Felicia Muftic: Charting a course back to confidence
August 16, 2011
The United States has a confidence problem … a big one. It lost it two weeks ago when the debt ceiling debate came to an end, and the thorniest issues are still hanging fire since they were tossed to a committee.
There is a way out of the loss of confidence, but it will take some guts to do it.
The first step of any recovery is to admit the problem. The world has lost faith we can govern ourselves to solve the economic mess. Consumers have lost confidence that the economy will ever improve enough that they can stop planning for possible job losses and be able to spend for more than the bare necessities.
Corporations sitting on $1.3 trillion in cash will not invest until consumers start buying again. Investors are deer caught in the headlights, not knowing which way to jump so they freeze in place.
Voters have no faith that Congress can come up with a plan to reduce the deficit. Both the far left and the far right have lost confidence that President Obama is leader enough to give them the solutions they demand and absorb the political blows that result on their behalf.
We can thank the Tea Party for the largest contribution to causing the problem. This minority within a party fabricated a crisis by threatening to prevent the U.S. from being able to pay its debts. For them it was simply a strategy to force their hard line views on the majority. Their taking the threat to the brink caused a moderate earthquake as the stock market ran amok and fears of a double dip recession were revived as economists here and abroad trembled in the aftershocks.
Imagine if the Michele Bachmanns of the world had their way and the U.S. had defaulted. The markets and investors would have reacted as if it were a 9 on the Richter scale.
The left has also contributed to the loss of confidence. Its reaction to the crash was to blame President Obama for not making rousing speeches in defense of keeping the status quo on entitlements or tying up decisions while the conservative leaning Supreme court ironed out the intent of the 14th Amendment. They joined their brethren’s litany on the right in condemning Obama for failed leadership. That is the most self-defeating strategy possible.
Someday the left will realize that they do not have enough votes in Congress to leverage their proposals and that joining the GOP in a feeding frenzy of attacking a Democratic president will not be the path to changing the balance in Congress or keeping the White House.
What can restore confidence? For one: Let’s stop equating compromise with failure and let’s cut the president some slack so he can make some grand bargain that will make the economy better. The left should stop cutting him off at the knees even if it tweaks entitlements a little.
The right may have to suck up some revenue increases. So be it; what we need is a credible plan that investors, business, and especially consumers feel will give them confidence that the future will be better .
The Simpson-Bowles plan to reduce the deficit has gotten the most votes of confidence from economists. Yes, it proposes raising some revenue and reforming some entitlements, but so what. It has the best chance of working.
Let us also reform the tax structure, simplify it, eliminate loopholes, reduce the top rates and make it fairer to small business and the middle class. Some incentives to encourage companies to hire the unemployed and more breaks for those willing to invest in infrastructure may help in the short term.
If the Democrats and President Obama were to take the lead in advocating a plan along these lines, my guess is 2012 will look a lot better for them.
For more commentary, go to http://www.mufticforum.com
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