After traditional U.S. congressional processes were ineffective in determining $1.4 trillion in U.S. budget cuts, the process was “outsourced” to a smaller group of legislators called the “super-committee”. With its November 23 deadline approaching, there is limited evidence that this group has made progress and political bickering continues.
Interesting, Rep. Gabrielle Giffords R-Arizona (still recovering from an assassination attempt), along with 14 Democrats and 11 Republicans submitted a letter to the committee this past Thursday recommending that congressional salaries should be cut by 5% citing that 1) members of Congress have not taken a pay cut since April 1, 1933, 2) U.S. Congressional compensation is among the highest in the world (only exceeded by Japan) and 3) “gold-plated member retirement benefits” should be curbed.
MY TAKE: With low expectations for the committee’s efforts, some investors believe the negative news is priced into the market. However, markets often do not take the negative hit until the news is finally released. Hopefully, the committee delivers some positive
results, otherwise the markets may take control. Note: Eurozone members, having poorly managed their economic problems, are currently learning the lessons of market control.