Congress has been operating without a budget since Obama took office, racked up over $1 trillion in deficits in each of those years, and in the recent debt-ceiling agreement Obama, Boehner and Reid (oh my!) make only a pretense at controlling spending. America is thus a bigger credit risk, and Standard and Poors reflects that in its lowering of the US credit rating. (I think AA+ is optimistic, if you ask me.)
Stocks are plunging because big-time investors react to long-term structural changes in markets. The unbridled government borrowing is squeezing out private-sector borrowing and ultimately devaluing the dollar. They don't see Washington doing anything to reverse the trend, so for now they're bailing. A borrowed stimulus would just make matters worse, profiting only the special interests that get the stimulus money. Washington needs to drastically cut its budget, as soon as it goes back to the habit of operating on a budget.
The government also needs to eliminate government-created obstacles to economic growth. I believe that the regulatory agencies (including but not limited to Sarbanes-Oxley, which has been a huge financial burden to corporations) can be streamlined significantly. We need to remove obstacles to oil and natural gas exploration. The NLRB needs to stop telling corporations they can't open plants in certain states - bravo to Boeing for ignoring the NLRB
. Taxes need to be simplified sufficiently to reduce the need for public-sector IRS agents and private-sector tax accountants, freeing resources for the kinds of jobs that actually produce something.
Labels: Economics, Politics