“Doomsday Machine” Politics Hurt Credit Unions

By Henry Meier

In the best political satire ever made, Dr. Strangelove, Peter Sellers as the U.S. President asks what good is a doomsday machine if no one knows that it exist?  In Washington, our political leaders, apparently at the urging of the White House, devised a fiscal doomsday machine in 2011 that was designed to mandate automatic spending cuts so crude that everyone would have to negotiate an alternative long-term deficit reduction plan.  We know now that Washington is even crazier than Washington thinks and the big loser is the American public, which now must wait and see how much these spending cuts impact the economy.

To be sure, as the President said on Friday, these cuts are not catastrophic so much as dumb.  No one would cut spending this way if it was up to them, but no one is willing to compromise on an alternative.  Why does this matter?  Well, also on Friday, NCUAannounced the year-end statistics from fiscal year 2012 and although they indicate some structural changes for the industry right below the surface, they also show that the worst is behind us and that the industry in the aggregate continues to make impressive gains.  For example, our loan losses are shrinking, assets continue to grow, earnings are up and people are continuing to turn to credit unions.

This does not mean that happy days are here again.  The Wall Street Journal points out that big name investors are starting to shy away from consumer retail stocks as consumers get hit with an increased payroll tax, rising gas prices and continued stagflation.  In addition, corporations continue to keep huge amounts of money in the safe rather than invest in new employees.

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