Friday, November 10, 2006

Peter Schiff On the Election

Many right-wingers argue that the Republican Party is the stupid party and the Democratic Party the evil party. Left-wingers often wishes to have the Democrats as the stupid ones and the Republicans as the evil ones. But anyway, this means that "bi-partisanship" is when people from both parties get together and do something that is both evil and stupid.

It is from this pessimistic perspective that Peter Schiff of Euro Pacific Capital analyzes the election results. I hope he is wrong, but unfortunately I think he is probably right:

"Now that the Democrats have likely taken control of both houses of Congress, some on Wall Street are cheering the return of government “gridlock.” The idea is that in a divided government each party stymies the other, resulting in no new legislation and no need to reformulate business plans. Companies and investors feel more comfortable with the devil they know. As legislation often does more harm then good, gridlock can be seen as being friendly to business and good for the economy.

However, my fear is that we actually get something far worse: bi-partisan cooperation. The most likely result of both parties "working together" is Democratic support of Republican pork, in exchange for Republican support of Democratic pork, which will wreak further havoc on the country's already dismal balance sheet. In addition, grandiose and ill conceived pet programs on both sides have much better chances of actually being passed. The last thing we need is Democrats and Republicans actually working together.

By 2008 the country will likely be in a deep recession squarely blamed on the Bush administration. This will set the stage for the Democrats to recapture the White House with a strong mandate for change and a supportive legislature. If the "free market" and "laissez-faire" rhetoric of Republicans are discredited, then the big government Democrats could be perceived as the solution. If so, look for a potential President Hillary Clinton and Speaker Nancy Pelosi to summon the ghost of FDR and conjure up another New Deal. Such fiscal activism, especially coming at a time when our nation can ill afford it, will cause the recession to be a whole lot deeper and last a whole lot longer than might otherwise have been the case."


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