Archive for Tuesday, November 2, 2010

Likely political gridlock may threaten economy

November 2, 2010

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— Political gridlock is supposed to be good for business. If bickering lawmakers can’t agree on anything, the thinking goes, they can’t pass laws and regulations that make the economy worse.

So will the midterm elections, which are expected to leave Congress at least partially controlled by Republicans and squaring off against a Democratic White House, be a help to the economy?

Don’t count on it.

A standoff between the Obama administration and emboldened Republicans will probably block any new help for an economy squeezed by slow growth and high unemployment. Congress might also create paralyzing uncertainty for investors and businesses by fighting over taxes, deficits, health care and financial regulation.

“We expect massive gridlock and little cooperation,” writes Brian Gardner, Washington analyst for the financial firm Keefe, Bruyette & Woods.

If times were good, gridlock wouldn’t matter so much. A Republican Congress and Democratic White House butted heads in the mid- and late ’90s, after all, and their sparring did nothing to derail a strong economy.

But now, nearly a year and a half after the official end of the Great Recession, the economy still isn’t growing fast enough to bring down unemployment, which is stuck at 9.6 percent.

“Very few believe the government should sit on its hands,” Yale University political scientist Jacob Hacker says. “But right now we’re facing a period of drift.”

In its Pledge to America, the GOP has vowed to oppose additional spending to stimulate the economy. President Barack Obama’s plan to spend $50 billion on roads, railways and airports, for instance, is probably dead. And the new Congress may resist continuing to extend benefits to the 6.1 million long-term unemployed, at least without cutting the budget elsewhere.

Federal Reserve Chairman Ben Bernanke has said lawmakers need to do more to jump-start the economy.

Comments

just_another_bozo_on_this_bus 4 years, 9 months ago

So, if the Republicans win, we get a standoff between Republicans and the Republicans-Lite. If the so-called Democrats retain both houses, we get slightly less gridlock, with the Republican-Lite Democrats occasionally prevailing.

notajayhawk 4 years, 9 months ago

Gridlock? How could we end up with gridlock? The only way that could happen after the Republicans make their expected gains is if the Democrats turn into obstructionists and the 'party of "No",' and of course we know that could never happen.

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