John Feehery: Speaking Engagements

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Current State of U.S. Economy: Lukewarm Water

Posted on April 2, 2014
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“There’s a fine line between stupid and clever.”   So said the lads from Spinal Tap.

Government's Role in the Economy


In much the same way, there’s a fine line between effective and dangerous when it comes to government’s role in the economy.

Too much government can suffocate economic growth.  But too little government can lead to chaos.

Same goes for government spending.   Too much priming the pump, like stepping on the gas when you start the car, can flood the engine of economic growth.

But too little government spending can starve the economy of the gas needed to ignite the engine.  Too much austerity at the wrong time can keep an economy in the dumps.

That’s what happened during the Great Depression.  Too little money flowed to lenders and borrowers and the economy stalled out as a result.

The Financial Crisis of 2009


During the financial crisis of 2009, the Obama White House poured too much discretionary money into the system, expanding the size and scope of government and making horrible funding decisions that undermined confidence in the government.

Taxpayers hate seeing their money wasted.

But in the aftermath of that spending spree, the White House and  Congress abruptly shifted course, and scaled back most of that discretionary money.

It was the White House that came up with the sequester as a substitute for real entitlement reform.   That sequester, coupled with a demand by the President to sharply raise taxes on job creators, helped to slow down our economy to a glacial pace.

Couple that with a much more aggressive regulatory regime, and new laws like Dodd-Frank, which made it much more difficult  lenders to lend to small businesses, and you have what we have right now:  a struggling economy.

The Upside to a Divided Government


The American people tend to like divided government because divided government tends to stop the excesses of both parties.

Gridlock can be helpful when the conflicting visions of governance result in a balanced approach to economic growth.

Republicans tend to be suspicious of too much government spending, while Democrats tend to want higher taxes.

Republicans want to free business of burdensome regulations, while Democrats want the government to basically dictate business decisions.

When both sides fight to a standstill, the result usually is an uneasy balance that rests in the midpoint between flooding the engine with too much gas and not tapping on the gas pedal at all.

That’s why voters usually feel a bit more comfortable in divided government.

The Ryan Budget


The Ryan budget doubles down the GOP theory of the case.   Cut spending and cut taxes and let the economy grow.

It’s not going anywhere in the Senate, because the Senate Budget Chairman and Senate Majority Leader have decided that the status quo is the best deal they are going to get.

It’s unclear whose strategy is more appealing politically, but one thing is pretty clear:  Not much new will happen this year on the budget front.

There a fine line between stupid and clever.

Derek Smalls, the bass player for Spinal Tap, once said this about his role in the band:   “We're very lucky in the band in that we have two visionaries, David and Nigel, they're like poets, like Shelley and Byron. They're two distinct types of visionaries, it's like fire and ice, basically. I feel my role in the band is to be somewhere in the middle of that, kind of like lukewarm water.”

That pretty much sums up the state of our economy right now:  lukewarm water.