Washington fiddles while the economy fizzles

07.26.2011 - Money Matters

The brinkmanship of the feckless politicians on both sides of the aisle inWashingtontoday is irresponsible.  The economic recovery has been the weakest since the Great Depression and remains extremely fragile to this day.  The fallout from a default would cause another recession.  While it is important to get the deficit under control and raise the debt ceiling, it is truly a sad day when the leaders of our country posture to enhance their reelection chances in 2012 rather than compromise.

It has been reported that the Republican proposal that has been advanced includes a call for a Constitutional Amendment requiring a balanced budget.  That would definitely be a step in the right direction.  However, what really is needed is an amendment limiting the number of terms a member of Congress can be elected and be on the public dole.

Personally, I thought Warren Buffett had the best solution when he quipped to Becky Quick during a CNBC show on July 7, 2011 “I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.”  The video is well worth watching as he castigates both parties for their immature behavior.

The truly unfortunate thing is that this partisan debate fails to address the plight of the unemployed.  As of June 30th the unemployment rate was 9.2% or approximately 14.1 million people according to the Bureau of Labor Statistics.  The problem is further exacerbated by the need to create an estimated 115,000 jobs monthly to accommodate new entrants into the workforce just to keep the rate stable.

Reducing the unemployment rate to what many consider normal historical level of 6% is a daunting proposition especially given the acrimony that pervadesWashington.  To accomplish it over a four year period would require 225,000 jobs be created monthly.  That is highly improbable as it has only been done three times in the last 50 years.  The first was during the second term of Ronald Reagan; the second was during Bill Clinton’s first term and the third time was during his second term.

It is little wonder people are worried about the economy and their job.  Consequently, consumers who make up 70% of the economy are unwilling to spend.  One is reminded of the memorable phrase attributed to James Carville, the chief political strategist for Bill Clinton’s 1992 campaign, “It’s the economy stupid.”  Neither are favorites of mine.  But guess what, it’s still the economy!

A June 19, 2011 article in Newsweek by Bill Clinton entitled It’s Still the Economy, Stupid is well worth reading.  He puts forth over a dozen proposals to put people back to work.  From my perspective many of his ideas have merit and appear viable, particularly those for rebuilding the country’s infrastructure.  Certainly they should be explored by policy makers sooner than later to reduce the unemployment rolls as quickly as possible.

At least it is a starting point for a dialogue instead of the usual rancorous partisan diatribes.