The 12th Congress: And We’re Off

Morris Segall      federal debt ceiling, government funding, new Congress, political gridlock, reduce federal government and national debt, Tea Party conservatives

Tomorrow the 112th Congress will be sworn in and members of the new Republican majority in the House have already declared their first order of business will be the repeal of President Obama’s healthcare legislation enacted last year. It would appear the bipartisan cooperation of the lame duck Congress last month  is over and the ideological divide resulting from the November elections will be prevalent particularly in the House. Of the 242 new Republicans in the House, nearly 90 will be conservatives ideologically aligned with the Tea Party. They will represent a large, dogmatic contingent committed to reversing the legislative and fiscal spending programs of not only the Obama administration but those of the Bush administration as well. They feel empowered by the mid term elections to move forward with a concerted effort to cut federal spending, reduce the size and power of the federal government and reduce the national debt. Their efforts will cause friction within the Republican party whose mainstream leadership is committed to producing legislative results that will produce jobs and help the economy. Nonetheless, the House Republican leadership has announced its intention to cut $100 billion from the Federal budget this year as a concession to the “Tea Party” agenda. Details of where the cuts will come from are missing. Keeping the hard line conservatives “in line” will prove a challenge to the Republican leadership.

While providing a challenge to the Republican party leadership, the new, hard line conservatives will represent an attack force to the Democratic Party whose slim majority in the Senate will have to hold back efforts to undue their legislative programs of the past two years and their legislative legacy of the past seventy years. The partisanship that has intensified since the Clinton administration promises to become more vehement given the rhetoric and promised zeal of the newly elected conservatives. One thing is certain. The federal largess doled out over the last two years to “jump start” the U.S. economy is over. The level of federal stimulus promises to be reversed by the new fiscal conservatives and that will force the private sector to fill the void and carry the burden of economic recovery going forward. It remains to be seen if the private sector can successfully accomplish that task.

In the meantime, the first battles between the parties and the President will be the funding of the federal government and the raising of the debt ceiling. The current continuing resolution funding the federal government expires in March and the current debt ceiling of approximately $14 trillion is expected to be reached in the spring. At this time, the rhetoric from the Republican conservatives indicates opposition to raising the debt ceiling and refusal to fund the government without substantial fiscal and regulatory reductions. We expect a game of “chicken” for the next two months as we near the deadlines for both. We expect the President to be conciliatory as he continues to move towards the political center, avoid devastating gridlock and attempt to paint his Republican opposition as irresponsible and unable to effectively serve the body politic. The President wants to get re-elected in 2012 and he stands to win politically if the Republicans grind the government to a halt.

Stimulus is in place for aiding the economy and the stock market in 2011. The new Congress will decide the future trends in both thereafter.

Morris R. Segall