US Economy: Why We're Here, How Did This Happen?

As anyone who’s ever read any of my articles knows, I’m generally liberal in my writing. I’m not very keen on being conservative as to me being conservative means being close minded. Given that I’m a student of history, I seem to recall Heraclitus stating “the only thing that’s constant is change.” As such, I’m abit more open minded. The question is why are we here and how did this happen? The point concerning this article is why the economy is where it’s at and how did this happen?

The US economy, more than any other, is driven by politics and political factors unprecedented in modern history. We have an economy that is slowly recovering but at the same time political headwinds seem to want to drive it backwards. Unfortunately the United States has a two party system that cannot seem to come to terms on anything. We really need a third party to smooth over the ideology of the other two. Independents are not a third party. Typically independents either caucus with Democrats or Republicans. Case-in-point, Bernie Sanders of Vermont. No one would ever accuse him of being conservative.

We can discuss the financial meltdown of 2008 and the bank bailout vis-a-vie TARP all we like; we can discuss the greatest recession since the Great Depression all we like and many have. But the fact is this: This economy is stagnant and in stalemate. We ended last year with just about every pundit thinking and feeling that 2013 was going to be a great year economically. Yet here we are at the beginning of the second calendar quarter and we are no further along. Just about every economic report coming out seems to be not too good economically speaking. Last week I wrote an article entitled “Effects of Sequestration…thus far” highlighting this. This week:

April 15th:

Empire State Manufacturing - Down 3.1%
TIC Long-Term Purchases - Down 17.8 Billion
NAHB - Down 42 versus 45 expected

April 18th:

Philly Fed Manufacturing Index Down 1.3 versus 2.7 expected
Unemployment Claims 352K versus 349K expected

We can discuss political gridlock all we like but at some point it has to come down to leadership or lack thereof. As any CEO of any Fortune 1000 firm will tell you they constantly have the sword of Damocles’ hanging over their heads; because they know that at any given time they can be blamed. On Wednesday evening this President blasted Congress and the gun lobby for not approving extended background checks for gun owners. If this President feels that strongly about it then why doesn’t he issue an Executive Order demanding it? It may amount to nothing but at least he’ll go on record stating that he supports it 100%. When he is going to realize that each time he offers the opposition an “olive branch” the first thought crossing their mind: appeasement and they don’t respect appeasement or compromise. The GOP likes and respects decisive action even if it’s wrong. Want proof? Take a look at all the WMD’s the United States found in Iraq. To them, compromise is wavering and they don’t like that either.

Here we are attempting to recover from the worst recession since the Great Depression and what do we do? We up payroll taxes by 2%, we approve the sequester which will reduce hours and earnings for many government employees; many of whom may be furloughed permanently. We create 88,000 jobs when more than double that are expected and consumer spending? Well that will drop too. In the meantime we can’t come up with a budget that acceptable to all parties, Medicare benefits will be reduced and Social Security benefits will be chained by chained CPI versus COLA.

The last time the world saw such gridlock was during the Roman Empire. There were Patricians and Plebes. The Patricians represented the wealthy landowners (the 1% if you will) and the Plebes represented everyone else. The Roman Senate could not come to terms or compromise on anything so they appointed a “president”. That “president” turned out to be Augustus and we all know what happened next. I have nothing against this President. I believe him to be a humane individual, but I wish he would have more backbone when required.

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at http://www.markettealeaves.com Feel free to visit and subscribe.