Thursday, July 28, 2011

Is Sammy still AAA?

For most of my father’s professional career he was a banker.  Last winter we ran into the now retired owner of a local gas station and my dad told me how he came to lend him money when he was just starting out.  In what I took to be their first meeting my dad was impressed with how neat and orderly his garage was, that all the tools were put away, etc. 

Now of course having a nice garage isn’t directly connected with having the cash flow to pay back a loan.  And I can’t help but think of the scene from Support Your Local Sheriff where the mayor is showing James Garner the new jail which is immaculate.  Says the mayor of the last sheriff, he was “yellow clear through, but a good organizer.”  But my father wasn’t wrong in seeing the condition of the garage and its organization as an attribute of credit worthiness.

I think a similar viewpoint is the correct way to evaluate the federal government.  Is it operating in such a way as to reassure the credit markets, that is demonstrating credit worthiness.  Consider the standard of baseline budgeting which starts from the premise that expenditures will go up.  A “cut” in baseline budget speak is when the rate of increase goes down.  But of course baseline budgeting assumes that you actually have a budget.  As Iowahawk tweeted yesterday “The Budget Act requires the President submit a budget, and Congress to pass one.  Why aren't all these clowns being led away in leg irons?”  Leg irons is an exaggeration of course, but the point holds.  Why indeed has nothing happened from a failure to produce the most basic act of governing?  Wouldn’t something like this in a parliamentary system lead to a vote of no confidence?    

There isn’t any way around raising the debt ceiling.  Even a bad bill is better than nothing (even if it doesn’t lead to anything like a default would the scramble after not raising the ceiling suggest to you that things were in order?).  But it is high time we started governing in a manner consistent with sound credit.  And this is why all of Obama’s talk of balancing revenue with spending cuts is nonsense, as if raising taxes and cutting spending are equal demonstrations of being able to manage our political affairs.  As Mark Steyn observed today of the plan I support “The Boehner plan tells us that real fiscal discipline is impossible within the U.S. political system. At some point, the ratings guys have to call them on it.”  It’s the best we can do right now.  But he’s right.  We have to do much better very soon.

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