Who’s to blame and how will it affect you

Headline – Politicians fiddling while US burns. Well, maybe … no, that’s not overly dramatic.  Its about right.  Really.  An event that has screamed out for leadership by our elected officials has turned into an tar pit of meaningless legislation, public battles from well dug positions, and now we are 48 hours away from the abyss.

What will happen?  Well, it appears certain that US Debt will be downgraded.  This means that we will no longer be AAA rated.  Mutual Fund Managers will have to sell US treasuries to keep the credit level of their portfolios within required parameters.  Interest rates will rise, causing increased payments on mortgages, credit cards and student loans.  Business expansion – what little there has been – will be suppressed again.  Mortgage costs will rise, that should really help out the moribund housing market.  That’s just the tip of the iceberg.  We will still be able to pay our bond holders (if we don’t, we default), but everyone else is a question.

Less likely is a default – our inability to pay our bond holders.  This would be calamitous and throw the country back into a depression, perhaps worse than we were before, according to all accounts.  Forever changed would be the concept of  “backed by the full faith and credit of the United States Government.”  How long will it take to reinstate our AAA rating is anyone’s guess, considering that no-one in the world has any faith in our ability to fix our own house.

Who’s responsible?  Well, the Tea Party is being blamed by the Democrats, because they won’t compromise.  The far left liberal Democrats are being blamed for spending all this money that we don’t have, and adding to it by forcing Health Care Reform through Congress.  The President is being blamed for not having a plan, and not providing any leadership.  The Democrats and the Republicans in the middle are being blamed for not being able to control their fringe groups.  And it is all, sadly, true.

In my mind they are all responsible.  We spend roughly 23% of GDP just on important things – defense, medicare, social security, medicaid, food safety, etc. – and only bring in about 18%. And we spend more on other stuff as well.  Clearly, this cannot continue without massive changes to our thinking and our way of life.  But it didn’t happen overnight, nor just on the Obama, or even the Bush II watch.  Yes, Obama has increased our spending more than any other President in history (3% of GDP, by some accounts), but this just made a bad situation worse.  The recession cut tax revenues dramatically (this should have been expected by Washington, as recessions are a cyclical event), which has aggravated a bad situation as well.

At this point, we are faced with political gridlock, and the inability to solve our own problems.  Severe cuts, and probably tax increases,  will be required. Do we stop sending money to other countries, pull all our Military back to our shores and spend it on Homeland Security?  Do we raise the retirement age, require those on Medicaid and unemployment to work for the government so they pay it back? Are we a nation like Greece, where entitled people will riot in the streets, burn cars and loot villages when the cuts come?  Or are we America – a land built on work ethic, pride, strength and a survival mentality? I pray the later.

I am one of those that believed it couldn’t possibly get this close- that the politicians would solve this long before now.  And I was clearly wrong about that.  So, hopefully I am completely off base again.  One can only hope.

Was it Albert Einstein that said “Doing the same thing, with the same people, and expecting different results, is the definition of insanity?””