Aright I have to admit I am fuming, I mean really ticked off at the current congress. The current lame duck congress is in session and is putting together and working on passing an omnibus budget that cuts $26 Billion from Obama’s 2011 requests but includes thousands of ear marks and appropriations. While the bill represents just under a 2% increase in spending from last year’s bill and it is still chock full of waste(including a $48 BILLION dollar earmark); I know dear reader, waste you are shocked! The problem I have with the bill is that it essentially renders the next duly elected congress into impotent eunuchs regarding budgets. Before I get further into this I want to take a small detour in to the history of congress and the lame duck session.
Back in the days before we had jet planes, automobiles and interstate highways it took time for the individuals elected by the people to travel to Washington and set up shop. As a result the leaders of the day when they drafted the Constitution incorporated a time period or window in which the newly elected could set up shop in Washington before taking over their new positions. The 20th amendment of the Constitution details the transfer of power and in its original form the new leaders became effective on March 4th after the election, but post 1933 the beginning of a congressional term was moved up to January 3rd(the President and Vice President was moved to January 20th). Additionally, Section 2 of the 20th amendment dictates that congress shall assemble at least once a year. At the time of the founding of our great nation there were no career politicians, instead people left behind their business or farm and went to Washington to do actual public service, not like what wealthy elites call public service today..yes I am talking to you Mr. Don’t Tax my $7 million dollar yacht Kerry.
Today the wealthy delude themselves into the idea that they are doing public service because they have the means to be able to run for and support themselves while holding public office; that in itself does not mean that they are there to do public work as demonstrated by the number of ego maniacs Washington breeds. Originally, “Lame Duck” congresses were to be convened if there was a serious problem that had to be dealt with in between sessions, the congress in session currently did not need to be reconvened but instead it was due to the current power trinity’s (Obama, Reid, Pelosi) desire. Lame duck sessions are usually a poor idea as the outgoing congressional lawmaker that has been defeated is just there going through the motions and it can lead to poor results. On a state level 39 states don’t even allow lame duck sessions which begs the question why does Washington still have them? Instead just as in 1933 we should amend the constitution to dramatically shorten the transition of power to avoid these sessions as the constraints that required the current timeframe no longer exist.
In the past there have been horrible lame duck sessions with terrible consequences. The Lame Duck of 1860 the congress allowed the secession of seven states because then President Buchannan felt that the government had not right to go to war to stop them and this set the stage for the Civil War. In 1980 the lame duck congress was looking to repair the tax code prior to Regan taking office and there was much concern that the outgoing Democrats would botch it up; instead the Republicans ended up getting what they wanted and the boom of the 1980’s had a foundation. That particular instance worked out but it could have gone either way. There have also been Lame Ducks in 1982, 1994, 2000, 2002, 2006 and 2008. Of course in today’s partisan world the Democrats defend the current lame duck and its attitude by using the 2006 lame duck as an example where the Republicans passed poor legislation when Karl Rove had a say in things. As far as I am concerned the lame duck action of 2006 was reprehensible just as it is today, to me the difference is that today it is more damaging.
Aside from the fact that the current spending bill and budget are wrong for the current environment it is an affront to the American voter. Not only is the congress spending bill loaded with earmarks but also this Lame duck was convened as a matter of one last feeding frenzy by the ”Demopigs” (this term does not reflect all Democrats just the ones pushing the current Omnibus bill and the strict Pelosi/Reed disciples) at the public trough to fuel their borderline Marxist wet dreams.
A friend and I were discussing this lame duck situation and she was incredibly upset with this whole scenario which is why I started to write this piece. Essentially this lame duck session was born purely of politics and has absolutely no regard for the public or voter will. Granted the Tea Party Republicans take over January 3rd and are going to have to spend lots of time attempting to undo the mischief that the unholy Reid, Pelosi, Obama trinity have crafted rather than getting to the business of fixing equally pressing problems. Instead this budget bill is being imposed on the next congress and chews up ½ of the newly elected congress’ term. It appears that besides further depleting the public checking account the goal was to put forth road blocks preventing the incoming Republicans from being able to cut the budgets. The next congress can’t just unilaterally roll back a budget once approved and the Trinity knows this; this leaves the new congress bogged down in trying to remove or reduce line items to defund or reduce funding thereby creating a log jam of legislation and debate. Moreover, even if the congress does agree on specific line items it is still subject to a veto from “thou who shall not be middle named”. With any luck this plot by the “Trinity” will backfire on them when John Q figures out that they have neutered the Tea Party at least temporarily and deliberately spit in the eye of the American voter.
As far as I can tell the current lame duck has screwed the pooch for the new congress and the American people. It is always a bad idea to let the congress that has effectively been fired back in to the capitol to make new laws or budgetary/spending bills; especially when the spirit and intent of the lame duck was in case of emergency to convene congress not just to continue on a path that the public has taken umbrage against. If you think about it the lame duck session should be eliminated regardless of the party it affects because ultimately it affects the US taxpayer who has to live with the consequences. I am sure most of you have worked at a corporation where an employee has been fired; the employee is generally watched as they collect their belongings and are then escorted out of the building as not to allow any collateral damage. Even on the ridiculous “Apprentice” show once Trump tells an individual they are “fired” that individual leaves the show they don’t let them hang around to mess with the others vying for the position of Trump lackey.
I wish I could take credit for the analogy I am about to impart to you dear reader, but the truth is I was working on one while writing this article and over heard a better one on the radio. So while I cannot take credit for this specific analogy as the original I was authoring while good was not as poignant as the one I am going to present here.
Dear reader, unless you are under the age of say 18 or have been living in a cave in Afghanistan sipping tea with the likes of Bin Laden you probably have seen the “Godfather” movies, which is where this analogy comes from. Rolling back the clock to November when America held its election we as a nation voted against the current agenda particularly when it comes to the House of Representatives. If you can visualize the scene in “Godfather I” where ”Sonny Corleone” after finding out that his brother-in-law was beating his sister pays a visit to teach him a lesson. “Sonny” is so enraged that he beats the brother-in-law essentially to a pulp; it is no holds barred as “Sonny” bludgeons him with fists and other objects even going as far as using a trash can lid. “Sonny” doles out one of the worst beatings ever captured on film and the brother-in-law is essentially left as a bloody, bruised motionless lump. Now if you can take that image and translate the scene to the political arena we the public are essentially “Sonny” and the congress (“Demopigs” in particular) are the brother-in-law based upon what the voting public did to the incumbents. I cannot recall a thrashing this brutal for congress in my lifetime; sure there was the “contract with America” period and the house and senate have flip flopped over my voting career but nothing like what happened this November. Essentially, John Q aka “Dufus Americanus” woke up and did not like what they saw transpiring and sent a message.
Flash forward to today and what scene comes to mind if you are to take analogy from “Godfather I”? At this point the public is still being portrayed by “Sonny” but the scene has changed. If you can imagine the scene where “Sonny” is driving his car and stops at a toll booth. There we are the American voting public played by “Sonny” in the car at the toll booth and the current lame duck session of congress is playing the group of gangsters arriving in multiple cars blocking our way and then turning us in to human Swiss cheese with machine gunfire as represented by this omnibus spending/budget bill.
So why should we care? Well dear readers, if you have been reading my columns then you know that there is a link between politics and your investments whether you like it or not. It does seem that for the moment even though the public has spoken it was not heard and the current mess of spending, deficits and debt is going to continue. The net result is that you need to continue on the same path as before since the problems are not being addressed. The investment path is still in tangibles. I am keenly aware that the tangibles particularly precious metals are getting hit at the moment; however, this is not a bad thing for a couple of reasons. First, the metals especially needed a break as things were getting a bit frothy and the bull needs to fling off more investors so as to maximize the number that will miss the moves. Second, this gives you an opportunity to buy in to the tangibles theme at a lower price reducing your risk. Third, this correction actually makes the longer run look more solid for if the prices on tangibles went parabolic it would end up being a bubble and we all know how that ends. The reality is that not much has changed overall and in fact the drivers of the tangibles bull have actually gotten stronger. The gyrations we are experiencing at the moment are both necessary and hard to swallow but needed to set the stage for the next leg up. The fact that Merkel could fart in Germany and it has an effect on the markets day to day just shows that investors have no clue as to what is really happening.
Don’t get hung up on or participate in sound bite economics as most investors do instead ask yourself: What has changed? Is the change real? Are the underlying drivers of your investment theme altered? Let’s face it we still have record deficits, zero financial discipline (short of lip service) in congress, additional piling on to the debt, creeping interest rates, “The BenBernake” still dropping conjured money and weakening confidence in the Dollar despite the short term respite; so things have not really changed at all. Moreover, even when the deficit commission charged by Obama came out with their recommendations many of which were good, they could not even get agreement among the 14 people on the panel; now imagine congress trying to figure this mess out. When you take the time to think for yourself you can see the forest for the trees and make smart decisions. If instead you listen to everyone and their brother paraded through the media or CNBC then you are assured to lose as they are either projecting what they want the message to be or looking in the rearview. Remember think for yourself and take care of your own investments as no one will do a better job or take more care of your money than YOU!
The take away from this event is multifaceted. First, I believe that the Lame Duck is doing nothing more than extending our current malaise and keeping the status quo for Washington and our investment themes. Second, if the explosion in the anti-incumbent mood is any indication of public feeling then now would be the time for the tea party to spring in to action to get various amendments to the Constitution before the congress.
The amendments I am suggesting here would show that congress is serious about listening to the voter and help prevent some of the ridiculousness that comes out of Washington every year. First, congress should move to dramatically shorten the period between elections and the power change over as detailed in the 20th amendment; this would avoid disgraces like what is currently occurring under this lame duck congress. Second, an amendment should be proposed that congress shall make no law that neither they nor any other part of the government is exempted from. Third, if the Federal government wants to impose laws, regulations or programs on the states they cannot do so without the approval of the states and the Federal government must not place the burden on the states, in other words the FEDs need to put their money where their mouth is. Fourth, let’s get that anti-earmark law on the books already! Fifth, there should be a law against special interests and lobbyists and their participation in the legislative process. I believe these five amendments would be a good place to start back on the road to sanity.