by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The market’s remaining bulls must be driven less by fundamentals than by fundamentalism. Call it “faith-based investing.” Bulls must firmly believe that, by year’s end, the president and Congress will address the nation’s debilitating debt addiction more adroitly and sagaciously than the Greek Parliament addressed its debt addiction–or at least creatively kick the can down the road one more time. They must adhere to the tenet that Democrats and Republicans will bury their beloved hatchets and muzzle their noisy blunderbusses and cooperate, rather than permit the U.S. from sailing off a “fiscal cliff,” a metaphor popularized by Federal Reserve Chairman Ben Bernanke.
A speech Tuesday by House Republican leader John Boehner put this belief to the severest test. Boehner lambasted President Obama as being too spineless to tackle the fiscal crisis. Boehner said that, election year or not, the country can’t afford to procrastinate. The Ohio lawmaker promised another round of brinkmanship over the debt ceiling around year end, when it must be raised again. Last August, an identical standoff roiled securities markets and resulted in a U.S. credit-rating cut from AAA to AA+. Boehner, as he did back then, insists that President Obama implement budget cuts and spending reforms greater than the increase in the debt ceiling. Obama is demanding a debt-ceiling boost with no strings attached.
Boehner also indicated that he won’t countenance Obama’s preferred way of plugging the yawning budget gap — higher taxes on upper-income earners. Instead, Boehner wants both parties to agree this year on an “expedited” tax reform bill for 2013 that lowers rates across the board while closing loopholes, which in effect would raise taxes on the wealthy, albeit less painfully and more efficiently. “Any sudden tax hike would hurt the economy,” Boehner declared.
The administration responded that the president doesn’t believe that the full faith and credit of the United States, which backs the nation’s commitment to pay its obligations, should be held hostage to GOP ideology.