The Stench of Capitol Hill

Dan Celia
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Posted: Aug 12, 2017 12:01 AM
The Stench of Capitol Hill

From Day One, Republicans coming into office said they would repeal and replace Obamacare. Obviously, they forgot that for the past seven years they had promised that very thing. They should have been prepared to present a viable plan.

Turns out they really had no idea what was in the plan they claimed they had. And it appears they had no need to understand what the plan was all about and how to debate its specifics because they knew it would never come to fruition. I can only conclude they lied to voters by giving the public the impression they were ready to repeal.

Because a repeal-and-replace didn’t happen on Day One or Day 50 or Day 200, Republicans proved to the American voter once again the depth of their lack of leadership. Frankly, Congress—Republicans in particular—has shown us just how dysfunctional they really are.

No Scapegoats Around

Here we thought this dysfunction and do-nothing attitude was all due to President Obama. Now we are finding out that all along it was the inability to unite in order to get anything done.

And don’t forget—“never Trump” Republicans are now much more obsessed with making sure this president fails than they are with helping him succeed. That can be easily fixed and turned around, simply by the president going to 10 or 15 House and Senate districts and participating in any way he can to raise up and support someone else for the GOP primary.

While we wait for the replacements, our do-nothing lawmakers must tackle the problem of our national debt. I know they are on vacation, but unfortunately a couple things that never take a vacation are continued spending and the trillions in debt the United States keeps accumulating.

Before Sept. 30, Congress will face raising the debt ceiling—again. It looks like the U.S. Treasury will run out of cash sometime around mid-October. This could lead to late payments for government programs and activities.

Fiddling While Rome Burns  

Because of bipartisan support, I suspect Congress will likely be able to set a new debt ceiling limit in a matter of hours—that is, as long as they wait until just before the end of the fiscal year so there can’t be any real discussion or debate.

Congress must also fund the government, which means they must pass a budget for the next fiscal year. Instead of that, however, I suspect they will do what they’ve become accustomed to doing—passing a continuing resolution.

The beautiful thing about a continuing resolution is that it makes it very difficult to hold Congress accountable for spending. If you have no budget, there is no yardstick anyone can use to measure what you are spending. This is a politician’s dream. It didn’t take Congress very long to figure that out, so I’m not expecting a real budget.

Like his predecessors, Treasury Secretary Steven Mnuchin has asked Congress to pass a clean debt ceiling increase—in other words, no strings attached and no requirements to meet. It’s like saying, “Let’s just kick this can down the road a little bit longer until we need to fix it.”

What this means is the issue won’t even be discussed until everything comes tumbling down. Or, we have a few years of extremely positive GDP growth with limited federal spending. The GDP growth is certainly a possibility, but limited spending? Let’s not hold our breath.

No Incentives in Sight

The U.S. has nearly $20 trillion of outstanding debt; $10 trillion of that is held by the public, $4.4 trillion by the Federal Reserve and the balance by foreigners. Thus, there is little incentive for anyone in the government to frame this as something pivotal for our government or our economy.

All of this to say that, because of the bipartisan support for more debt and spending, which I think has been bipartisan since the beginning of our republic, the debt ceiling and budget are likely to get through Congress fairly quickly once they get back from their five-week vacation.

I feel fairly confident, however, that tax reform will not happen this year. The best thing that we can hope for in 2017 is a corporate tax cut, which will be a huge stimulus for the economy. Once that is complete, we can focus on an infrastructure bill and possibly revisit real tax reform.

Of course, all of this will take a backseat to problems with North Korea. This is one of those uncontrollable geopolitical events that can have major consequences on the markets and investment portfolios. It can also create a slowing down of an economy—and concern surrounding North Korea seems to be gaining momentum.

Letting the Issue Play Out

There is little we can do politically about North Korea, other than let things play out as we make decisions on how to negotiate and resolve the matter. Of course, all of the negotiation has to be with China, in hopes they will sway North Korea and get it to slow down its nuclear ambitions and stop its heated rhetoric.

Using China to handle this, and likely the only way it can be handled, means ultimately attacking the financial system of North Korea. And if China won’t, then the U.S. and our allies must. That means attacking China’s financial system, too, which won’t be good for anyone.

The bottom line here is that this dysfunction, lack of leadership, partisanship and lack of unity will not benefit America or our economy. As President Trump is working to drain the cesspool, the stench on Capitol Hill is growing stronger.