PLAYING WITH FIRE

PLAYING WITH FIRE

Our mothers told us not to play with fire. The message didn't get through to President Obama and the Congress. The stalemate over government funding and the onrushing date when the debt ceiling may be breached is an indictment of the President and Congress. Their attempt to pin the blame for their brinkmanship and its dire consequences on each other means they believe that we're dumb enough to fall for it.

However, the good news is that most Americans are clear headed enough to know that the spin coming out of Washington is just that—spin. It's a smoke screen, a smokescreen that cloaks a conflagration that could irreparably harm the nation's already fragile economy.

The impasse over funding the Government and raising the debt ceiling is cause for alarm. But the real problem is, of course, much worse. Washington's failure to govern is monumental and longstanding. The economy remains weak and fragile. Its growth rate is anemic. Unemployment remains persistently high and far too many of the jobs being created are part time, low pay jobs. The necessity to reform the tax code for individuals and corporations is dead in the water. Regulatory reform of the puzzle palaces that line the Potomac is stillborn. Millions of young Americans graduate from college inadequately equipped to find good jobs, while saddled with crushing student loan debt. Immigration reform has morphed from dream to nightmare. The effort to make America energy independent and to curtail the power of OPEC has run out of gas. The renaissance of American manufacturing that the energy boom could have triggered hasn't materialized. The urgent need to reform Medicare, Medicaid, and Social Security before their runaway growth eats the entire Federal budget has been shelved.

You get the picture. You and I are responsible for having populated both ends of Pennsylvania Avenue in Washington with a collection of deceitful clowns who won't work together, who won't do the nation's business, and who expect us to reelect them, regardless of their willful failure to govern. Unforgivably, too many of us do just that.

And now their intransigence has led the nation to the brink of default. Complicating the battle that will occur over the next few weeks concerning raising the debt limit is the fact that a large swath of the American people do not understand the risks associated with default. A recent Washington Post-ABC poll showed that 43% of respondents favored not raising the debt limit and letting the Government default on paying its bills and meeting it obligations.

Such a view is either foolhardy or draconian. Here's why. Default will cause the Government to cut spending by about a third. That will throw a wet blanket on already anemic economic growth. Default will preclude the government from borrowing from investors in order to meet its financial obligations. That will send a shock wave of instability through the financial system as investors worry that their loans might not be paid back. Their response to that uncertainty almost certainly will be to raise interest rates. Those interest rate increases will spread throughout the economy adversely increasing what you pay on your mortgage, car loan, and your credit cards.

In 2011, when the President and the Congress last collided on whether to raise the debt ceiling, one of the nation's three credit rating agencies, Standard and Poors, lowered its rating of the U. S. Government from AAA to AA+. If the Government defaults later this month, it's likely that the other two rating agencies, Moody's and Fitch Ratings, will also lower their ratings. Such a move will roil Wall Street and international markets. So what, I don't care, you may say. Well you should care because what's at stake is the value of your 401K and your IRA. Once this cycle begins the threat of a new and severe recession becomes real.

The way to break this impasse is for the House Republicans to set aside their insistence that the debt limit can only be raised if the President and the Congressional Democrats agree to their Obamacare demands. Don't misunderstand me here. I'd love to see Obamacare delayed, or repealed so that a wholly new and effective Health Care Reform law could be enacted in its place. But that is not going to happen until 2017 at the earliest. The GOP's Obamacare strategy is fatally flawed, dangerous to the economy, and will backfire politically.

If the GOP believes that Obamacare won't work, If they believe that its onerous taxes on individuals and businesses will provoke a national outcry of opposition, and if they believe that the Federal Government will never be able to properly and efficiently administer the program, then they should simply sit back and wait for its inevitable collapse, which will fall directly and crushingly on President Obama and the Democrats. When that happens, who knows, it might create the conditions whereby the Republicans could regain the Senate and the White House with a governing mandate.

In the meantime think of Washington as a major league baseball team with a starting rotation of Reid, Pelosi, Boehner, McConnell, and Obama. For two of them every pitch is wild Left. For two others every pitch is wild Right. And that leaves the southpaw who takes the mound, fingers the rosin bag, goes into his windup, but refuses to pitch the ball.

The Shadow's yanking Washington's starting rotation and sending them down to the bush league (pun intended), but Goldman can be reached at:  EmailMe

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