As our elected officials sprint headfirst towards a U.S. default carrying hyper-partisan banners, they have signed pledges to lobby groups, damned compromise, and vehemently refused legitimate proposals to raise the debt ceiling and reduce the deficit through increased taxes and decreased spending. While the No Labels call for our legislature to not break until a deal is done helped get them back to the job at hand, we are perilously close to default. The far right has continually argued that raising taxes will severely hurt our fragile economy and destroy already anemic job creation. The far left has argued that the poor economy and job market is proof in the pudding to not reduce spending or touch entitlement programs. The far right approach is akin to an arsonist proclaiming that the increase in fires that he has caused is proof that people should not pay more for a fire department that doesn't work. The far left approach is another arsonist who says that the fires that he caused are proof that the fire department needs more funding. Our politicians have played a large part in causing the economic dip that they are using for their key arguments.
This past March saw continued signs of economic recovery while this June saw decline and all estimates for July point to further decline. The March report saw 216,000 new jobs and the lowest unemployment rate in 2 years. The June report saw job creation falter to 18,000 new jobs and unemployment hit its highest point this year. While other factors are involved as well, the correlation between our politicians' actions and the economy are undeniable. Back in April, the Federal Government narrowly avoided shutting down and the debt ceiling debate began --while summer dips do occur and other factors are at play as well, there is a strong correlation with the economy getting worse than expected during this time. As the outlook of a legitimate bipartisan solution has faded, the credit rating agencies have threatened to downgrade the U.S. rating, the economy has continued to stagger. The refusal to find a compromise solution that effectively handles our debt crisis in a responsible way (by reducing spending and increasing/reforming taxes) has brought our economic recovery to its knees with default threatening to bring it lower.
Business owners, employees, and consequently the markets crave stability. The hyper-partisans crave dramatic, sweeping new legislature that starts from a new social contract. This contradiction is what is stalling our economy. Small and large businesses are not hiring because we are facing a 50% chance or greater at defaulting on our debt. If default occurs, the value of the dollar will fall and interest rates will rise weakening purchasing power for imports, particularly raw materials and making money harder to get. A weaker dollar can lead to new manufacturing jobs over time as it becomes cheaper than paying for jobs overseas, but a modern infrastructure that could handle future growth would need to be in place including cheaper raw materials and delivery systems. Instead, it appears that companies are not hiring, holding on to the cash that would be paid to new employees, to prepare for future uncertainty. The threat of default has become a prohibitive factor for economic growth. Leading up to this week, there was speculation that a deal was in the making and markets grew. When the Gang of Six plan was announced, markets rallied and the Dow Jones had its best day of the year, despite what the hyper-partisan extremes said about tax increases/reform and spending cuts. Now that the deal is DOA at the House, markets are worried again. The threat of default and the hyper-partisan extremes are causing the very economic conditions which they are trying to use to validate their arguments.
In statistics, marketing, and every day decision making, the outliers and the extremes are removed, however, in our political system, the extremes are glorified -- making the decisions and causing severe damage that they in turn use to push their own agendas. Negating the extremes has been a key factor in our efforts in the War on Terror and developing burgeoning democracies, yet we do not practice what we preach. We demand that Israel and Palestine compromise to make peace, yet we are not setting an example of how compromise works -- only how non compromising hyper-partisanship fails. This nation was built upon compromise: the House of Representatives and the Senate exist together only because of a compromise between the two systems that were originally proposed. Totalitarianism and Dictatorships are based on the extremes not compromising. Democracy and Republicanism are compromise.
The NFL struck a deal, why can't our government? The Gang of Six's plan tackles now what other lawmakers are trying to deal with down the road in a manner which will ease change and pay our debts responsibly. I urge everyone to call and email (No Labels has made this easy) their Senators and Representatives to demand that they stop their bickering and rhetoric, and push for compromise.
Thanks to the Gang of Six, the elected officials that are backing their proposal and others who are working to solve this crisis rather than cater to the far extremes that hold our economy hostage.
A solution that does not keep the status quo, but eases change and compromises between spending cuts and increased revenues is necessary now.
An original version of this post has been revised by the blogger.