"Ask Not, What is Good for the Country? Ask Instead, What is Good for my Re-election?"

Sydney M. Williams

Thought of the Day

“Ask Not, What is Good for the Country?

Ask Instead, What is Good for my Re-election?”

April 19, 2011

Yesterday, in revising the long-term outlook for the U.S. from stable to negative, Standard & Poor’s wrote that the government has “very large budget deficits and rising government indebtedness.” They added that “the path to addressing these is not clear to us.” Nor is it clear to the American people. On Sunday, Senator Tom Coburn (R-OK) said political leaders must stand up for what is right and be prepared to lose their seats. There is, in Washington however, a dearth of lambs willing to be sacrificed. The ‘pain’, we are told, should be shared…except for those in Congress.

While I hesitate to grant praise on a rating agency after the deplorable role they played in the recent credit crisis, I believe that what S&P did yesterday was a good thing, if only that it puts Congress and the White House on notice. S&P did say that they viewed President Obama’s and Congressman Ryan’s proposals “as the starting point aimed at broader engagement, which could (emphasis mine) result in substantial and lasting U.S. government fiscal consolidation.” As Hamlet might murmur, in an aside: “’Tis a consummation devoutly to be wished.” However, S&P concludes, in less poetic prose: “That said, we see the path to agreement as challenging because the gap between the Parties remains wide.” Hamlet would have nodded: “Ay, there’s the rub.”

The economy continues its plodding, but steady ascent. Last year’s fourth quarter GDP was revised down from 3.1% to 2.8%, but still above the third quarter’s 2.6% growth. Given higher gasoline and food prices, a number of economists have lowered projections for the quarter just ended by about 100 basis points to 1.5%. However, people are always fiddling with these estimates. The IMF cut estimates last fall, raised them in January and recently cut them. The Federal Reserve raised their estimates in February, only to cut them a week or so ago. Economists are always fine-tuning their numbers, trying to get accurate something they rarely do.

From my perspective, not being burdened with a degree in economics, I worry more about the trend than the details. And it appears that the economy is sluggishly, though reluctantly, moving ahead. Leading indicators, as determined by the Economic Cycle Research Institute (ECRI), continues to suggest positive momentum, in spite of higher gasoline and food prices and despite inflationary pressures in China, from whom we imported goods valued last year at $365 billion – a big number, but only about 2.5% of GDP. Retail sales persist positively and non-farm payrolls, again somewhat anemic, have been positive.

The important thing is that an improving economy, left unmolested, will throw off increased revenues to the state. The problem is that relief will be temporary and risks masking the spreading of a growing cancer – the inability on the part of Washington to rein in spending.

Washington, or at least the President, is in re-election mode. (The Republicans are in total disarray. When Donald Trump shows up as the leading candidate – a blowhard with a mop of hair that must make his barber cringe – as he did in one recent poll, one can only conclude that the GOP has a death wish.) The risk, as I see it, is that a recovering economy will generate revenues that will surprise positively, lessening the immediacy of the debt crisis, essentially kicking that bucket into the next Presidential cycle.

The American people, according to most polls, reflect a dichotomy. On the one hand, they recognize that the persistent spending spree of Congress is unsustainable. On the other hand, they indicate they want no change in the services Congress provides – a perfect manifestation of those lines from a post-World War I song, “How ‘ya gonna keep ‘em down on the farm? (After they’ve seen Paree.”) It is an attitude that should concern us, for it only postpones the inevitable. The country’s remarkable growth is because of the willingness of a few creative people to take risk. A coddled citizenry may feel comfortable, but almost certainly, in time, will be consigned to reduced circumstance.

How far we have traveled since that cold day on January 20th, fifty years ago, when President Kennedy asked the citizens of this country to think less about what they receive from government and more about what they can provide the country! Today we have a host of political leaders who promise the world and suggest that any pain must be shared… except by themselves.