Tuesday, April 10, 2012

Gridlock: Good for the Economy?

A recent article in the Huffington Post discusses the economic benefits to Gridlock, as perceived by banking giant, Goldman Sachs.  The article outlines the arguments made in a recent Goldman research note.

The economists explain that a divided government is the only way that our government wouldn’t experience a sudden “belt-tightening” at the end of 2012.  They conclude that a Democrat-dominated government would let the Bush Tax Cuts expire, which would have severe economic consequences.  They also conclude that a Republican-dominated government would let stimulus funds expire, which would also be detrimental to our economy.  By retaining a divided government, Congress is more likely to slowly “phase out” both programs through compromise, which would lessen the risk of any sudden drops in stimulus funds or tax cuts.

This argument is an interesting one, because most discussions of Gridlock only mention the negative consequences of the perceived inaction.  But according to the Goldman perspective, both parties’ platforms could be harmful to the economy, and our nation would receive the most benefits with a compromise, rather than with smooth passing of legislation from one party.

1 comment:

  1. I tend to agree with this concept. Both spending cuts and tax increases are likely necessary to control the deficit, but neither party seems willing to embrace the worthwhile elements of the other's platform. The only possible way to get both of these solutions in the end result, it seems, is to place the two parties in a situation where they simply must work with one another or see the country's economic situation rapidly deteriorate. With a less combative political system, some kind of action is more assured, but in form of less thoroughly vetted and more radical policy. I would concur that this extra assurance is easily worth the cost of dealing with gridlock.