Saturday, August 06, 2011

Information is a Scary Thing

Make no mistake about it, I am a Democrat. However, I am not afraid to talk about what the other side thinks, and why they advocate the way that they do. My friend Tom once said a long time ago that he liked how I would express my belief, but then I would back up and say why the other side feels the way that they do---even noting when my adversaries in a political debate had good points.

We're overwhelmed with information nowadays, and sometimes that's not a good thing. We all spend so much time catching up to the information that we sometimes forget the pig picture.

The recently ended debt-limit debate in Washington is a case in point. What I find amazing, in hindsight, is that at some point, several months ago, we all decided that additional debt was a bad thing, and now was the time to fix the issue. The elections last fall convinced us that the growing debt meant uncertainty for business. The voters sent representatives to Congress that were hellbent on reducing the size of government and shrinking government spending. The debt ceiling debate presented the best opportunity to make the voters' sentiment heard.

The only problem is that, heading into the debt ceiling debate, there was no sign-- at all-- that our debt was having a negative impact on the economy. Investors around the world, including large foreign governments already possessing large quantities of U.S. debt, were willing to buy more of it, and with incredibly cheap costs to the U.S. But we were convinced that we needed to stop taking on the debt-- and now.

The truth is, debt isn't the biggest issue we all face right now. It's the crappy economy, and more specifically, the fact that so many are out of work. Yet when one Congressman tried to make the point that the debt is not a concern right now (that creating jobs, instead, was) he was eviscerated by the media. Somehow, even the jobless have been convinced that reducing the size of government will help them get jobs more so than a government that is actively helping them find a job.

Truth be told, we Americans just decided to dramatically cut government spending at a time when the government seems to be the only entity willing to spend. Consumer spending is down. Consumer confidence is in the toilet. No one is buying a house, and even fewer are building houses (an exception being my parents). Companies are spending-- a little-- but most are hoarding the cash they have.

With the government now cutting back spending, I am not sure who is going to pick up spending as a result. The impact will be felt hardest by the individual states, who are dependent on federal spending to make up for tax revenue deficiencies (keep in mind that unlike the feds, state governments can't just print more money to bail themselves out).

We got what we voted for when the debt ceiling compromise was passed. I hope no one is surprised that the markets tanked in response.

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