Wednesday, November 3, 2010

Electoral Thoughts

I rarely write about politics, but given last nights events, it seems appropriate to make a few comments.

Personally, I have moved from liberal in college to libertarian when I was a bond trader to conservative Democrat to my current position of independent. I'm an independent for the following reasons: the Democrats can't lead at all -- they want everybody to get along -- and don't want to hear basic economic information when it runs counter to their narrative, the Republicans have walked away from logic and fact and the Tea Party could care less about mere competence. As such, all parties have key flaws making them unable to effectively govern. Hence, you get our current mess.

Do I think anything will change? Yes -- for the worse. The economic recovery is fragile and still needs support. It will not get it. Within the first year, the House will either argue about what spending to cut and implement same or will wind up shutting the government down for a short or extended period of time (completely forgetting the GDP equation). This will seriously threaten if not jeopardize the recovery. The Senate will cower in fear and accomplish nothing (which is to be expected from an institution populated by really old white guys) and the President will be ineffective (thinking that selling anything is below him)-- at best. As I have repeatedly said there is a time and place to cut spending. This is not the time.

What the country needs is the following: once the recovery is cemented, taxes have to increase and spending has to decrease. The problem with the first is Republicans are married to the "tax cuts always pay for themselves" line of nonsense (the stupidity of which Barry Ritholtz clearly explained and refuted in this post) and the Democrats are completely unwilling to look at entitlement reform -- spending which now accounts for about 60% of federal expenditures and which has been increasing for the last 30 years. The input/output gap at the federal level is simply too wide to be solved by any other option. Yet neither party wants to compromise on their core issues. As such, the impending train wreck continues to approach.

So, I think the election means we're not going to solve anything and the fundamental problems will get worse.


Have a Nice Day