Whether in matters of the heart, business, politics or the economy, the key to all successful relationships is confidence. While it may seem a bit of a truism, let's consider that any strong and stable relationship always experiences elements of uncertainty, stress and sometimes distress; the successful ones pull through the difficult times typically because of an underlying sense of confidence and trust that somehow it will work out. Conversely, relationships plagued with uncertainty and mistrust are almost always doomed to fail. In the successful relationship, trust is integral to confidence, but there is an important distinction between trust and confidence. Trust without confidence can be a stable relationship, but not necessarily a strong relationship. This is important to understand in reflecting on the current state of our economy and the daily newsfeed that will soon begin to filter out of the deliberations of the Congressional Budget Super Committee.
We are at an interesting crossroads in the economic history of our America. By and large, through good times and bad, there has been an underlying sense of confidence and security in the knowledge that we would find a way to pull through difficult economic times and make it out even stronger for the experience. Certainly, the Great Depression tested our resolve, but we ultimately prevailed and used that experience, in part, to solidify our role as a world economic leader. As a nation we have endured many economic and other hardships sustained by confidence -- in ourselves, each other and our country -- to overcome the challenges we confronted. But what about today... is the confidence still there?
A critical test of confidence in America's economic strength and long-term well-being will be the work of the Congressional Super Committee, due to be completed next month. The 12 Americans making up the committee, to a very significant degree, have the ability to make decisions that could profoundly influence our economic fate for the next several generations. They have the ability to shape the future direction of our economic policy, to set the tone for our ability to overcome very difficult financial circumstances and, most critically, to restore the wavering confidence that many Americans now feel about their lives and the economic future of their children and grandchildren in America.
While it is unfortunate that it has come to this, we need only look back a few months to understand just how high the stakes are for the Super Committee. An unprecedented display of partisan brinkmanship by both parties this past summer almost triggered a second financial crisis. While the crisis was averted, the partisan debacle impaired our pristine credit rating and sent shockwaves through the world markets that are still rippling across Europe. The reason for this, of course, is that we are not the only ones whose confidence was shaken by the inability to get our budget back on track; the long-standing confidence in America of many other countries was sorely tested. And the world is now watching to see what we will do next to get our economic house in order... or, at least, headed in the right direction.
To do this, certainly we all have to be prepared to accept some of the pain. Difficult choices and compromises have to be made across the board. Most importantly, our actions -- and particularly the actions of our elected officials -- have to reflect a true understanding of the facts and underlying economic consequences if we fail to act decisively to reduce our budget deficit. Simultaneously, our elected officials must find a way to partner with our financial sector to increase lending to promote new job growth. This cannot be accomplished with regulatory edicts or political grandstanding vilifying the financial sector for its failings, but with true economic incentives that directly benefit job creation -- and reducing excess regulation would certainly help. Minimal regulations that promote healthy and fair competition, as well as reasonable risk-based safety and soundness and consumer compliance guidelines, are sufficient and far more effective than layers and layers of rules that micro-manage almost every aspect of a depository institution's operations. This would free up considerable sums for lending and investment, rather than the tens of millions of dollars now spent by some banks on compliance.
Finally, we need to come to terms with the double-edged sword of troubled assets and foreclosures that continues to undercut our housing economy, economic recovery, and our historical confidence in housing as a stabilizing and strong component of our larger economy.
Only decisive action can restore Americans' confidence in America, as well as the confidence of the world markets in America. The failure of the Super Committee and the White House to take decisive (and not necessarily popular) action could very well trigger another downgrade of U.S. debt by one or more of the credit rating agencies. This would only succeed in digging a deeper hole from which we will need to extricate ourselves, at a much greater cost due to the increased expense from higher interest rates to service our debt, and could very well have more immediate and dire consequences in the world economy. Certainly, the world will be watching the efforts of the Congressional Super Committee to see whether we have the resolve and confidence to make the hard choices we must make to overcome our current budget and broader economic problems. Now is not the time for political squabbling, which most certainly could trigger another crisis... this time in confidence.