I am less than happy with all of this grousing about the President’s recent compromise on the Bush tax cuts. I am totally in favor of increasing taxes on higher incomes but Democrats left the President few options. Liberals failed to show up at the last election. Here is a thought: GO TO THE POLLS! All of the post-election data had a common theme, the people who voted to throw out Bush and Company in 2008 stayed away. Presumably they were busy watching reruns of Gossip Girl….
Is big inflation on the way? The three big uglies are happening; the sinking dollar, rising oil prices and lower demand for long-term treasuries. This usually means trouble with inflation downstream. Other currencies are classic havens for those fearing inflation and clearly investors are demanding high yields for long treasuries. Mr. Bernancke at the Fed has made it clear he fears deflation more and apparently is not loathe to tempt the inflation gods.
I would bet on the Chair. The employment numbers out today indicate that we are a long way from inflation. Higher prices are most influenced by labor costs and those are hardily going to rise in the next year. There is simply too much slack in the labor pool and the price of labor will be flat in the short and medium term.
The current debate over the President’s proposed freeze on Federal pay raises reminds me a bit of the air controller’s strike during the early days of the Reagan administration. While this could be viewed as a bone tossed to the Tea Party, it could also signal a new era of relations with public employee unions. I think it is more political than economic as the last thing the economy needs is lower wages.
The federal deficit is a problem that this country needs to tackle immediately. But to do so, there has to be a meaningful discussion amongst all of the citizenry. No political persuasion has the magic ideological bullet, this is only about numbers. Income in and expenses out. The era of the Reagan diet is gone and we are left with a major hangover and no aspirin.
Everyone is going to suffer economic pain. We live in an era of interest-group politics and the federal employee unions are now serving up the first volley of this war. As an aside, I think California state workers have not had a pay raise in about four years not to mention the furlough program, which is a pay cut.
Everyone at the Federal trough has to take less and tighten their belts. The states and cities have started this process and no one seems to be going hungry.
