Is a Third Party The Answer?
Author: Greg Valliere
March 29, 2023
ON ISSUE AFTER ISSUE — the shaky banks, the debt ceiling, gun reform and more — there’s plenty of finger pointing but no sign of actually getting anything done. As we wrote last week, the key issue is confidence, and the public has very little because these serious issues don’t have serious prescriptions.
LET’S START WITH GUN CONTROL: We did several media interviews yesterday on whether the latest mass murder will finally prompt real reform. Our reaction: how naïve, there’s no chance of significant gun reform, what a waste of time to even consider it.
THEN THERE’S THE BIG ISSUE on Capitol Hill: who to blame for the Silicon Valley Bank collapse? Plenty of targets — the lack of aggressive supervision by the Fed, inept banking officials, and of course the lack of regulations, or is it the crush of regulations? Which one? It depends on the political party making angry accusations.
THE TOXIC MIX of ultra-low interest rates followed by a dramatic spike of rates obviously caught banks off-guard, which makes us wonder how people so smart could get their asset allocations so wrong. And speaking of smart people, how could Janet Yellen and Jerome Powell so confuse the markets last week on the issue of bailing out depositors and perhaps even equity investors as well?
THIS COMPLICATED NARRATIVE of bank and Fed miscalculation will fade in a few days, as investors contemplate a new definition of too big to fail — and as Washington gears up for this city’s next major crisis: budget gridlock and the threat of a debt default.
WE GIVE HOUSE SPEAKER KEVIN McCARTHY SOME CREDIT for proposing harsh new spending restraint, because he needs to first get his hard-core conservatives on board. They are, at least for now, which means McCarthy can play a strong hand with President Biden and the Democrats, who are horrified by the initial Republican proposals.
IN A MANIFESTO YESTERDAY, McCARTHY IS CALLING FOR THE FOLLOWING FIVE PRINCIPLES:
1. Cuts in “excessive” non-defense outlays, reducing spending to 2024 levels, with 1% annual increases going forward.
2. A clawback of unspent pandemic aid, which would penalize states that have used the money cautiously, keeping much of it in “rainy day” funds.
3. Tighter work requirements for anyone seeking any kind of government aid such as food stamps. This polls very well and will be part of any final deal.
4. New policies to lower energy costs, which of course have fallen but this also polls well.
5. Steps to stop illegal importation of fentanyl. This deadly drug has ravaged America yet there’s no credible plan to combat it.
McCARTHY CAN NOW ASSERT that he has a proposal that requires a response from President Biden, but of course the GOP has to come up with specific budget proposals. And his initial salvo doesn’t mention the country’s most pressing economic crisis — immigration reform — which for now is simply a talking point for both parties.
THE DOMINANCE OF FINGER-POINTING — and the lack of serious solutions in Washington — will persist, probably exacerbated by a recession starting this fall.
THE INABILITY to address guns and banks and huge deficits may reach a boiling point later this year, as serious people explore a last-straw: a wake-up call from a third party dedicated to getting things done. We’ll be writing about a third party this spring, largely because so many of you ask whether it has a chance.
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