Michael Lipper: the looming threat bigger than the Fiscal Cliff
Political wrangling and half-baked legislation comes under scrutiny from the veteran investor this week.
by Michael Lipper on Dec 03, 2012 at 10:17
Recently, the US markets have been headline-driven, focusing only on the so-called fiscal cliff.
This fixation is unfortunate, as there are many other (and in the end, more important) issues to focus on than the dances in Washington, D.C.
Nevertheless, it is an important subject and I wish to share my ruminations with you.
For political types
The real and present danger is not going over the proverbial cliff. My fear is “the sausage".
That is how the process of passing pieces of legislation has been described; stuffing together different points of view without any overall or in-depth understanding of what the new law actually dictates.
When the current ruling party had control of the White House and effective control of the two houses of Congress, they gave us two classic examples of this phenomenon.
Both the Affordable Care Act (Obamacare) and the Dodd-Frank bill are structurally very important pieces of legislation that are so long, complex, and poorly drafted that to this day the American public does not understand how they work and what implications they have upon the rest of our lives.
In the month before we in theory go over the fiscal cliff, and become a victim of the Budget Control Act or “sequester” of mandated overall tax and expenditure dictates, there does not appear to be the will or perhaps the ability to make major progress as to our habitual deficit production.
Some believe that there will be a last minute compromise on enough items to get an agreement to “kick the can down the road,” delaying enactment of any meaningful reforms.
Based on past legislative history, my deep concern is another omnibus “solution,” written largely by aides and lobbyists that few if any fully understand.
The fundamental issues facing the dancers in Washington are very deep and are similar to those facing most nations with democratically elected governments.
For a number of generations we have been spending too much of our personal money and permitting governments to spend too much of our money. With the example of Greece and possibly France before us, America now needs to begin a very long process of getting out of debt to one another.
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