The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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We Deserve Better


Our government can shape our economy with both monetary policy and fiscal policy.  Monetary policy is controlled by the Fed and is concerned with interest rates, changes in the money supply, management of its huge portfolio of Treasury debt, and so forth.  Fiscal policy is controlled by Congress primarily and the President secondarily.  It includes budget policy, debt policy, trade policy, and tax policy.

While the world is transfixed by our clownish presidential election, Congress has gone home, and there is no budget for the new fiscal year beginning in six weeks.  When they return, they will only have seventeen working days to agree on the budget.  That means we will have yet another government shutdown October 1st, or Congress will string together enough “continuing resolutions” (CR) to keep the doors open and to minimize our national embarrassment.

Budget policy is important, because it allocates funds across sectors of the economy.  For example, infrastructure-related companies will be hurt if infrastructure funds are instead allocated to Medicare spending.  How do you allocate funds across the economy determines whether you eat your seed corn in the short-term or plant it for the long-term.  Budget policy is very important, and Congress only has seventeen days to develop a thoughtful budget . . . fat chance!

Debt policy has become important since the U.S. decided to become the only nation with an arbitrary ceiling on the amount of debt issued by the central government.  Since it has become a pointless exercise in partisan brinkmanship, the debt ceiling has been temporarily suspended, but it returns next March.  Unless either party wins the presidency and both legislative houses, it is unlikely this ridiculous relic can be eliminated.  Another bitter, nonproductive partisan battle can be expected.

So, if you are hoping for less partisan bickering when you get out of bed on Wednesday, November 9th . . . just go back to bed!

What a way to run the greatest country in the world!

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