It’s too bad the stock market didn’t crash yesterday.
The Dow Jones industrial average did decline a substantial 121 points, which is probably painful enough for anyone with the guts to speculate in this market. But if there had been a full-out crash, maybe the jokers in Washington would get the point: end the fiscal tiff before we go over the cliff.
People in this country have come to expect to be entertained with easy-to-understand explanations. So here’s the bottom line: The truth is that we went over the cliff a long, long time ago.
Right now we are simply trying to retain some dignity when we hit the ground.
When a cliff deal is signed — and it will be signed — it won’t even begin to address the problems caused by our profligate spending over the past four years.
The US spent $1.1 trillion more in fiscal 2012, which ended this past September, than it received in revenue. That deficit was better than the $1.3 trillion shortfall recorded in fiscal 2011.
But in the first two months of fiscal 2013 — October and November — we were already considerably ahead of last year’s deficit figures, mostly, it seems, because government spending was accelerated to help the president win re-election.
The deficit in 2010 was $1.3 trillion and the shortfall was $1.4 trillion in 2009.
Sometimes large numbers lose their meaning. So this will put it in perspective.
In 2008, we were frantic because the deficit had ballooned to $455 billion — less than half of 2011’s deficit. That panic was, in turn, caused by the fact that 2007’s deficit was just $162 billion.
So the US now finds itself with trillion-dollar-a-year deficits and total debt of more than $16 trillion. And if it weren’t for the fact that the Federal Reserve is keeping interest rates exceptionally low — and hurting savers by doing so — Washington wouldn’t even be able to keep up the interest payments on all those loans.
Yesterday’s market decline began when House Speaker John Boehner had to pull his Plan B budget proposal. Under Plan B, the House Republicans were supposed to approve a tax hike on people earning more than $1 million a year. But Boehner couldn’t get enough of his own party to go along, which was, correctly, seen as setback for the entire fiscal cliff negotiations.
Stocks opened sharply lower Friday morning before some heroic buying by unknown traders lifted prices. Yesterday was one of those options expiration days during which market pros like to see prices higher.
So the situation didn’t turn out all that bad except that Wall Street had the chance to propel Washington into action.
The last time we heard, President Barack Obama wants $1.3 trillion in revenue increases and Boehner $1 trillion — over 10 years!
That averages out to just $100 billion to $130 billion a year. And no matter how you achieve those figures — through whatever combination of tax increases or spending cuts — that simply isn’t enough to make a significant dent in the deficit.
Wall Street was worried yesterday for a little while. It should stay worried.