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Change The Subject
The participants don't seem to realize the danger, but the budget debate has reached the most perilous status in American politics.
Bor-ing.
"Shutdown" occupied anchors for a whole week, and default would have been exciting, but the opposing sides have cried chicken too many times to be taken seriously. Besides, the public can't tell the difference between the two budgets: both balance in seven years, both have tax cuts, and both reduce future Medicare spending.
Democracy is once again showing its special genius: "You boobs in Washington may not have anything else to do with your time, but I do. (click)" Citizens have important things to do this time of year, like making fun of Dad's efforts to get the tree straight in its stand.
For six months the budget has consumed the country's limited appetite for financial news, and an item or two has been overlooked.
Item. The economy has been slowing down since summer. Mortgage rates are within a half percent of the 25-year low set in 1993, yet home sales have fallen for three months in a row. If the country slides into a recession next year, any budget deal will require re-negotiation. We can survive a recession; re-negotiation might finish us.
Item. Where is the Fed? It reduced short term rates once in July (by .25%), but money is almost as tight now as a year ago, when it was necessary to "slow an overheating economy and pre-empt inflation." There is no inflation, and nothing is overheating except Mr. Gingrich. Has anyone seen Alan Greenspan?
Item. A weakening economy has caused bond yields to fall of their own accord, down two percent since last Christmas. If the gods of bonds think the economy is falling apart, what is the stock market watching? Is there another economy out there, one the rest of us don't know about?
Item. The dollar is back over 100 yen/dollar, up from 79 early in the year. American dollars are becoming the money of the world: Argentina has solved its chronic inflation problem by tying the astral to the buck; Cuba has suddenly allowed public trading and ownership of dollars; and in Russia the C-note might as well be the official currency. If we are supposed to be so anxious about our economy, why isn't the rest of the world?
Item. Speaking of anxiety, Labor Secretary Reich refers often to the "anxious class", as he decries stagnant wages. There is a legitimate problem with manufacturing wages, as advanced economies all over the world are switching from goods-producing to information bases. However, how do we square anxious arguments with high levels of consumer confidence in every survey?
Item. Income inequality may be the next great political divide. The rich/poor gap seems to be widening, and is nearly double that found in Europe. The left has the old redistribution juices flowing, and the right is headed for the rising boats. The data on inequality are too murky to support either side, which makes for an ideal political debate.
Prediction for 1996: Whatever the budget outcome (stalemate, compromise, or surrender), the budget will be eclipsed by one of the items above, and maybe all of them.
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