The U.S. Economy following the November Election I generally disagree with Rana Foroohar of Time magazine; we usually seem to see the world differently, perhaps through different lenses. In Foroohar (2012a), however, I find several points of agreement.
Foroohar (2012a) noted the bet made by Fed chairman Bernanke that implementing quantitative easing (QE), in both iterations, would be complemented by political moves to simplify the tax code and to improve the confidence and optimism of business leaders to invest in job creating activities. Instead, the Norquistians, who seem to dominate the Republicans in Washington, DC, and the Democrats, who seemingly never passed a course in finance or accounting, never mind a full business curriculum, continue to constipate the bowels of governance. Bilateral cooperation in 2012 seems to mean collaborating with anybody who agrees to do what I want, holding fast to some illusory ideal of no increases in revenue or decreases in the spending I want, in the embodiment of Voltaire’s perfection-as-the-enemy-of-the-good scenario.
As a result of the QE imbalance, US equities and corporate cash are at relative highs, while confidence, never mind certainty, in the direction of financial and economic policy remain at or near all time lows. Ironically, as Foroohar (2012a) observed, the beneficiaries are the wealthiest 10% who own 90% of U.S. equities, the very group the Democrats love to bash and resent. While commentators lament the stalemate in federal governance, the targets of proposed higher taxes are reaping the benefits. Ironically, as long as both sides rigidly stick to their platforms, the wealthy in the U.S., both individuals and institutions, gain. The losers are the sustainable economy and those praying for job creation, or are they?
Foroohar (2012b) noted a housing market recovery, improved consumer confidence, increased consumer spending, reduced delinquencies on credit cards, and lower mortgage debt, apparent indicators that the consumers in the lower 90% of the wealth continuum are also benefiting from the current economic condition. The question of sustainability, however, remains. Foroohar (2012b) pointed to lower-than-expected third-quarter earnings reported by industrial and tech corporations and artificially-low interest rates as indicators of unsustainability. Bernanke and the U.S. governance structures may have helped dodge a deeper recession but little they have collectively done and not done seems to be able to stimulate capital spending and hiring and more than seasonally-adjusted modest levels. If we can find some sustainability, perhaps a do-nothing Congress may emerge as a good thing, at least doing no harm.
Foroohar, R. (2012a, September 24). The S&P soars, the economy snores. Ben bankrolled stocks to boost demand. But what if the wealth effect doesn’t work? Time, 180(13), 24.
Foroohar, R. (2012b, November 5). The two-faced economy. Consumers are spending, corporations are not. Which group is getting it wrong? Time, 180(19), 21.