The Independent Market Observer

1/25/13 – Things Really Are Getting Better

Posted by Brad McMillan, CFA®, CFP®

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This entry was posted on Jan 25, 2013 7:04:28 AM

and tagged Politics and the Economy

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I mentioned the other day that the narrative in our country has changed and that the focus now is on what is going right. The news today supports this notion yet again. New unemployment claims came in at a five-year low, and housing continues to strengthen.

I think the improving economy and changing narrative have had a causative effect on how the political parties are addressing the deficit problem as well. As the feeling of crisis recedes, the public tolerance for grandstanding and ultimatums is also receding—no crisis, no need for radical measures. This is probably a key factor in why both parties are pulling back from the more confrontational tactics of the past couple of years.

The parties are not, however, pulling back from their visions and agendas; they are simply choosing to compete on the quality of ideas rather than the ability to assign blame. I would argue that this is an unmixed good as well. We are starting to see a positive cycle, where the improving economy makes people feel better, which leads to more improvement—both in economics and politics.

As we move away from the edge, we can also start to have a real debate about where we want the country to go. President Obama laid out his most liberal agenda so far in his inaugural address; that’s one side. On the other, the Republicans have just finished a retreat during which they started to grapple with their problems—not the philosophy or ideas, as they say, but the presentation and tone.

We as a country need exactly the sort of debate that is shaping up here. We need to discuss whether higher taxes on the rich are the way to go, as proposed by Sen. Patty Murray, or whether a shift away from income taxes to consumption taxes is better, per Gov. Sam Brownback on Kansas. As the narrative shifts from the end of the world to how to make the future better, we all benefit.

Needless to say, this conflict of ideas will lead to more fireworks, but that is good as well. Politics as entertainment has a long and valuable history in the U.S., and I wouldn’t have it any other way.

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