6
◼ AGENDA
● Avoidinga debtceilingcrisisis good,butthespendingdealin Washingtonis anaccidentwaitingtohappen◼BLOOMBERGOPINION
WrittenbytheBloombergOpinioneditorialboard ILLUSTRATIONBYOLIVERSILVESTERObserverscallingfora moreconsensualstyleofAmerican
politicsweredealtsomethingofa correctivebyPresident
TrumpandCongressonJuly22.RepublicansandDemocrats
agreedthatpublicspendingandpublicborrowingshould
risea lotfasterthanpreviouslypromised.Forthemoment,it
seems,fiscalindisciplineis a bipartisanendeavor.
Granted,there’sonegoodthingaboutthisagreement,
andit’simportant:It postponesfora coupleofyearsthe
nextdebt-ceiling-and-government-shutdowncrisis,which
Congressandtheadministrationhadpreviouslypenciledin
forSeptember.Threateningfinancialmarketsfromtimeto
timewithdeliberatelyinducedcalamitiesis a provenfailure
asa waytocontainspending.It alsoneedlesslydestabilizes
theeconomyandmakestheFederalReserve’sdifficultjob
evenharder.
Soit’sgoodthatthenextdebtceilingshowdownhasbeen
avoided.ButtheU.S.needsa permanentremedyforthis
management-by-crisissyndrome,nota temporaryone.And
inthemeantimeit needsCongressandtheadministrationto
concernthemselveswithfiscalsustainability—ina waythat
yieldsresults,notpointlessposturing.
AccordingtotheCommitteefora ResponsibleFederal
Budget,thedealjustannouncedwilladd$1.7trilliontoAQuestionableConsensusontheBudget
publicspendingoverthenext 10 years—roughlyasmuch
asthe 2017 taxcuts,whichwerethemselvesunaffordable.
So-calledoffsets within the plan fall way short of paying for
the increases, meaning that public debt will rise even faster
than the steady increase that was already forecast. The pro-
jected debt ratio approaches 100% of gross domestic product
by 2029, even assuming no recession between now and then.
When the next recession does arrive, diminished space for fis-
cal maneuver will make it harder to deliver a strong budget
stimulus when it’s actually needed.
A consensus based on the Democratic Party’s fondness
for public spending of most kinds and the Republican Party’s
aversion to taxes of any kind won’t serve the U.S. well. In the
past, the case of fiscal austerity has been overdone, and the
kind of fiscal rigidity that equates the government’s budget
with an ordinary household’s financial planning oversimpli-
fies the issue. But it’s no oversimplification to say that a policy
of high and relentlessly rising deficits and debt ratios, with
the economy already at full employment and short of spare
capacity, is grossly irresponsible.
Just because there’s consensus doesn’t make it right. <BW>WillTrumpgetthecuthewants?TheFederalReserve
maybringinterestratesdownatitsJuly30-31meeting.
Predictionspointtoa quarter-percentage-pointeasing.
ChairmanJeromePowellhasbeenonthereceivingendof
presidentialtweetsfora yeartolowerborrowingcosts.▶BeyondMeat,the
alternative-proteincompany
whosestockhassoared
morethan700%sinceits
MayIPO,reportsearnings
onJuly29.▶Christie’sstarts
anauctionofvintage
timepiecesonJuly30,
includinga gem-coated
RolexGMT-Masterwatch
estimatedat$320,000.▶ThetopDemocratic
presidentialcontenders
willfaceoffin Detroit
onJuly30-31in the
party’ssecondroundof
2020 debates.▶ The U.S. employment
report for July is due on
Aug. 2. Economists predict
the jobless rate will hold at
its half-century low of 3.6%.▶ Apple unveils third-
quarter earnings on July 30.
Rising service revenue and
recovering iPhone sales
have helped the stock
advance by a third this year.▶The Bank of Japan
announces its monetary
policy decision on July 30,
possibly lowering inflation
and economic growth
forecasts for this year.▶ Waiting to Hear From the Fed
Bloomberg Businessweek July 29, 2019