Brandon Barford: «The Political Economy of America, Inc.»

Washington, D.C.- It is not that easy to understand how economic politics and policy work in the US. But tonight we had the right person to help us understand it a bit better. Brandon R. Barford is Vice President of ACG Analytics, where he advises clients on economic and financial regulation. He worked at the U.S. Senate Banking, Housing and Urban Affairs Committee where he served as Professional Staff under Ranking Member Richard Shelby (R-AL) from 2006-2009. In order to explain what is happening, Brandon compared the US to a company with various factions (Republicans and Democrats) pushing various plans (austerity vs. stimulus). And currently, the US is a far from well managed company.

“We are in a time when economic cycles mirror political cycles, which has not always been the case”. Much of the current politics around economic issues is related to the individual characteristics of newly elected representatives in Congress. A drastic change has also happened over the past two to three elections. Both sides of the aisle have become more ideologically pure. On the Republican side, Tea Party representatives were elected as a backlash to the perceived Republican policy «excesses» of the past advocated for a larger government presence–especially egregious examples were TARP and the bank and auto bailouts. Additionally, the majority of elected Democrats are now either minorities or female representatives, increasing polarization in that caucus as well. Nationally, there are an increasing number of «purple states» for Presidential and Senate races, but House seats remain «gerrymandered» to prevent true competition outside of the primary process. As a result, the divide between both parties is bigger than it has been in recent memory. It is more difficult to work together, compromise, and to even interact socially.

With this as the backdrop, it is not a surprise that Congress has not reached a long-term agreement on a budget and spending and tax reforms. An extremely cumbersome procedure to approve the budget doesn’t help either. Congress has to approve 12 separate laws to allocate funds for all the different agencies. An alternative procedure is to approve one single “omnibus bill”. Because the last budget was approved in 2010, the US government is currently running thanks only to “continuing resolutions” which extend the last budget’s allocations. The sequester has now been in effect for half of a year and absent any new compromise will stay for the next nine years, steadily shrinking the amount of discretionary spending across each and every program. The situation cannot be sustained for the long-term, but since the sky has not yet fallen yet there is a sense that it can stay this way for a while…