William Shakespeare may have been envisioning the Joint Select Committee on Deficit Reduction, the so-called supercommittee, when he wrote Macbeth’s famous soliloquy:
“Tomorrow and tomorrow and tomorrow,” Macbeth began, referring to Congress’ proclivity to put off important national decisions indefinitely, “creeps this petty pace from day to day.” Of the doom the U.S. faces if it fails to get its finances under control, the Bard continued “all our yesterdays have lighted fools the way to dusty death.” Of the supercommittee, he added simply: “Out, out, brief candle!”
And of the whole sorry saga, from the failure to agree on a debt-ceiling plan on time to stave off a credit downgrade by S&P to the current supercommittee impasse on achieving $1.5 trillion in deficit reduction over 10 years, Shakespeare seemed to say of our national economic life that it is “a tale told by an idiot, full of sound and fury, signifying nothing.”
While it is not entirely clear that the Bard of Avon was having a vision of the U.S. Congress four centuries into the future, financial services industry insiders seem to share his analysis. Chief market strategist for LPL Financial, Jeff Kleintop (left), in his weekly market commentary released Tuesday, suggests the supercommittee follies ultimately signify nothing, since “there is no debt ceiling or potential default looming this time.”
As part of Congress’ August debt deal, the U.S. won’t face a debt-ceiling issue until 2013 and the legislation passed then provides for the event of the supercommittee’s failure through automatic cuts amounting to $1.2 trillion over nine years. That is why Moody’s, Standard & Poor’s and Fitch are unlikely to take any seriously negative action before 2013 if they don’t observe steps toward fiscal consolidation at that time.
While many worry about the harshness of sequestration cuts, which fall heavily on defense and the elimination of the Bush-era tax cuts, Kleintop predicts the sequester plan will never take place. “This is because there is likely to be a major deficit reduction package in 2013 under a new GOP-dominated Congress following the 2012 elections.”
Meanwhile, at a T. Rowe Price media conference Tuesday in New York on the investment and economic outlook for 2012, T. Rowe’s chief economist, Alan Levenson, added to Kleintop’s (and Shakespeare’s) view of the non-significance of the supercommittee, calling it a “three-ring fiscal circus” and adding, to laughter in the room, “I don’t think we should use the word ‘super.”’