Wednesday, July 27, 2011

What Does Wall Street Want?

Ms. McArdle offers some insight on Wall Street's thinking about the debt ceiling

Republicans seem to be under the illusion that Wall Street are avid supply siders who want them to cut spending in order to restore our long-term growth prospects. This is also not true. Wall Street are not advanced economic theorists; they are people who want to get paid. They do not need massive supply-side growth to get paid; they just need tax revenue. They do not care how we generate the surplus to pay them: spending cuts, higher taxes, whatever. I mean, individually, some of them do care; finance guys have ideology, just like the rest of us. But professionally, this is not about ideology; it's about math. All they want to know is whether the economy can plausibly generate enough tax surplus to pay our debts. And right now, the answer is yes.

Our AAA is not at risk because our current fiscal path is unsustainable, but because ratings agencies know what many GOP freshman and party activists apparently do not: that doing the unpopular things required to get the budget in balance is going to require both parties to hold hands and jump together. Otherwise, whoever forces through their unpopular plan (huge tax increases/massive spending cuts) is going to get trounced at the next elections by an opposition party promising to undo whatever it is the party in charge has just done.


"The Hammer" said...

Lots of politics being play here, that's why the Democrats haven't submitted a budget in over two years. As Mr. Sam said, it takes a carpenter to build a fence but any damned fool can kick one down.

Tom de Plume said...

"Wall Street are not advanced economic theorists; they are people who want to get paid."

Says it all.

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