|
April 25, 1997
The bond market stayed put this week, hunkered down in anticipation of next week's news.
The relative stability of the last three weeks has masked terrific tension. The Fed is still on the warpath, but recent economic data have given no signal as to how soon or how much the Fed may tighten again.
Next week we'll find out. Market-moving data will be released each day, and next Friday (as every first Friday each month) will bring the next installment of Payroll Roulette.
For a year, now, the bond market has focused entirely on the pace of economic growth and the will-they, won't-they game with the Fed.
Just for old times' sake, take a minute to catch up on your elected representatives and their epic battle to balance the budget.
Tigger had more luck with the tablecloth.
Only 60 days ago, it looked like a deal might get cut to revise the CPI, which -- shazam! -- would have balanced the budget on the spot by correcting excessive indexing of benefits to inflation.
No such luck. Congressional Democrats had become annoyed with Mr. Clinton's centrist run against his own party, and had lost interest in protecting him from Whitewater, Campaigngate, and the juicy possibility that China bought itself a commerce department (ours). When Mr. Clinton remembered his need for cover, the Congressocrats demanded that he abandon the CPI revision.
Just about then, Mr. Gingrich made a play to rehabilitate himself, and offered the statesmanlike proposal that both sides should drop all plans for tax cuts until the budget was balanced.
Mr. Gingrich, of course, cannot be saved from his death of a thousand self-inflicted cuts (his lawyer yesterday announced the Speaker's intention to deduct his $300,000 ethics fine on his tax return), and anything he proposes faces instant dismissal. Now, no balance, and no tax cuts. If you wondered how elimination of capital gain taxes on home sales could possibly fail to pass, now you know.
The impossible, cruel, budget accident is that the damn thing is trying to balance itself. The deficit estimate for 1996 was $124 billion, but tax revenues are pouring in over estimate. The Treasury looks like Grand Forks, and 1996 will come in under $90 billion, the lowest in a generation, and only a single, trivial percent of GDP.
The cruel part is the reaction of our worthies in Washington: if the deficit is down, so is any incentive to get to balance. If it's no big deal anymore, why hurry? It's much more fun to haggle over how to spend the bulge in tax revenue.
Arrrgh.
|
