Sunday, February 24, 2013

Stanley Druckenmiller and Friends Focus on the U.S. Budget and the Future

Stanley Druckenmiller
As U.S. policy makers continue to negotiate budget cuts, the following comments by Geoffrey Canada- President Harlem Children's Zone, Stanley Druckenmiller - former President of Duquesne Capital and Kevin Warsh - former Federal Reserve Governor, from their article “Generational Theft Needs to Be Arrested” (Wall Street Journal Feb. 14, 2013) are worth considering.
  • We recognize several hard truths: Government spending levels are unsustainable. Higher taxes, however advisable or not, fail to come close to solving the problem. ..Three main infirmities plague Washington and constitute a clear and present danger to the prospects for the next generation.”
  • The country's existing entitlement programs are not just unaffordable; they are also profoundly unfair to those who are taking their first steps in search of opportunity…The government has an obligation, of course, to support needy seniors. But this pension system is ripe for common-sense reforms, including changing eligibility ages and benefit structures for those with greater means.”
  • Elected officials continue to allow the immediate [needs] to trump the important…The country has spent trillions in temporary tax credits and short-term "stimulus" to goose growth by the next election…..The Federal Reserve's policies reinforce this short-term orientation… As a result, Congress may be missing market signals and failing to see the costs of its spending addiction in time to undertake real reforms. Ultimately, economic fundamentals—not the promises of central banks—will determine the prices of stocks and bonds. “
  • “Too many politicians appear more eager to divide the spoils of electoral victory among their own than to increase the size of the economic pie for all…Some individual Americans are surely better off than they were many years ago. The more probing question is whether America is better off.”
  • The deeper failing is one of essential fairness. The benefits of rising stock prices accrue to those who have already amassed wealth at the expense of those who are struggling to save. And failing to deal with runaway spending will burden the country's children with higher interest rates and a debt bomb that will come due in their lifetimes.“
MY TAKE
As these views join those of other high profile citizens, many Washington decision makers are influenced by local voters, campaign supporters and affiliations with congressional committees. History has demonstrated that the big hard decisions are often adjustments to the status quo as pressure increases. The risks are known, but the sense of danger has dissipated. Because the economy remains fragile, market dynamics have the potential to change rapidly.

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