impact of financial crisis on us economy
Everybody knows that screwing up a critical assignment at work will almost surely get you fired.
That is, unless you work as a member of the U.S. Congress.
After more than two months of bickering, the six Republicans and six Democrats on the "super committee" tasked with finding at least $1.2 trillion debt reduction savings over the next decade have thrown in the towel.
They have no debt reduction plan.
Analysts agree that despite the urgency of addressing America's fiscal issues, both sides are more interested in scoring political points than solving problems.
Meanwhile, the federal debt continues to grow. It eclipsed $15 trillion last week.
With representatives pocketing salaries of $174,000 a year despite their failures, it's no wonder U.S. citizens are down on Congress. A recent New York Times/CBS poll showed Congressional approval sinking to just 9%.
Even some members of Congress admit it.
"The politicians care more about their parties and getting reelected than they do the very real problem," Sen. Tom Coburn, R-OK, said Sunday on C-SPAN's "Newsmakers" program. "[The super committee] was Washington's answer to kicking the can down the road."
According to the law passed as part of the debt ceiling deal over the summer, failure of the super committee to come up with a debt reduction plan is supposed to result in $1.2 trillion in automatic cuts, known as "sequestration."
Half of those cuts, $600 billion, are to come from defense spending, with the other half coming from such areas as education, the environment, transportation, housing assistance and veterans' healthcare.
But just because that's what the law says doesn't mean it will happen. Congress, don't forget, can undo any laws it creates. Ideological opposites Sen. John McCain, R-AZ, and Rep. Maxine Waters, D-CA, among others, are already working on this.
It's just more evidence of a disingenuous Congress.
Pointing FingersInstead of developing a deficit reduction solution, lawmakers have tried to convince the American people that the super committee's failure is the other party's fault.
Democrats had called for a "balanced" approach of some higher taxes, mostly on the wealthy, and spending cuts. Republicans eschewed any increase in taxes, preferring instead to reach debt reduction goals entirely through spending cuts.
"The wealthiest of Americans, those who earn more than $1 million every year, have to share, too. And that line in the sand, we haven't seen any Republicans willing to cross yet," super committee co-chair Sen. Patty Murray, D-WA, said on CNN's"State of the Union."
"I don't understand the economics that says that if we raise taxes on my employer, or my boss, somehow they're going to go out and hire my unemployed brother-in-law," Rep. Jeb Hensarling, R-TX, another committee co-chair, countered on "Fox News Sunday."
Why so much rhetoric and no action?
The main reason is that the automatic cuts don't kick in until January 2013 - after the key 2012 elections. Both sides hope to pin the blame on the other side to secure election victories next November that will empower them to solve the debt problem their way.
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U.S. Economy In Crisis: How To Prepare For The New 2012 Recession
just finished a battery of media appearances on Fox Business, Bloomberg, BNN and CNBC Asia, and without exception I was asked about two things: President Barack Obama's jobs bill and the U.S. Federal Reserve's "QE3."
The first thing investors and analysts want to know is whether or not the president's jobs bill will work. The answer to that question is "no" - not as it stands, anyway.
The Real State of the Union: A Rescue Plan for the U.S. Economy
If Money Morning's Keith Fitz-Gerald were granted an audience with U.S. President Barack Obama and Federal Reserve Chairman Ben S. Bernanke, the one message he'd deliver is this: It's time to stop the gravy train and reform the U.S. financial system once and for all.
In fact, this may be our last chance.
"If I had the chance to sit down with President Obama and Fed Chairman Bernanke, I would offer [them an] eight-point plan that's designed to increase growth, provide jobs and increase America's international competitiveness," says Fitz-Gerald, a well-known commentator and bestselling author who is Money Morning's chief investment strategist.
In this second installment of a two-part interview with Money Morning Executive Editor William Patalon III, Fitz-Gerald took the time to outline that eight-point rescue plan for the U.S. economy. In that plan, the changes Fitz-Gerald calls for include:
- Cuts in federal spending.
- Pension reforms at all levels.
- A halt to weak-dollar policies.
- And a realization by Washington that it's time to take China much more seriously.
The highlights of Part II follow below. And if you missed Part I, you can access yesterday's story by clicking here.
To read Keith Fitz-Gerald's fix-it plan for the U.S. economy, please read on...