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  • Featured Story

    The Debt Ceiling Debate: Will the Democrats' Gambit Lead to a Victory in the 2012 Election?

    By , Money Morning - July 15, 2011

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Article Index

  • The Debt Ceiling Debate: Will the Democrats' Gambit Lead to a Victory in the 2012 Election?
  • The 2012 Election and the Truth Behind the Debt Ceiling Debate
  • The Ugly Debt Ceiling Debate

The Debt Ceiling Debate: Will the Democrats' Gambit Lead to a Victory in the 2012 Election?

By , Money Morning - July 15, 2011

We talked yesterday (Thursday) about the debt ceiling debate, and how the GOP is making the most of its opportunity to affect the economy in the run up to the 2012 election.

Well, the Democrats are doing the same thing - except whereas the Republicans are looking to make long-term fixes at the expense of short-term growth, Democrats are doing the opposite.

I'll show you what I mean.

As I said in my previous piece on GOP economic strategy, I'm a firm believer in Public Choice Theory.

And in this battle the Democrats would like to see rapid growth between now and November 2012. More than anything, they want to see unemployment come down sharply.

They don't care so much about whether inflation is ticking up a bit, or whether an over-large budget deficit may cause trouble in the future. If they get elected in November 2012, they can try to sort out problems then - particularly if they can recapture the House of Representatives.



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The 2012 Election and the Truth Behind the Debt Ceiling Debate

By , Money Morning - July 14, 2011

At this point, there can't be anyone left who truly believes that the debt ceiling debate taking place in Washington is really about what's good for America.

The truth is it's about the 2012 election - and the party that wins the debt ceiling debate will be the party that comes out on top next year.

It's politics - pure and simple.

Republicans and Democrats have their own respective agendas heading into the 2012 election. And with 16 months to go, there's just enough time for actions taken now to work their way through the system and swing the economy in one direction or the other.

Now, I'm not a believer in conspiracy theories, but I am a firm believer in Public Choice Theory. That means I believe we can make clear statements about what economic conditions each party would like to see 16 months from now - considering their own selfish political points of view.

The Democrats would like to see rapid growth, with unemployment coming down sharply. They don't care so much about whether inflation is ticking up a bit, or whether an over-large budget deficit may cause trouble in the future. If they get elected in November 2012 they figure they will sort out any problems after the fact - particularly if they can recapture the House.

Conversely, the Republicans would like growth to be sluggish, with unemployment stubbornly high. They also would like to make the painful decisions that bring long-term growth now, so that they can benefit from the growth and not suffer the political cost of the pain if they capture the Presidency and ideally both Houses of Congress in November 2012.

Both parties, of course, have strong beliefs about what policies work better, about what policies are better for the interest groups that support them, and about what policies are best suited to their ideology. But at this stage of the electoral cycle, they're pragmatists.

Here's how the election cycle breaks down:

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The Ugly Debt Ceiling Debate

By , Money Morning - April 13, 2011

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