Super Committee Failure: Another Ride on the Roller Coaster

It would appear that investors and traders are once again on a roller coaster of sorts, and politicians in Washington are the ones who pulled the lever. As of today, the market is on the descent. Americans have good reason to be upset as it was just starting to look like the economy was starting to get back on track.

Bloomberg is reporting that the US Super Committee is expected to announce tomorrow that it has failed to reach an agreement on $1.2 trillion in federal budget savings. According to Bloomberg, the 12-member panel made up of six Democrats and six Republicans has been deadlocked over taxes. Singing that same old song in Washington, Democrats are "seeking tax increases on high earners while Republicans were pushing for an extension of tax cuts enacted under Pres. George W. Bush". Republicans are also calling for a cut in federal funding of so-called entitlement programs like Medicare.

In response to the Super Committee's expected failure, Wall Street has reacted negatively. Two hours into the trading day, the Dow Jones Industrial Average was down 312 points (-2.65%). Where many Americans are waiting for the economy to get back on the road, like a family about to head out on a long journey, it would seem that the trip to wealth-creation and lower unemployment has been delayed while the parents are arguing at the gas station. Those unemployed in America may be asking from the backseat, "Are we there yet? Are we there yet?", and meanwhile, the parents are bickering outside the car.

While the political gridlock between Republicans and Democrats in Washington festers, the markets appear to be struggling to find solid ground. According to the Associated Press, "uncertainty about federal spending hurts the fragile recovery because private-sector growth is so slow". Unfortunately, the current political dialogue seems to be an echo from the recent debt debacle. Associated Press: "The lack of an agreement also makes less likely a renewal of the payroll tax cut and extended unemployment insurance benefits. Both expire at the end of December. Economists say that will further drag on the economy."

In looking at the course of the the DJIA over the past five years, where it was beginning to look like we had the potential for rising out of the Great Recession, one has to wonder if the current trend suggests that we on the verge of another recession. Where the prospect of a double-dip recession may not be news for some, there were those of us who had hope that perhaps the nation would find its way despite rising energy costs, the specter of inflation, high unemployment, and political gridlock.

Traders, investors, and everyday Americans have good reason to be frustrated -- and dare I say it, angry. In the aftermath of accusations that members of Congress are trading stocks on inside information, one has to wonder how a freefall in the markets plays into the hidden intentions of members of Congress. Are there any Congressmen who are benefiting from the current decline in the market? And if so, what are their names? Even if the Super Committee manages to work out a viable compromise in the eleventh hour at the last minute, would that be merely playing into lawmakers' trading plans? In a time period where Americans are getting tired of political uncertainy, political gridlock, and political games, one would hope that resolution to the country's dilemmas will be worked out in the markets eventually -- and if not the markets, then at least the voting booths.

Throughout the nation's current dilemmas ranging from the debt debacle to Occupy Wall Street to unemployment, I have often repeated the fact that at some point, non-productivity starts to become counterproductivity. One might even call it "Rabinowitz's Law" at this point. Given enough time, apathy and doing nothing starts to become counterproductive. In this way, in light of political gridlock in Washington and a failure to find compromise, political issues are starting to become socio-economic issues.

CNBC reported Monday that Kevin Logan, chief US economist at HSBC, has stated, "The super committee may come up with a procrastination plan that specifies targets for spending cuts and revenue increases, but leaves the details to congressional committees to write the necessary tax and spending legislation." Once again, there is an apparent lack of accountability in Washington. Is this procrastination, or sheer apathy? Even worse, further political gridlock and inaction could lead to downgrades of the US credit rating. Logan: "The rating agencies might be tolerant of this for a while, but failure to make clear progress could lead to downgrades of the US sovereign credit rating at some point next year." Investors and all those who are in search of wealth-creation and productivity in this nation have good reason to be frustrated.

As goes the oft-told quip, "If 'pro' is the opposite of 'con', then what is the opposite of 'progress'?" In light of the market's drop in response to the inability of Washington to find compromise with respect to federal finances, it would appear that we are finding the answer to that question.