.S. Debt Default would be a Moral Disaster. The real moral disaster has already occurred through the Congressional power play that the world’s largest economy would even consider default. The fact is simply unthinkable. The global credit markets would be thrown into utter chaos. Dimon asserts that default would be…“catastrophic…dwarfing Lehman.” After all, what is the system of credit and debt based on if not the promise to pay? DC politicos know this; they know it is impossible to default on debt without creating a massive global economic panic and depression. So why are they playing cat and mouse with our economic lives?
In the wake of greatest economic disaster in seventy years, the American fiscal policy seems to be: Punish the elderly, tax the rich, abandon the poor, add a few more wars and bleed this baby dry!
First of all: leave the old folks alone. Life is hard enough with Lipitor and Viagra as it is. The amount of concern over vital Social Security checks for those that depend on these is unnecessary. Picking on the defenseless should be off-limits—period.
In terms of taxing the rich, I have some possibly controversial thoughts on that. The rich need to feel rich in order to spend money. Upping the taxes to punish them for Wall Street mishaps is not the best policy. The Rich are a lot like you and me. They need a little love too. Okay, I am a bit tongue and cheek here, but in the Get-Rich-Quick-America we know and love, wealth is not a crime. Nor should it be treated as one. I’m just sayin’….
Instead of punishing the “rich,” why don’t we take a page from good old Latin America wisdom and help the poor? Huh, you ask? A recent 60 Minutes segment on Brazil as a new and improved economic powerhouse was an eye opener. How did Brazil recover from economic disaster to become an emerging global economic superpower in eight short years? For starters, it placated the rich and boosted the poor out of poverty at the same time. What a concept! Brazil’s government gave struggling citizens a monthly stipend to send their kids to school and receive proper medical care. The result was the creation of a new spending middle class. The previously neglected group felt empowered and emboldened as it became a vital part of Brazil’s recovery. The nation has reached almost full employment in the wake of the economic stimulus. The poor have moved up in the economy and everyone else moved up with them.
So Washington… take a page from a powerhouse emerging market and stimulate the Stimulus. The entire debt talk should be as much about “where to make cuts in spending” as it should be about how to increase tax revenues through a vibrant and booming economy. Debt and credit is part illusion anyway. The illusion that things are going well gets people to invest, spend and circulate credit and capital throughout the economy. The so-called “cuts” in spending are stretched over ten years for future Congressional bodies and administrations to embrace. Congress is using an old trick called: creative accounting. Are we really saving any money at all?
But then again, if we really want to make cuts in wasteful spending, we should start with our 3.5 unnecessary wars. The nation’s killing machines are no good to anyone except Halliburton and a handful of defense contractors. If you ask the American people should we continue in Afghanistan or eliminate Social Security, the nation’s seniors would surely win that vote. It’s about value for the dollar. What do we value? Life or death? War or peace? Money or People?
Congress is a reactive, not proactive body. The urgency and current hardships experienced in the slow growth American economy and tragic long-term unemployment necessitates that Congress must become proactive.
Perhaps, lawmakers should instead consult the financial experts on how to stimulate profits at the job creator level. As reported in Good-b, two Wall Street vets, Goldman Sachs and New York’s Mayor Bloomberg, have taken action to support small business where the Feds have left a large gaping hole. Tax incentives for hiring, access to community credit and capital, direct fiscal support for boots-on-the-ground employment and relief from consumer and mortgage debt would reignite growth at the core of the financial system.
Incentives, incentives, incentives. Job growth is a crucial key to building revenues and restarting the sluggish economy. Americans must be able to earn a decent living. Stimulating Main Street economics would actually make a difference for working America and in turn for the nation. And for goodness sake: we should leave Social Security and Medicare alone. If Congress wants to find some savings, perhaps it could sacrifice some its own cushy benefits and we might take them more seriously.
Category: sustainable leadership