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Thursday, October 10, 2013

Lean to the Left, Lean to the Right: Shutdown and the Debt Ceiling


Lean to the Left, Lean to the Right,
Stand up, Sit down,
Fight, fight, fight:
Shutdown and the Debt Ceiling
 
If I haven’t already indicated my dismay at Washington, let me do it again:  we are rolling toward the first sovereign debt default in history by a solvent nation.  The shutdown is a frustration and an annoyance, like a room full of mosquitoes.  The debt default is like a hurricane on steroids, or as Warren Buffet put it, a financial nuclear weapon.  A default on the debt would significantly impact the dollar, pensions, the markets and the global economy.  Not to mention the fact that we (the U.S.) would look pretty darn foolish.  We are the most powerful nation in the world, and we cannot get our house in order (or our Senate or the White House)?
 
I liken this to two bickering spouses.  One wants the garage cleaned.  The other offers to take out the trash.  The garage cleaning spouse gets mad and demands that the garage gets cleaned.  The other spouse insists they will take out the trash and then talk about cleaning the garage.  One then threatens to burn the house down unless the garage is cleaned. The other one says they will only take the trash out and talk later, or go ahead and burn the house down.  Now the kids are scared as well as the neighbors.  Everyone else thinks the couple is crazy. 
 
How do you fix it?  Well, maybe one gives in.  Maybe two of the sisters-in-law get together and share a bottle of wine and then go talk to their respective siblings (like maybe the budget chairs getting together in a back room and creating a deal). 

In the movie Rebel without a Cause (or if you’re younger, Footloose), there’s the game of chicken, where you drive cars at each other and whoever swerves first looses.  In Rebel, James Dean jumps out of the car at the last minute, but Buzz, gets caught on the door handle and goes off the cliff in a fiery crash.  This is a game of Chicken with the U.S. (and maybe world) economy on the line.
 
As Brian Roehl pointed out, Democrats tend to lean left and Republicans tend to lean right.  If they’re playing chicken, this could be a really bad thing, even if they both swerve.
 
That being said, to whatever extent the current situation is labeled as “this time it’s different”, we have been here before and every other time we managed to come to a resolution.  While past performance is not a guarantee of future results, we are betting that after the drama plays out in the media and in Washington D.C. that the U.S. will not go down in history as a deadbeat nation.

Let’s hope this madness stops without the crash, and open up the national parks again.  By the way, I thought the shutdown furloughed non-essential personnel.  If that’s the case, why are the elected officials still getting paid?
 
Sorry for the frustrated observations,

Leon