Impact of American mid term elections

It has now been a week since the mid term elections took place.  Personally, I never thought that the Republican would recover so quickly from their 2008 drubbing, but then I made two miscalculations:  First, Americans are shell shocked by the 2007-2009 recession, the worse in nearly 80 years.  Second, the Obama administration has gone a long way to demonstrated that Democrats are not fit to govern.

Obama’s priorities to focus on the status quo appear somewhat strange.  The banks problems have been swept under the carpet, and sustained by a mix of lies and omission.  Level 3 assets are the perfect example of the weakness of the U.S. banking system.  His focus on the health care reform was important, but a 2,000 page new law is beyond the pale of what is acceptable. 

Americans like black and white solutions and Obama has failed to deliver these.  He has spent an inordinate amount of time courting Republicans who have time and again spurn him.  His desire to re-regulate the banks, while leaving them unchanged was bound to end badly, since the banks have nothing to loose from aggressively pushing back on regulations.  If he thought the system was broken, why did he not fix the problem at its source?

So today America finds itself in a gridlock, no legislation will be approved, it’s almost certain that the Bush tax cuts will not be reconvened, because some idiotic congressman will do something stupid.   For Canada the news is somewhat good, many were concerned that America would slow the inflow of oil sand sourced oil in view of the severe pollution – when in fact this issue died the day following the BP explosion in the Gulf of Mexico. 

I don’t believe for one minute that the Republican will cut expenses – aside from maybe a $100 billion of token cuts, America needs to cut nearly $1 trillion for its federal expense bill and those will have to be generated entitlement programs.  The first real test of congress will be the extension of the ethanol and biofuels subsidies – if these are renewed, Canada will know that the Republicans have no real intention of addressing the budget deficit. 

The real risk for Canada is the new congress “nativists” streak.  The real risk is that Canada, as America’s largest trading partner, will be in the crosshair of Congress as a way to increase jobs at home.