Politics: Congress

Weiner: ‘I Lied’ About Lewd Photo

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June 6, 2011, 1:46 p.m.

Ex-NY Comp. Alan Hevesi (D) told a judge 10/7 “how he took part in a sprawl­ing cor­rup­tion scheme” in­volving NY’s $125B pen­sion fund “while serving as its sole trust­ee.” Hevesi: “I deeply re­gret my con­duct and I sin­cerely and deeply apo­lo­gize to the people of the state of New York, to the court, to my fam­ily.” He pleaded guilty “to a single felony count.”

“Still, it was un­clear wheth­er Mr. Hevesi will face any jail time.” Hevesi also ad­mit­ted “for the first time” 10/7 “he had known that his long­time polit­ic­al con­sult­ant, Hank Mor­ris, set him­self up as a middle­man between in­vest­ment firms and the pen­sion fund.” State of­fi­cials al­leged the ar­range­ment “net­ted” Mor­ris “mil­lions of dol­lars and al­lowed him to grant a vari­ety of fa­vors” to Hevesi’s al­lies (Hakim/Rash­baum, New York Times, 10/7).

A Moot Point

Two-time-AK Gov./ex-In­teri­or Sec. Wal­ter Hick­el (R) “was in­vest­ig­ated by fed­er­al au­thor­it­ies for fraud” for hav­ing a Nat’l Guard “plane ferry per­son­al be­long­ings” to AK from DC, after Richard Nix­on fired him as In­teri­or Sec. in ‘70. “Noth­ing came of the in­vest­ig­a­tion, which was dis­closed with­in 362 pages of doc­u­ments re­leased this week” by the FBI un­der a Free­dom of In­form­a­tion re­quest (Bo­hr­er, AP, 10/7).

The pace of the ex­ceed­ingly fra­gile eco­nom­ic re­cov­ery over the 204 days between now and the Nov. 6 elec­tion is a lot more im­port­ant than any­thing that either Pres­id­ent Obama or Mitt Rom­ney says over the course of the cam­paign. How fast the eco­nomy grows — meas­ured by change in gross do­mest­ic product, in the un­em­ploy­ment rate, and in real per­son­al dis­pos­able in­come, as well as in oil and gas­ol­ine prices — will be far more in­flu­en­tial than rhet­or­ic in de­term­in­ing wheth­er voters re­new Obama’s con­tract for an­oth­er four years.  

If the eco­nomy grows, the job­less rate de­clines, real in­comes in­crease, and gas­ol­ine prices drop, Obama’s eco­nom­ic policy would be val­id­ated. It would also heal some of the scar tis­sue of his first two years, when his ap­prov­al num­bers plummeted among in­de­pend­ent voters and Demo­crats were ejec­ted from their House ma­jor­ity. Con­versely, if eco­nom­ic growth re­mains slug­gish, the job­less rate stays about the same, voters’ per­son­al fin­ances don’t im­prove, and gas prices stay high, Obama’s situ­ation would look con­sid­er­ably dim­mer.

The struggles would re­in­force linger­ing doubts from 2009 and 2010, when voters saw the pres­id­ent and the Demo­crat­ic Con­gress as be­ing more fo­cused on health care re­form than on a dra­mat­ic­ally worsen­ing eco­nomy. His reelec­tion hopes would di­min­ish.

To a cer­tain ex­tent, the level of the down­ward drag on the eco­nomy for the next six-plus months is bey­ond the con­trol of mere mor­tals. Europe, which con­trib­utes 21 per­cent of glob­al eco­nom­ic growth, is in a re­ces­sion; the sov­er­eign debt crisis in South­ern Europe — with Spain and Por­tugal in­creas­ingly re­pla­cing Greece in the head­lines — is a threat to world fin­an­cial mar­kets. China’s eco­nomy also has in­creas­ing dif­fi­culties, and eco­nom­ists de­bate over wheth­er it is headed for a soft land­ing (slow­ing down, flat­ten­ing, but avoid­ing a re­ces­sion) or a hard land­ing (more vi­ol­ent, rough­er, and pos­sibly head­ing in­to a re­ces­sion). Why do these events from around the world mat­ter to us, bey­ond the spillover ef­fect? If world­wide fin­an­cial in­sti­tu­tions be­come weakened, U.S. ex­ports drop. This de­cline then hurts our do­mest­ic eco­nomy. In­cred­ibly low nat­ur­al-gas prices in the United States give many sec­tors of the na­tion’s man­u­fac­tur­ing eco­nomy a boost. But if fer­til­izer, chem­ic­als, and oth­er goods can’t be sold abroad, that ad­vant­age evap­or­ates.

An­oth­er ele­ment may fur­ther dam­age the eco­nomy as well: We are already start­ing to hear the drum­beat of con­cern among busi­ness lead­ers and the fin­an­cial mar­kets over the com­ing fisc­al cliff. The con­cern is that Con­gress and Obama will not re­solve the is­sue of the ex­pir­a­tion of the Bush tax cuts (which ex­pire on Dec. 31) and that they will not be able to re­duce the size of the de­fi­cit by Jan. 2, for­cing the budget se­quest­ra­tion pro­cess to kick in. Se­quest­ra­tion ba­sic­ally would make dra­mat­ic across-the-board spend­ing cuts to the fed­er­al budget, ex­empt­ing only So­cial Se­cur­ity and Medi­care.

I heard one of the smartest guys on Wall Street this week say that the pres­id­ent and Con­gress will have about 29 work­ing days for Con­gress to deal with the ex­pir­a­tion of the Bush tax cuts and budget se­quest­ra­tion, which if al­lowed to run their courses, would equate to a 3.5 per­cent drop in GDP.

Some budget hawks might say that the end of the Bush tax cuts and the start of se­quest­ra­tion would be good de­vel­op­ments. Elim­in­at­ing the tax cuts would pull in an enorm­ous amount of new rev­en­ue, and forced spend­ing cuts would dra­mat­ic­ally de­crease fed­er­al spend­ing. But eco­nom­ists warn that these two sim­ul­tan­eous hits on a very fra­gile eco­nomy could well trig­ger a double-dip re­ces­sion. Add in­to that equa­tion that the fed­er­al debt lim­it will likely be reached late this year or early next year, and you have the fisc­al cliff that we are headed to­ward, if Obama and Con­gress don’t act to avoid it.

Cor­por­ate ex­ec­ut­ives and the fin­an­cial mar­kets might be­gin to get spooked by the pos­sib­il­ity of the U.S. eco­nomy go­ing off a cliff for a second time in five years. They might be­gin scal­ing back spend­ing plans, slow­ing down re­hir­ing, selling stocks and bonds, and tak­ing oth­er de­fens­ive meas­ures to pro­tect their com­pan­ies, in­sti­tu­tions, and port­fo­li­os in case of a fisc­al dis­aster. Those ac­tions them­selves would slow down eco­nom­ic growth.  

Eco­nom­ic de­cision-makers will be watch­ing Wash­ing­ton in­creas­ingly closely over the next six months. They will look for signs as to wheth­er poli­cy­makers can deal with the is­sues of rais­ing the debt lim­it, ex­tend­ing some or all of the tax cuts, and achiev­ing suf­fi­cient de­fi­cit re­duc­tion to avoid se­quest­ra­tion.

Evid­ence of con­tin­ued hy­per-par­tis­an­ship will res­ult in anxious busi­ness lead­ers tak­ing pro­phy­lact­ic meas­ures to pro­tect against a sharp down­turn. Evid­ence of co­oper­a­tion and com­prom­ise will make them more likely to hire, in­vest, and ex­pand.  

Words and ac­tions in Wash­ing­ton al­ways mat­ter. But in an eco­nomy this fra­gile, they mat­ter even more than usu­al.

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