Trade Nov-Dec Interactive - page 7

E c o n o m i s t ’ s C o r n e r
W
ith the two-week government
shutdown in early October,
partisanship in Washington has
shown its ugliest face. This escala-
tion should serve as a reminder that
successful politics require the
willingness to compromise. And this
willingness will be tested again soon.
After all, the deal that reopened the
government and lifted the debt
ceiling has only kicked the can down
the road for a few months. There are
new deadlines looming in mid-
December, mid-January and early
February. As most Republicans have
now understood that the current
political constellation makes changes
to the new health care law ("Obam-
acare") impossible, the focus is back
on budget issues.
Over the next two months, a biparti-
san committee of Congress will
negotiate over broader budget issues.
The main focus will be to find either
entitlement or revenue replacements
for the sequester, the automatic
spending cuts that have been in
place since this year. Democrats
would like to delay some of the cuts
into the future and replace others
with higher revenues. Republicans,
on the other hand, want to at least
keep the amount of overall spending
cuts, but would like to shift some of
them from defense to entitlements. If
the committee wants to have any
chance to succeed, the two parties
might need to look in the mirror and
acknowledge some facts first: On the
one hand, Republicans have to stop
blaming the Obama administration
for being the main culprit for the
elevated public debt. According to
the Center for Budget and Policy
Priorities, it is in fact the Bush tax
cuts and the unfunded wars in
Afghanistan and Iraq that account
for nearly half of the outstanding
debt. Democrats, on the other hand,
will need to acknowledge that
entitlement costs are in fact the main
driver of future deficits, which need
to be addressed. According to the
Congressional Budget Office,
spending for Social Security and
major health care programs will rise
over the next 25 years to 14.2% of
GDP, more than twice the average
over the past four decades.
Instead, the political parties will
probably waste another opportunity
and fall back into partisan trench
warfare. In other words, I do not
think that the budget committee will
be able to find common ground,
which means that the sequester in its
current form will continue next year.
Does that also imply another
shutdown or debt ceiling stand-off in
January? I do not think – and
certainly hope – so! After the most
recent fight sent their approval
ratings to record lows, Republicans
are unlikely to risk another gamble
only months before mid-term
elections. But that is the really the
only good news coming out of
Washington these days.
n
Partisanship Has Shown its Ugly Face
German American Trade Nov/Dec 2013
7
production facility in Brantford,
Ontario. The company says that
construction of the new facility is
almost done and that test production
should lead to the start of production
by the end of 2013. From its new
location in Brantford, the company
plans to support its customers
throughout North America with
solutions for rigid plastic packaging
in the cosmetics category.
Winemakers in Germany
are Exporting More Than Ever
Germany may be famous for its beer
gardens and the Bavarian Purity Law,
but the wineries of Germany have
edged their way into the liquid
export market. Wine in Germany has
often been underrated due to the
prolific grape production of its
western and southern neighbors, but
in recent years the wine industry has
taken off. In 2011, the Federal
Statistical Office reported that
German wine exports accounted for
348 million euros.
Dr. Harm Bandholz, CFA
Chief U.S. Economist
UniCredit Research
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