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Saturday, May 15, 2021

A Veranda View Of The Debt Ceiling Discussion

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On the eve of an apparent debt ceiling resolution, an ironist can relish sifting through a surfeit of politically inconvenient material.  Prickly and defensive after a humbling 2010 election rebuke, the Washington D.C.-centric Democratic Party finds its ‘no entitlement reform/tax policy fairness’ tenet undercut by the verities of competitiveness and simple math at the local governance level.

Governor Andrew Cuomo, foreswearing ideology for pragmatism, addressed New York’s pyramidal dysfunction and unending public spending metastasis through structural cost reform without income tax increases.  Furthermore, he didn’t blink at the false choice presented by baseline budget extrapolations.

Mayor Rahm Emanuel, knowingly taking on Hercules’ eighth Labor, resisted the public sector union anaconda-constriction of Chicago with this message:  “I won’t nickel and dime taxpayers.  I can’t ask people to pay and put more money into a system that needs restructuring”.

More examples?  Connecticut’s Governor Dan Mallory, fighting the same mindset that imploded Detroit Motor City, Big Steel and the Friendly Skies, will now need to implement substantial public headcount reductions union chiefs believed the governor would be too craven to enact.  The Nutmeg State’s workers were unwilling to make wage and benefit concessions that would have forestalled this outcome.

President Obama, at best a reluctant Comptroller-in-Chief, revealed the obvious by eclipsing his fiscal probity shape-shift with this comment:  “I’d rather be talking about stuff that everyone welcomes, like new programs”.

Context matters.  This debt ceiling dialogue differs from all those preceding because the design flaws in the entitlement (and defense) promises made by the U.S. political system risk our economic national security, the U.S.’s AAA bond rating, the U.S. dollar’s status as the world’s reserve currency and the attraction of our country as a sound, after-tax magnet for increasingly migratory business investment.

Many loathe the intransigence of the Tea Party and its influence on the Republican Party, believing compromise is a path to comity and a desirable solution.  Perhaps.  Yet we’ve seen in California and in Delaware how spending reform doesn’t take place when either the revenue picture brightens or the use of the tax option appears viable.  A reflexive compromise mentality has enabled the inviolability of Great Society political compacts no longer tethered to human longevity change, a rational worker/beneficiary ratio or a technocracy’s more judgmental sense of restraint.  This is the true public service benefit of this multiple month mud wrestle.

Democrats wonder why these budget civics discussion haven’t gone their way?  The answer is hubris and programmatic overreach, which the Obamacare legislation genesis did little to dispel.  The political Left so likes to enrobe itself in the raiment of sustainability (energy and environmental policy), yet won’t discipline the incoherence of its redistributive and safety net spawn.  In time, policy makers may embrace and income tax payers may assent to income tax and loophole closure, but, to borrow health care reform debate imagery, not until the U.S. government bends its commitment cost curve irreversibly lower, with mechanisms that enforce this discipline from one Congress to the next.  The auto-pilot nature of our government’s cumulative promises faces necessary reengineering and the re-capitalists of this emerging redesign and prospective funding wield the marionette levers.  As seen on Sunday’s edition of Face The Nation, normally smug Democratic Senator Charles Schumer’s train wreck-like body language stated that all too clearly.

 

Mr. Walker is a principal, portfolio manager and stock-picker for a local growth equity money management firm for whom he has worked twenty-five years.

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