I want to continue on the path I started with yesterday’s rerun post, but a couple of things came across my desk today that, together, warrant discussion. They’re examples of the kind of slow, steady progress in the economic recovery that, over time, is adding up to big things.
Let’s start with Washington, DC. The federal government—and particularly Congress—has been part of the problem for so long we kind of expect it to be a drag. The recent unexpected budget agreement (for two years even) was a positive sign, but it left open the possibility that legislators wouldn’t be able to agree on actual spending numbers. The passage of a spending bill yesterday by the House on a vote of 359–67, with 167 Republicans voting in favor, says that both parties are now focused on solutions rather than creating train wrecks as a negotiating tool. In particular, it shows that the Tea Party caucus no longer has the power to force the rest of the Republican party to vote against a deal. You can argue over the economics or the politics, but the uncertainty created by the prior theatrics was undeniably harmful, and the fact that they’ve come to an end (at least for now) is a good thing. This is also a good signal for the pending debt ceiling negotiations early next month.
Another positive sign comes from the housing market—not price increases this time, but a decline in foreclosures to their lowest level since 2007. Filings in 2013 were down 26 percent from 2012 levels, and 53 percent from the peak in 2010, according to RealtyTrac, a housing market information company. (See the full article here.) The foreclosure inventory was down 22 percent from 2012, and 44 percent from the peak. Even as the market improves for sales, the underlying foreclosure problem has also eased significantly. This matters, because it speaks to what might be called the “looking back” part of the housing crisis, as opposed to the “looking forward” information on sales and prices. Both sides are improving, which will support further growth going forward.
Europe has good news as well. The French president, François Hollande, a Socialist, got praise from Germany and the European Union (and rage from many of his constituents) by proposing reduced government spending and lower corporate taxes. France has been the big outlier in European financial reform, and the country has made minimal changes to address its growing problems. These proposals, from a Socialist president, represent a recognition, even and especially in France, that the old social model was not supportable. This kind of change is what’s necessary for the euro—and the political idea of Europe—to survive; if passed, it should make the survival of the euro that much more likely.
The final item I want to mention is an article in the Wall Street Journal, “Taliban Bring Girls Back to Class,” about how the Taliban, or parts of it, have now not only shifted toward allowing girls to go to school, but have actually stared such schools. Radical Islam remains one of the major civilizational forces that is actively hostile to modernity, and this shift, minor though it seems, is a signal that change is possible there as well.
Tomorrow, I’ll return to risk management. But, as active as I am in calling out risks and problems, sometimes it’s nice to look at the good stuff—especially when, as today, a bunch of it shows up together.