Tuesday, December 11, 2012

Behind Closed Doors

Many American's get upset when government officials and politicians do things behind closed doors rather than open to public scrutiny. After all, we are a democratic society and we want open government--not back room deals. On the other hand, we have a feeling that the majority of the negotiations aimed at avoiding the fiscal cliff are really taking place behind closed doors while the politicians ramp up the public rhetoric so that their political bases are satisfied with their leaders' positions. One should be looking not so much at what you see and hear in the media vs. what you can't see and hear as easily. For that news you have to dig a bit deeper. What we all should be looking for here is compromise. There is not a single side that will win the other side over. Each will have to contribute to the compromise with significant concessions. The true winner of the compromise will be America and especially the American economy. The latest employment report tells us that even though the numbers are improving, we still have a long way to go. The markets were relieved that Hurricane Sandy did not seem to have as great an impact on the report as expected. There is no denying the fact that we have come a long way from the depths of the recession and there is more work to be done. If our leaders start getting their work done behind closed doors, it certainly would help.

Tuesday, December 4, 2012

Fiscal Cliff Talks Get Serious

While the analysts report that the Holiday shopping season has gotten off to a strong start, the news from Congress continues to stay front and center. The lame duck session is addressing the automatic budget cuts and tax increases that go into effect in January if an agreement is not reached. The changes would be so draconian that the media has nick-named these "the fiscal cliff." The concern right now is whether the threat of the fiscal cliff is causing businesses not to hire and consumers not to spend. Thus far, the results from Black Friday and Cyber Monday seem to indicate that at least the public is not worried. We are not of a mind to believe that Congress will let us fall down a fiscal cliff. We do understand that if they wait for the last minute -- not unusual for Congress -- and start the finger-pointing rhetoric, it could hurt the economy as we approach the Holidays. Thus far, Congress has been pretty cordial. It is as if the elections delivered a message to our representatives that we want them to work together. Keep in mind that even though we think either a temporary "kick the can down the road" or permanent solution will come out of the talks, that does not mean the economy will not be affected. Higher tax revenues, budget cuts and even changes in Medicare and Social Security are all on the table. You can't cut a trillion dollar deficit without raising revenue and lowering spending. The lobbyists are busy protecting their clients' interests such as social security and the mortgage tax deduction. We hope a balanced approach will emerge and a major potential stumbling block for the economic recovery will be removed. Meanwhile, this Friday look for the most unimportant employment report in a while. The data is expected to be skewed because of the effects of Hurricane Sandy.