"Congress - Isolated with Contempt for the Electorate - Another Call for Term Limits"

Sydney M. Williams

Thought of the Day

“Congress – Isolated with Contempt for the Electorate – Another Call for Term Limits”

December 17, 2010

In a vivid manifestation as to what is wrong with Washington, two news items were released on Wednesday. First, Senator Harry Reid announced a 1924 page, $1.2 trillion dollar omnibus spending bill – a bill laden with earmarks from both Parties – which he wants passed before the current lame duck session ends at year end. Second, Gallup released a poll indicating that only 13% of Americans approve how Congress is doing its job. Gallup estimates that the surveys’ overall sampling error is plus or minus four percentage points. Regardless, this Congress has the lowest approval since Gallup began doing surveys. As the Wall Street Journal, in Thursday’s lead editorial put it: “The 111th Congress has shown contempt for taxpayers from its first day…”

In September, I wrote a TOTD entitled “Washington, Are You Listening?” November 2nd proved they were not, when Republicans picked up 63 House seats giving them the largest margin of control since 1948. And their action since the election suggests they have chosen not only to ignore the message, but to scorn the electorate. And, unless this new Congress proves very different from its predecessors, voters may discover that they simply swapped one group of thieves for another. In terms of pork and earmarks in the omnibus spending bill, Republicans are as guilty as Democrats; voters are fed up with the entire bunch. If this is not the time to consider term limits for our elected representatives, I am not sure when would be. I am reminded of that New Hampshire man, Jabez Stone (The Devil and Daniel Webster), when, in a peak of affectionate concern, he cries out to Daniel Webster: “‘Mr. Webster, Mr. Webster,” he said, and his voice shaking with fear and a desperate courage. ‘For God’s sake, Mr. Webster, harness your horses and get away from this place while you can.’” While I have no affection for Harry Reid or Nancy Pelosi – and, as Lloyd Bentsen might have said, neither comes close to Daniel Webster – I sure wish they would harness their horses and flee to their respective homes. The Republic would be better served.

However, it is my belief that no matter what damage Congress attempts, the country, because of the character of the people, will survive and thrive. It is encouraging seeing people involved in the political process and expressing their disapproval at the voting booth. The country and the financial markets have been through a great deal since the first hint of credit problems in August 2007. While many disapproved of the role government played during the autumn of 2008, I find myself thankful that, intentionally or serendipitously, capable people were there to guide us through what could have been financial Armageddon. While the system survived and financial markets have largely stabilized, a severe recession ensued and the way forward will continue to be painful for many, as slower than normal growth will keep unemployment elevated for some time. The risk of debt contagion in Europe remains, but at least we are on a more familiar and constructive path. The lessons of the past three years, it seems, have been learned best by business, secondly by individuals and seemingly not at all by a majority in Washington. It is the cynicism of opportunism embedded in Rahm Emanuel’s comment, “A crisis is a terrible thing to waste,” that still stings.

When one looks at markets and the opportunities they offer, it is stocks with strong cash flows and managements who are intent on returning cash to shareholders in the form of dividends or buy-backs that seem most attractive. Treasuries and commodities are selling close to all time highs. Yields on many high grade corporate bonds are at or near record lows, suggesting attractive terms for borrowers, but little opportunity for lenders; an example being IBM that was able to borrow three-year paper for about one percent. High Yield Bonds have seen current yields decline from 25% at the worst of the financial crisis in late November 2008 to 8.4% today. Stocks have done well also, but so have earnings, thus earnings multiples have lagged the upward movement in stock prices. Companies have hoarded cash – cash that the President is intent on their using, not for dividends, but for investment and hiring. If the President is able to provide confidence that the environment for investment is (and will be) sound and that class warfare is not on the agenda, then we will all be better off.

One thing that age has taught me is that nothing is static. The world and markets and politics are in constant motion. While the ability to forecast what will happen is virtually impossible, the one constant we can be assured of is change. Despite markets that have done well since the dark days of early 2009, pessimism persists. (Alan Abelson of Barron’s does not believe it, but that is my sense from talking to investors and reading the papers.) We worry about Europe, the size of our deficits, politics in Washington, the state of the Dollar, about competition with China, of Iran and North Korea and our schools and illegal immigrants. None of these problems can be dismissed and they should not be, but they also are discussed almost daily and so have been woven into the fabric of our markets.

We now need Congress to get on board, to demonstrate that they have the people’s interest at heart, not merely their own. Given the experience of the 111th Congress, that may be asking too much, but the country will survive even if they do not. Term limits would serve the cause of bringing their interests in line with the electorate.