Sometimes I am amazed at the stupidity of our congress. In the paper this weekend there was a generic comment made about congress wanting direction. They want to know where we want them to go. My gosh I think it is clear where we want them to go. We want them to work together and deal with the gap between the tax revenue and government spending. Any thinking person recognizes this is the black swan looming. Even our wonderful neighbors to the North are warning us about the storm coming.
The American Enterprise Institute, a fairly conservative group, hosted dignitaries from Canada over the weekend. The visitors included former Canadian Prime Minister Paul Martin. His message, “Get real about the gap between federal revenues and spending, or get ready for disaster.”
During the 90’s the Liberal Party was in control in Canada. Jean Chretien was the Prime Minister and Paul Martin was its finance minister. Martin was tasked with “pulling his country out of a fiscal death spiral.” The Canadians accomplished this with deep cuts in government spending and tax cuts. Their reasons for doing this was “not ideology, but simple arithmetic.” They knew if they did not take on the difficult task the cost of living would rise significantly.
Another Canadian speaker at this conference was Janice McKinnon. She was the finance minister for Saskatchewan in 1993. During this time Saskatchewan’s “tax-supported debt was 180% of its annual revenue.” Its credit rating was diminishing, dropping to triple B. In response they closed 52 hospitals, many schools, and thousands of people lost their jobs. McKinnon stated they did not have a choice. If they would have waited the pain would have been that much greater.
Congress if you are looking for direction, then get busy and deal with this problem. I doubt you have the will to accomplish the task. “Market discipline doesn’t exist in Washington, which has the privilege of an accommodating central issuing the world’s reserve currency. The big spenders don’t need to pay attention to pesky numbers.” You better start paying attention to the numbers, because the longer it takes to deal with the debt issue, the harder it will be and the greater the risk.
And that is my thought for the day!