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Politics and Money Dominate Historic Week


US Politics, The Fiscal Cliff and Euro Debt

In a week that will not be soon forgotten, the United States will elect its President for the next four years. Voters will also fill Senate seats for the next six years and fill House seats for the next two years. The 2012 elections will not only shape the US but also shape  the globe. Regardless who the next President of the US is, the need for a functional Congress may be off greater import.

Last year, Congress achieved the dubious distinction of officially achieving a 10 percent job satisfaction report from US citizens. Even more than the Presidential race, it is the composition and mindset of Congress that will determine how the US and the global economy trends in the next two years. After the past two years, most Americans would just as soon throw out the entire Congress and start anew. If the same gridlock exists after the election, the US and the world could soon be in an insurmountable fiscal position.

Speculation is that there is not the political will in Washington to seriously address the impending Fiscal Cliff, that convergence of events on December 31st that will see the Bush Tax Cuts expire, the payroll tax reduction expire and a series of heavy budget cuts paralyze the US and the globe biggest consumer. If no action is taken, the US will lose about 6,000,000 jobs early next year.

Of equal importance is that the US credit rating will be lowered and the nation’s debt will not adequately be addressed. The country’s top CEOs have united in a call for a significant and far-reaching deficit reduction initiative along the lines of the $4.6 trillion Simpson Bowles Deficit Reduction Plan. If the Democrats do not give on reforms to social programs and the Republicans do not get away from the Norquist Pledge, which Romney signed and which his Vice Presidential running mate endorses wholeheartedly, the best outcome will be a short-term fix to the Fiscal Cliff.

Whether Americans realize it or not, such an outcome is not acceptable. The deficit and budget need to be addressed with serious people with serious, non-partisan solutions. The country must be prepared to pay the price for two unfunded wars, a crisis on Wall Street, two poorly administered governments and the worst Congress in US history.

Americans have been swamped with more than $2 billion of marketing spent by just the Presidential candidates, not to speak of untold billions spent on local and Congressional races. The US is sick and the doctor is out to lunch.

The Presidential election is billed as a battle between a financial wizard (Romney) and the champion of the middle class (Obama). Romney has changed positions so many times during the course of the campaign that nobody really knows his intentions, except that he has signed the Norquist Pledge which he will need to disavow if the country is to move forward. Obama has been battered for four years of a struggling economy that has been further hampered by Congressional Republicans that cast the interests of constituents aside in favor of opposing the President at every turn.

The campaign has been exhausting for candidates and the American public. A lackluster turnout at the polls will favor Romney. In all likelihood, Republicans will remain the majority in the House and Democrats will hold a narrow edge in the Senate. Unfortunately, the US may have reached a point where one party must control the three wings of government to get anything done. Half the country will be disappointed by the outcome of the Presidential election.

The G20

This has been a contentious and frustrated G20 summit this weekend in Mexico City. The world is losing patience with both the euro zone debt crisis and the US Fiscal Cliff. If there is one thing that all G20 nations agree with, it is that the time for action has come and gone. Both the euro zone and the US have acted irresponsibly in addressing their debt. The December 31st cliff is the immediate concern but new requests by Greece and a fragile Spanish economy and others could lead to the dissolution of the euro zone.

The US Congress will soon have to add more debt. Euro zone finance ministers are in gridlock, much like the US with Germany steering the region its way while weaker economies resist. The gridlock in the US and in Europe have unmistakable similarities; the chief one being that politics prevent progress. This is a critical week across the globe. The results of this election will either take the US consumer out of the game or add hope to a world that needs a strong US economy.

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The US Fiscal Cliff – Part II


The US Fiscal Cliff is set to be enacted on December 31, 2012. As portrayed in Part I, the repercussions of the expiration of payroll tax reductions and the Bush Tax cuts combined with automatic budget cuts called sequestration would plunge the US into an immediate, brutal recession. If analysts view this recovery as fragile, there will be no doubts about the crippling repercussions of the Fiscal Cliff.

And, the devastation poses a greater threat to the global economy than the current euro zone debt fiasco. The Fiscal Cliff will sink economies overnight. The crucial element needed to avert the Fiscal Cliff requires a complete reversal of form by the most ineffective Congress in the nation’s history.

The Congress that will need to address the Fiscal Cliff resolution is the same congress that permitted the downgrade of US bonds and was mired in a combative stalemate along party lines that were designed to destroy the reigning US President at the expense of the public in favor of right and left wing special interests.

Yes, there is a need for a formula for disaster that has led to the Fiscal Cliff. There is optimism that a deal will be implemented to avert the Fiscal Cliff, but this optimism would be contrary to the historical performance of this Congress. Regardless of the Presidential race outcome, there is no reason to believe that Congress will be any less divisive after the election. The majority of the Republicans in Congress have signed the Norquist Pledge guaranteeing that they will not agree to any legislation that raises taxes. To moderates and independents, Republican Presidential candidate Mitt Romney’s signature on the Norquist Pledge is not a moderate position. It is a radical move.

A coordinated initiative by CEOs of some of the country’s largest corporations has taken their demands for Fiscal Cliff resolution to Congressional office doors. Certainly these persons have differing political agendas, but it is clear they believe political compromise is necessary and a deficit reduction plan exceeding the Simpson-Bowles plan must be implemented in some form immediately, even if the long-term plan is extended for a few months while a bipartisan initiative is structured.

The CEO’s call to action demands solutions. Presumably, that means a down payment of the debt and a balanced approach to debt reduction that includes revenue increases and cuts to every sector of the economy including social programs and education grants. Millions of jobs will be lost.

No matter how the Fiscal Cliff solution evolves, it is going to be painful. How the pain is dispensed is the key to any hope of compromise.

CEOs want a solution similar to and greater than the $4.6 trillion Simpson-Bowles Deficit Reduction plan. Balanced and fair distribution of pain is sure to be contested. There is a lack of time and a deadline, two elements this Congress has not dealt with acceptably in the past. CEOs realize there are few reasons for optimism. The political gridlock is atrocious and paralyzing. As bad as it is now, it is likely to be worse after the election and after the new Congress is sworn in.

Republicans will be more conservative and even less moderate. The majority will have signed the Norquist Pledge and the few moderate Republicans are off the ticket in favor of more conservative candidates.

The Federal Reserve reports that US households have shed $880 billion in debt since 2008 during a tough economic recovery. Households have done their fair share. If Washington applied the same commitment, the Fiscal Cliff would have been resolved long ago. However, households do not have to represent the interests of financial backers and run for re-election in 2014.

Radical Solutions

Warren Buffet and others suggested that there were ways to fix the deficit:

Limit Congressional terms to one term.

Support this initiative with dramatic cutbacks to congressional benefit packages and a policy that enforces that every time budget expenditures exceed the budget, replace the Congress with an immediate year-end election.

Make Congress share the pain. Cut salaries, cut their benefits and make Congressmen agree to the health coverage choices their constituents purchase.

Make them reduce their staff and overhead like small businesses.

Cut Congressional pay by 50 percent or more.

Ban lobbyists and tell industry to spend their lobbying allowances on public, transparent policy statements.

Open the closed doors in Washington.

Make Congressman spend half the year in their state offices, with their doors open to constituents.

In other words, throw out professional politicians who go to Washington to profit. Elect candidates who are providing a public service by representing the best interests of their constituents and the nation not their personal best interests. Heck, they will only be there for one five of six-year term and if they misbehave in any way, suspend them and put them in front of a jury of the people, not behind the cloak of the Hill.

Isn’t that what happens when “We the People” run afoul?

This nation needs to go back to the basics. Out with what has come to be called professional politicians and back to public service.

 

 

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