Last evening’s televised drama starring Messrs. Boehner and Obama put many an episode of “The Real Housewives of New Jersey” to shame in terms of both script as well as delivery. Even after having been presented with the “stealth” Reid version of his own proposals to cut the deficit, Mr. Boehner stood there and pontificated about why such a plan would not be acceptable – even as it excludes new revenues from higher taxes.
President Obama, on the other hand, had little left to say beyond asking Americans to contact their representatives and tell them what it is they might want them to do about the stalemate and the issues behind it. The gap between the two men is apparently growing larger than the huge divide between the US’ revenues and spending at this juncture. Bridge-builders, apply within. Interestingly (perhaps to the Boehner faction only), in the majority of the most recent news polls a large swath (60%+) of Americans feel that the budget-balancing act must include higher taxes for the well-to-do.
Curiously, the very league of extraordinary gentlemen who profess to be horrified by the US government’s spending sprees took an active part in getting the country right where it finds itself today. “Mr. Boehner, House Majority Leader Eric Cantor, House Budget Chairman Paul Ryan and Senate Minority Leader Mitch McConnell all voted for major drivers of the nation’s debt during the past decade: Wars in Afghanistan and Iraq, the 2001 and 2003 Bush tax cuts and Medicare prescription drug benefits. They also voted for the Troubled Asset Relief Program, or TARP, that rescued financial institutions and the auto industry.” Together, a Bloomberg News analysis shows, these initiatives added $3.4 trillion to the nation’s accumulated debt and to its current annual budget deficit of $1.5 trillion.
Meanwhile, the amount of comments, urgings, warnings, and friendly nudges from various officials and academics on the topic of the US’ debt ceiling continues to swell the closer we get to D-day next week. The IMF’s Christine Lagarde remarked this morning that a US default would be a “very, very serious event” and that it could not come at a worse time (given the tremors in Europe on a largely similar front). Oft-quoted econo-pessimist Prof. Nouriel Roubini says that notwithstanding the flying gauntlets in DC, the USA will suffer a fiscal “drag” but not a default of the type that appears to be spooking so many investors these days. A gap between perception and reality is nothing new among investors.
A trillion here, a trillion there; it all adds up, as they say, to some serious money. Speaking of seriousness, we note the continuing resolve on the part of the Reserve Bank of India (RBI) to combat the inflation bogey. Whip inflation NOW. How? How about a 50 basis point hike (a stunner, say market watchers) in its repo rate. The RBI now lends money to banks at 8%. Whatever it takes to close the gap.
It might take quite some feats, on the other hand, to begin to address the yawning gap in wealth that is developing between American black and Hispanic individuals and the country’s white population. As things stood in June, the chasm of wealth disparity between the aforementioned group in the USA, was at a record width. The period between 2005 and 2009 saw a 66% decline in median Hispanic household wealth and a 53% drop for black households.
This, while white family wealth took a hit of 16%; bad, but nowhere near the 50% mark. Also noted in the Pew Research Center’s most recent findings was the fact that Asian household wealth in the States sank by more than 50% from its 2005 peak of $168,000 – a number that had placed that group of Americans at the top of the US wealth ladder. The dramatic contraction still points to the after-effects of the housing bubble’s implosion.
Until tomorrow, do mind the gap(s)…
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America