Opinion: Heading toward a Sept. surprise
by Judd Gregg
The fiscal cliff is the most talked about , and predictable, event in
If the policies it involves go forward with massive cuts in defense
spending and a massive tax increase on everyone who pays taxes it
will cause a dramatic slowdown in the economy.
It will probably put the nation into recession.
Just the anticipation of it seems to have significantly slowed
economic activity investment, in particular as we head into the
second half of this year.
Of course, Congress talks about it. But it cannot act, or will not
act, until December.
President Obama has simply abdicated his role as the nation s leader
and moved on to something he can actually do, which is campaign.
But while the fiscal cliff is a critical issue, it may not be the next
major threat to our prosperity.
September is a month where unusual and often extremely damaging things
seem to happen.
It is the month that kicked off the Great Depression and led to Black
Monday a month later.
It also is the month in which, in 2008, the nation came close to a
total economic collapse.
Bear Stearns failed. Lehman failed. And the world stood on the brink
of another potentially massive depression brought on by financial
Without the forceful intervention of Hank Paulsen and Ben Bernanke,
Main Street America would have gone through extraordinarily hard
In between these two cataclysmic events, there have been numerous
sharp stock market downturns in September.
Why these events seem to crowd into September is a subject of a great
deal of conjecture. There is no consistent answer. But it seems
September is the point in the year where people assess where they have
gone, and what the next year will be like, and make investment
decisions based on their conclusions.
To put it another way, reality sets in.
If investors see big problems in the economy or in world affairs, they
take matters into their own hands rather than hoping they will be
fixed by some outside force such as government.
Usually, they act defensively.
Unfortunately, this year, September may be a decisive month for the
world and our nation s economy.
Think about the forces afoot. None of them seems to be headed to a
First, there s the European fiscal mess.
Although there is a constant and energized effort to abate the
problems driving the disarray there, progress is minimal. As
Bernanke pointed out in sobering testimony before the House last week,
Europe does not have its act together.
It has not addressed the core of its problem its massive debt and
unstable banking system. The recession brought on by this problem is
only aggravating things.
This will probably be undeniably clear by September.
Second, Israel is under attack, or at least her people are, in places
such as Bulgaria. They believe Iran is behind these attacks.
Couple this with the fact that Iran continues its march to obtain
nuclear weapons and the means to deliver them and one wonders how
much longer Israel will cede her potential survival to Obama and the
Not long, one suspects. September.
Third, America is not doing a good job of managing its own
responsibility being a force for responsible government and a
source of economic growth.
In fact, the impending fiscal cliff is clearly a potential accelerant
for a meltdown.
After all, once reality sets in that there is going to be no
improvement in leadership , whether on the fiscal cliff or on
long-term deficits and debt, people and markets will react.
They will not wait until January.
Historically, September has been a good time for such a reaction.
Fourth, Americans who generate economic activity are beginning to get
worn down amid the incessant attacks of the Obama administration.
It is becoming clear to anyone who participates in the private economy
that they have a target on their backs.
The president, for one, has revealed his view that government is
responsible for the success of people who take risks and generate
In the meantime, true believers at the White House continue with
pervasive expansion of regulatory excess.
The Obama administration is expanding government to a point where it
rivals European social welfare states in size.
These things provide a type of clarity that tends to lead to
investment decisions that in turn lead to economic contraction.
All this is probably not good news, but I will say this September is
a great month to be in New Hampshire.
Judd Gregg is a former governor and three-term senator from New
Hampshire who served as chairman and ranking member of the Senate
Budget Committee and as ranking member of the Senate Appropriations
subcommittee on Foreign Operations. He also is an international
adviser to Goldman Sachs.
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