Wednesday, November 03, 2010

The Morning After The Night Before

Now the real work begins.  The Republicans get the House, the Democrats just barely keep the Senate.  Can the parties and the President make the new relationship work?  According to The New York Times there is cause for concern.  This is not at all trivial since the House now has the ability to put together a Republican agenda yet get stymied via the Senate and President.  Given our financial situation, these guys must get their act together or the consequences could be far worse than what we have endured so far.  Nouriel Roubini (aka Dr. Doom) predicts a fiscal train wreck if gridlock continues.  You think it's bad now?  Think how bad the good doctor predicts it could become.  If that is not what you want you had better plan on the following:

Shared sacrifice - business as usual (BAU) in entitlement expenditures cannot stand.  Like it or not we are looking at modifications with Social Security and Medicare at the top of the list.

Tax changes - no one wants to pay more, but we may have to change the law to pay for the costs of the entitlements we continue with.  Changes in deductions are the first place to look.

We can choose to continue with BAU, but we cannot afford it.  If the major parties continue to legislate from ideological positions we will all suffer.  Compromise is good, and will be necessary.  You think it is bad now?   If we don't get our act together these will become the "good ol' days."

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