(Released on 8/21/11)
As we noted in last week’s commentary, a good deal of the underlying reasoning for the downgrade of the nation’s debt rating was due in large part to the growing concern about whether or not the nation’s political leaders have the will to make the tough decisions to move the nation forward and to address the issue of the rising national debt.
Although the administration seems to be pointing the partisan finger at the Republicans for not even being willing to consider any kind of tax increase, one has to wonder why there is such a resistance to any kind of tax increase. This position, or stand, is certainly questionable in face of the admission by one of the richest individuals in the country admitting that he should be paying more in taxes – as a percentage of his income – than his housekeeper.
And perhaps one glaring reason why the “other” side doesn’t want to even consider a tax increase proposal is that there is very little track record to believe that this administration and the folks on the other side of the aisle are willing to make the necessary spending reductions. That truly was at the heart of the stalemate which nearly brought the nation to a halt earlier this month. The downgrading of the nation’s debt was intended to be a wake-up call to political leaders that unless they have the courage to face this dilemma directly in the eye and recognize that the United States cannot continue to borrow to fund its projects and programs it too will follow in the path of many European countries that are now on the ropes like Greece, Spain, Portugal and Ireland.
It will now be up to the “super” commission to come up with a strategy or game plan that will set a course for the financial affairs of the nation. Although the markets reacted sharply with the downgrade of the nation’s debt rating, they also seem to demonstrate some hope that this smaller group of leaders will have the perseverance to come up with that game plan that will set the nation on a firm financial footing. So, while many feared the worst following the downgrade of the nation’s debt rating, the markets knew exactly what the rating agency was doing, sending a message that the nation’s political leaders have to step up to the plate and make the tough decisions and quit pointing fingers of blame.
While this super commission will have the next three months to come up with that strategy, both the administration and Congress must demonstrate that they can work together and that they can listen to each other to understand the concerns of both sides and as we were reminded over and over again, that politics is the “art of compromise.” So no one side will “win,” but whatever the recommendations to be presented later this year it will have to have the stamp of approval by not only the banks and the nation’s creditors, but also the nation’s taxpayers.
In the meantime, political leaders will work hard on creating the jobs that they all heralded in their debates and many, including the administration, will come up with this or that package or plan, nothing will matter more to corporate America than certainty in the marketplace. This will require government to get out of the way of businesses, both large and small, and allow them to do what they do best, that is to make money and create jobs that will help them produce the products and services that will make that money.
This means a pull back on the over-regulated work environment of laws and rules that nit-pick everything employers and employees must do to comply with some inane bureaucratic requirement. This includes a little known requirement that is being proposed before the National Labor Relations Board that will require businesses to report any expenditure of funds to seek advice, information, or counsel on how a business can avoid having their workforce organized. While this information would, no doubt, be of interest to labor unions who would want to organize workers, the question is why should businesses be required to disclose that information and just how much additional administrative costs this would add to a business’ operation? Yet this proposal may just become the law of the land, adding yet another cost to doing business.
If the intent is to revive the economy and to create jobs, then government needs to get out of the way, to quit dictating what businesses and workers can or cannot do. Regulations that go beyond the basic health and safety issues need to be questioned as to their appropriateness and necessity. The added cost of administration and compliance also needs to be questioned.
Until the cost of living and doing business is reduced for both businesses and consumers, the nation’s economy will continue to struggle and stumble along.