May 8, 2023
Let's talk about the debt ceiling drama.
Politically, this looks like 2011. Obama had spent two years with an aligned Congress, and a war-chest of fiscal stimulus (the American Recover and Reinvestment Act – ARRA), which, in part, opportunistically funded his agenda. It was the building blocks of the disruptive tech revolution and the early stages clean energy investment.
$465 million went to Tesla, under the directive of "investing in emerging technology." Tesla had a new CEO (Elon), was burning cash and amassing liabilities (they were broke), and had yet to produce a consumer viable car. This was an uninvestable company, that the government plowed almost half a billion-dollars.
ARRA included around $90 billion in funding for clean energy and climate initiatives. More than 90 percent of the 3.5 million jobs created, were promised to be in "rebuilding roads and bridges, constructing wind turbines and solar panels, laying broadband and expanding mass transit."
Despite the roll-out of an unimaginably large stimulus package, the economy sputtered.
If we look back at historical recessions, the contraction tends to be followed by a strong snapback in growth – at least offsetting the loss in economic output.
The growth that followed the 8.5% contraction of the Great Financial Crisis, was just a little better than 4%. And that was while the Fed was at zero rates, and supporting markets with QE (and with tailwinds of $900 billion of fiscal stimulus).
Yet, facing risks of a double-dip recession (which would have been economic apocalypse), Obama went to work on executing his health care agenda.
This all brought about a split Congress by late 2010.
And then the debt ceiling standoff in 2011.
This, unsurprisingly, has a lot of parallels with the current environment.
In both cases, this is/was a debate on the budget. The Republicans are effectively trying to claw back some of the agenda spending in a budget that was approved by the Democrat-controlled Congress.
This is as much about policy-path, as it is about debt (probably moreso).
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