Sometimes a specter sticks around so long it no longer is frightening, but rather familiar.
So it is with the fact that Social Security and Medicare is running out of money. That specter has been around for so long that many of us think of it as nothing that is actually real. But proposals to correct the future course of both sure are frightening. The Simpson-Bowles Commission tasked to find solutions to our nation’s debt came up with some scenarios that would make both solvent, but the proposals never went far because the actuality meant cuts to services so many have come to expect, in fact, feel entitled to — thus the term entitlement.
Another specter that has reared its ugly head in recent years is the debt ceiling. It rattles its chains at times and in fact, the failure of a congressional deal to contend with it in summer 2011 prompted a Wall Street sell-off. The solution, of course, was the sequester cuts, which were threatened solely because they were so blunt and distasteful that they would force our leaders in Washington to finally, finally come up with a deal. But alas, that was not meant to be and the sequester cuts were enacted earlier this year. While there was some talk that the cuts would be so challenging that the populace would rise up and demand change, the only cut that really seemed to resonate was the one to air traffic controllers. While that was quickly remedied, the other cuts remained. Those cuts, along with rising tax revenue means the debt ceiling is still on the horizon, yet our government is not trimming the debt, just simply not adding on to it at such a rapid rate.
And so, this fall, arrives the debt ceiling deadline once again. Will it rattle its chains? Who knows, but the Federal Reserve is running out of arrows in its quantitative easing quiver to continue propping up the stock market. For those who know about quantitative easing, props to you. For those who don’t, it has essentially been an ongoing program in which the Federal Reserve has poured money into treasuries to diminish their value and force those with equity into the stock market. A recent look at the Dow shows it’s still relatively high, but lower than its recent record mark in part because there have been hints that quantitative easing is near its end and the Fed will pull back on its current $85 billion monthly bond purchases. Of course, the saber rattling in Syria doesn’t help either.
The deadline for the debt ceiling deadline is a moving target with some saying it could be reached as soon as September, or maybe October. Some suggest it might be pushed as far out as the holidays. In the past two years, however, there has been little evidence that the White House and the Republican-led House of Representatives have the taste, or at least the ability, to come up with a deal that could rectify the fact that the United States is hitting its self-imposed debt limit of $16.4 trillion set in 2011 when the last deal was reached.
For many, the debt ceiling and quantitative easing are about as exciting as determining the difference between Navajo white and tan paint, then watching it dry. But for those who have money in the markets through individual investments, mutual funds or individual retirement accounts, the impact could be mighty ... and a little depressing and all too-familiar.
Jon Mays is the editor in chief of the Daily Journal. He can be reached at email@example.com. Follow Jon on Twitter @jonmays.