Despite embarrassingly low, single-digit approval ratings, Congressional leaders have, for the third time this year, put America on a countdown clock. It seems odd that "we" get held hostage due to ''their'' inability to finish their work on time but alas, it is ''us'' who keep sending them back. The point is, whether or not this impasse (over extending the payroll tax cut) is cleared, there is sure to be another, and another after that as neither side has the desire - or ability - to step away from its game of brinkmanship.
As tiresome as this is, in my world, the capital markets, it's not the worst possible scenario, If you think about it, gridlock is essentially what happens when checks and balances get written about in the newspaper. No clearer are the benefits of these stalemates than during Bill Clinton's 2nd term, which still stands as the high water mark, economically speaking, in the Y2K era.
While blocking the government's ability to do the wrong thing is a good thing, the inability to do anything is not. And that is pretty much where we stand right now, at a time when the country is growing tired of our economic sludge and needs decisive action to move forward.
"In times of economic growth, in times of surplus, gridlock is fabulous," says Mark Lamkin, CEO of Lamkin Wealth Management. "But in times of systemic stress like the budget deficits that we're facing now, gridlock is bad and the markets hate it, and the average American hates it."
From his point of view, advising affluent individuals and business owners, Lamkin sees failure to pass the 2% payroll tax extension as more of a psychological blow than a game changer for already anxious investors.
"I think the average American is scared to death right now and I think it shows in the volumes," Lamkin says, adding that normally passive, long-term investors are sitting on the sideline and don't mind missing some of the upside.
"They're scared. They like yield. They like safety," he says.
While he thinks the "country would be better off" if the Federal Reserve - not Congress - set and managed the budget, that seems to be more of an endorsement for what the central bank has done to avoid a depression than it is a realistic goal.
Even so, as we find ourselves gridlocked again and on the cusp of a hotly contested battle for the White House, Lamkin is somewhat sanguine about 2012. Despite his belief that it will be a year of brutal political rhetoric, he's expecting the negotiations will "start at the fringes and meet in the middle."
Is gridlock of this magnitude good or bad for the market? Feel free to reach out on Twitter @MattNesto or the Breakout Facebook page.
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