Charting a course back to confidence in the economy

my column published in the online version of  the Sky Hi News 8/17/2011; Another, edited version appeared in the print edition

 

The United States has a confidence problem ... a big one. It lost it two weeks ago when the debt ceiling debate came to an end, and the thorniest issues are still hanging fire since they were tossed to a committee.

There is a way out of the loss of confidence, but it will take some guts to do it.

The first step of any recovery is to admit the problem. The world has lost faith we can govern ourselves to solve the economic mess. Consumers have lost confidence that the economy will ever improve enough that they can stop planning for possible job losses and be able to spend for more than the bare necessities.

Corporations sitting on $1.3 trillion in cash will not invest until consumers start buying again. Investors are deer caught in the headlights, not knowing which way to jump so they freeze in place.

Voters have no faith that Congress can come up with a plan to reduce the deficit. Both the far left and the far right have lost confidence that President Obama is leader enough to give them the solutions they demand and absorb the political blows that result on their behalf.

We can thank the Tea Party for the largest contribution to causing the problem. This minority within a party fabricated a crisis by threatening to prevent the U.S. from being able to pay its debts. For them it was simply a strategy to force their hard line views on the majority. Their taking the threat to the brink caused a moderate earthquake as the stock market ran amok and fears of a double dip recession were revived as economists here and abroad trembled in the aftershocks.

Imagine if the Michele Bachmanns of the world had their way and the U.S. had defaulted. The markets and investors would have reacted as if it were a 9 on the Richter scale.

The left has also contributed to the loss of confidence. Its reaction to the crash was to blame President Obama for not making rousing speeches in defense of keeping the status quo on entitlements or tying up decisions while the conservative leaning Supreme court ironed out the intent of the 14th Amendment. They joined their brethren's litany on the right in condemning Obama for failed leadership. That is the most self-defeating strategy possible.

Someday the left will realize that they do not have enough votes in Congress to leverage their proposals and that joining the GOP in a feeding frenzy of attacking a Democratic president will not be the path to changing the balance in Congress or keeping the White House.

What can restore confidence? For one: Let's stop equating compromise with failure and let's cut the president some slack so he can make some grand bargain that will make the economy better. The left should stop cutting him off at the knees even if it tweaks entitlements a little.

The right may have to suck up some revenue increases. So be it; what we need is a credible plan that investors, business, and especially consumers feel will give them confidence that the future will be better .

The Simpson-Bowles plan to reduce the deficit has gotten the most votes of confidence from economists. Yes, it proposes raising some revenue and reforming some entitlements, but so what. It has the best chance of working.

Let us also reform the tax structure, simplify it, eliminate loopholes, reduce the top rates and make it fairer to small business and the middle class. Some incentives to encourage companies to hire the unemployed and more breaks for those willing to invest in infrastructure may help in the short term.

If the Democrats and President Obama were to take the lead in advocating a plan along these lines, my guess is 2012 will look a lot better for them.

The debt ceiling deal..who were the most irresponsible?

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Copyright 2011 Sky-Hi Daily News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. August, 4 2011 8:44 am

Felicia Muftic: Imagine, a bipartisan compromise

Sky-Hi Daily News

Lo and behold … a deal in D.C. on the debt ceiling? It was no surprise that part of the solution was to send the hard decision-making to yet another committee, so that only a few would take the fall for killing off sacred cows and the rest of the elected representatives could go on record and keep their campaign pledges not to compromise on anything.

What was new was the charge to the panel to come up with a solution or face the firing squad of across the board cuts, which would cause pain to both ideological sides. The compromise included cuts to Medicare providers and the Pentagon, but not to Social Security and assistance to poor and vets. Note that the fundamental decisions of what to cut still awaits the bipartisan panel's judgment calls, though parameters were set by the deal.

On balance, the GOP won most of the battle, but they could also lose the war in 2012. Some Teaparty types may lose their seats if they are viewed by enough voters as having been willing to destroy the economy in order to save it, including taking down Wall Street and harming seniors counting on full benefits. Their “my way or the highway” excluded other more rational alternatives offered by their party leaders, think tanks, or nonpartisan commissions.

The Teaparty's uncompromising ways also failed to change the way Washington works other than to make it even more dysfunctional and more partisan than it was before.

The Democrats did not get taxes raised on millionaires or cuts in spending that were less than what the GOP demanded. They did succeed in keeping the agreed upon debt ceiling until 2013 to provide more stability to the economy and cutting defense spending.

The compromise may also have rescued the U.S. from the World's perception that we were incapable of governing ourselves, but the seeds of doubt have been planted. We will be viewed by investors and lenders as more risky than before. Those with whom I have spoken in Europe feared we had been captured by right wing crazies who were willing to destroy both ours and their fragile recoveries and renege on obligations. That may haunt us later with higher interest rates.

To find the most irresponsible players in this drama, we just need to look in the mirror. The minute anyone proposes to hit our pocketbooks, whether through higher taxes or cuts in entitlements, 70 percent of us want our Social Security, our Medicare, our educational institutions, our defense but we do not want to pay for it. Instead, many want a smaller government, less taxes and more fiscal responsibility. We cannot have all simultaneously; there is not enough wherewithal to go around … at least that has been the conclusion of every commission to date. The compromise panel will have to face that reality, too.

There are some who deserve praise for acting responsibly and who made honest efforts to find compromises. Among those were Sen. Tom Coburn (conservative Republican from Oklahoma), who at least was willing to converse with Democrats, and our own Colorado senators Mark Udall and Michael Bennet, both Democrats. In February Udall proposed a constitutional amendment to require the annual budget to be balanced. Democrats approved a FUTURE VOTE ON a balanced budget provision in the compromise. Democratic Sen. Harry Reid, Senate majority leader, credited Udall by name Sunday.

In March Sen. Michael Bennet and Sen. Mike Johanns (R-Neb.) wrote a letter to the president asking him to engage in budget negotiations beyond FY2011 that included discretionary spending cuts, entitlement changes and tax reform, to create meaningful deficit reduction. Thirty two Democratic senators (including Udall) and 30 Republican senators signed on to their letter. This became the basis for the last ditch effort of the bipartisan Gang of 6 to work out a compromise within the past month.

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