Tuesday, October 11, 2011

The Republicans Are the Problem

   This is becoming clearer every day. The game of debt ceiling chicken they played over the Summer really hurt their stock with the American people. While it didn't help Obama it hurt them even worse that it hurt him.

   But not only has their stock gone down with Main St-about time-but indeed the more thoughtful parts of Wall Street. Some pretty significant financial authorities are making it clear that the Republicans are responsible for the problems in the world at least those that are attributable to the United States. Broadly speaking there are 3 major problems facing the world economy at the present.

   The Euro crisis, the Asian slow down-the Asian slow down probably should be called the slow down of the emerging economies-and the U.S. government's dysfunctional legislative process. While there's only so much we can do about the Euro mess-the blame there goes on the ECB, the EU and many of the rich Euro nations-chiefly Germany, Finland, etc-or the slowdown of the emerging economies-we would love if China right now would reflate some more as they did in 2008 with a huge government stimulus but they don't see this as being in their interest and are not going to pump on the volume of their economy to 12 or 14 or 16% as would suit if-obviously our dysfunctional domestic politics are our problem.

   It's interesting that much of the analysis of some major financial authorities-specifically S&P, Ben Bernanke, and the Economist-is not so different from that of the current Occupy Wall Street movement. If you have listened carefully to what all 3 of these financial big wigs have said recently it has been things are not looking so good in the U.S. and it's all the Republicans fault.

   For example, while the big story for many when S&P downgraded U.S. debt was how dare they who are they to downgrade anything with their own sorry track record, it's interesting to consider the rationale for it ,while I agree that the downgrade was wrong.

   Their reasoning you have to admit totally checks out, they cited the dysfunctional way that game of debt ceiling chicken went and concluded that this bodes ill for future U.S. government and fiscal policy. Further they were pessimistic-in light of 4 months to accomplish what should be a very routine procedure-that they Bush tax cuts would expire; the tax cuts are what gives our government such an anorexic feel. Over the last 10 years they have been tremendously destructive of our fiscal health Agai,n, overall S&P while you can question their action the reasoning is spot on.

    Then this week you had Ben Bernanke pretty explicit about the insufficiency of Congress's fiscal response. He came as close as he as Fed Chairman would ever come to saying that short term austerity is exactly the wrong policy.

    Then the piece on pg 13 of this weeks Economist piece on the world economy has this to say, "In America the Republicans are guilty of outrageous obstructionism and misleading simplification, while Mr Obama has favoured class warfare over fiscal leadership. At a time of enormous problems, the politicians seem Lilliputian. That's the real reason to be afraid" (pg. 13 The Economist October 1-7, 2011).

    At first glance this might seem to simply be the usual media tactic of splitting the difference-the old "opinions differ" saw of Krugman-where the answer to every dispute is "you both need to stop bickering and meet in the middle" regardless of the fact that the Democrats have already compromised about 85 percent of the way and the GOP hasn't budged. Yet it seems to me that reading between the lines the Economist like Bernanke and S&P are sort of saying "the Republicans are the problem."

    The Economist if you have read it's analyses over time you know that it always tries to be "above petty politics." It is based in London not the U.S. and when it critiques our country it affects to be nonpartisan by criticizing both sides. Often it is clear they prefer the GOP side and you can make the case that they tend to somewhat favor them ideologically. But no matter what the solution is always "you Republicans are wrong there you Democrats are wrong here."

    In the quote above they did just that. What's different is that there is very little context or examples of Obama's "class warfare over fiscal leadership." In fact in the whole piece until that final paragraph they didn't mention this alleged class warfare once. What they did say is that Congress should,  "Come to its sense, pass Barack Obama's jobs plan and agree on a medium-term deficit reduction plan by November."

    Notice that not only do they say Congress should pass Obama's plan but that they need a medium term rather than short term deficit reduction plan? Is that not exactly what Obama-and for that matter Harry Reid-has offered?

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