Back in August, I made a few predictions on what would happen if the Congressional fiscal policy of of using aggressive cuts to attempt to close the debt while avoiding new revenues:
- Due to the economy being unaddressed, consumer confidence will reach an all-time low. Lack of consumer spending will hurt businesses, which will fuel unemployment, which itself will fuel further undermine consumer confidence in a rather vicious cycle.
- The loss of jobs will sap tax revenues, resulting in further deficits that CAN'T be blamed solely on spending. The "supercommittee" may have to make more aggressive cuts or raise taxes across the board in order to balance the budget. This is the same trap that the State of New York found itself in during the Patterson administration.
- The big rating agencies (Moody's, S & P, etc.) will go from a negative outlook to actually downgrading us, due to the economic instability that was ignored. The continued deficits and the underinvestment in the fragile economy will give them more than enough reasons to trash the value of our securities. If that happens, then the interest on our debt would skyrocket. Portugal's is in the double-digits (loan-shark levels)!!!
- As a result of the above three, the U.S. recovery will finally halt, leading to a double-dip recession that will last for at least a decade.
Two months later, let's see what really happened:
- Even though Wall Street has been behaving sporadically, it has been rallying for the past few days. Consumer confidence HAS hit all-time lows. In fact, they have hit such lows that thousands across the country have begun to protest in the major cities.
- Employment remains at a standstill. At the time of this writing, unemployment remains a dismal 9.1%. We are seeing some reduction in the deficit due to increase tax receipts, but a rather small one. Disturbingly, cuts are being made to offset natural disasters, which are unpredictable in nature.
- While Moody's preserved the US's top rating with a negative outlook, the S & P actually downgraded us to AA+, the same level as Belgium. However, interest rates remain at record lows and many agree that S & P went too far.
- No double-dip recession in sight, but a stalled recovery.
In short, in some ways, we are no better off than where we were before. In other ways, we are worse off than where we were before. To add insult to injury, the American Jobs Act, the one bill that could have made a difference, was defeated by the Senate. In other words, the pragmatism that once reduced our economic recession length from 50% to 17% has given way to the laissez-faire market extremism of the past, a past that was marked with robber barons and decade-long recovery periods. Have we forgotten the lessons from our forrefathers? Have we forgotten that it's the PEOPLE who make the business, NOT the business that makes the people? Have we forgotten that wealth comes from the bottom up, not the top down? Have we forgotten that a rising tide raises all boats, but heavy rain can sink them? Does the bible not say, “If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you. Do not take interest of any kind from him, but fear your God, so that your countrymen may continue to live among you?”
Let's do the right thing and work on a more balanced and stable approach that ensures everyone is contributing their fair share to the economy! Show Wall Street and Congress that you can't ignore 99% of the population and gamble the fate of the economy on the altruism of 1%! Let's Occupy Wall Street!!!