The meaning of the California earthquake
I’ve talked to loads of investors, pro and amateur, who think the game is up. They think the American economy is doomed to downshift into a permanent slow-growth mode. Massive budget deficits, more regulation, more taxes. My standard reply points out that global current, debt and equity investors would punish, sooner rather than later, any nation that follows such a course. The financial vigilantes would prevail in the end.
Oh, and the voters might have a say, too — as they did in California, giving a thumping to tax-hiking referendums. I mean, the common wisdom here in DC is that Americans need to pay higher taxes. And for awhile, many here believed that Americans would accept this perceived reality, despite the fact that President Obama was elected as an (overall) tax cutter. Some polls showed the same thing.
But actual voters sent a different message. It’s the same message that is also cutting the knees out of the Obamacrats’ plans for a cap-and trade system. Americans, facing reduced net worth and a terrifying job market, don’t want government imposing higher costs whether through taxes or regulations. (Especially when the don’t think that government is particually well run or efficient.) And higher taxes for healthcare, too? Plus, if those Obama middle-class tax cuts aren’t extended, many folks will be getting a tax hike in 2011. There seems to be a complete disconnect here between the political class and the rest of the country.