Lather, Rinse, then What?

Could we please not do this again?

240 years ago John Adams reportedly said that one useless man is a disgrace, two become a law firm, and three or more become a congress. After barricading tourists inside the Old Faithful Inn and practically stranding our astronauts in space, the Republicans and Democrats got—what exactly? The opportunity to plummet in the polls to the point where only blood relatives have a positive view of Congress? Seriously?

Standard & Poor’s estimates that the 16-day shutdown cost the economy $24 billion—that’s about $1 million per minute. Economic uncertainty has a real cost. Businesses that don’t know if their clients will pay them on-time for their scale back expansion plans, begin demanding cash for services, and are slower to hire.

America has significant balance sheet issues: public debt almost equal to its GDP; projected obligations over four times the size of the economy; Social Security Disability Insurance will be insolvent by 2016. And if running into the debt ceiling is like maxing out the credit card, then the solution isn’t just to keep raising the ceiling but to evaluate spending.

Washington’s antics may serve as guerilla theater to make people aware the debt and deficit. But as the pending debt downgrade from Fitch makes clear, this is no way to run a Aaa country.

Douglas R. Tengdin, CFA

Chief Investment Officer

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