Grover Norquist is the head of Americans for Tax Reform who is known for having politicians sign a pledge not to raise taxes. What is newsworthy about that is that politicians, republicans in particular, are upholding the pledge. So much so that despite being tasked to come up with a plan to try to shrink the U.S. budget deficit a bipartisan committee known as the U.S. Debt Supercommittee is on the brink of failure because of the refusal of politicians to raise taxes, while Norquist is being touted as one of the most powerful men in Washington. While this may be good news for supporters of Americans for Tax Reform, it is not good news for U.S. stock indices and global markets. It is one of those rare times where markets are actually paying attention to politicians, and the continued political gridlock looks to be a lose/ lose proposition for global stock investors with Grover Norquist, whose unassuming looks seem to match his characteresque name, at the center.
While the damage that political gridlock in Washington D.C. causes to U.S. household wealth may be overlooked by conservative republicans counting coup over their democratic opponents – the August 2011 sell off following the July political gridlock insured that 3rd quarter losses to U.S. household wealth were on par with the 2007-2009 recession – the rest of the world is well aware of the dangers of U.S. politics as usual. When asked what concerns her in the current economic environment the head of the IMF, Christine Lagarde, was quick to point to the failure of U.S. politicians to actually get anything done regarding their country’s debt issues.
As always it is the market, and not politicians, that is the final arbiter, and with the S&P 500 down another 2% a half hour into the U.S. session today the Grover Norquist household wealth tax is yet again extracting more damage to U.S. and global investors.