Assessing the Role of Government
Recently, President Trump bemoaned
the inconveniences of low-flow toilets, showers, dishwashers and
energy-efficient lightbulbs – all implemented in the wake of government
regulation aimed toward conservation efforts.1
One issue in the political divide
between parties is disagreement about the role of government in the economy. When
Congress passes legislation or the administration’s Cabinet departments impose
new rules and regulations, that, in turn, can cost American businesses money in
their efforts to comply. This, in turn, may reduce profits, threaten the growth
of jobs and expansion, and may reduce shareholder value.
However, the opposite side of the
debate is that without government oversight, corporations may run afoul of
consumer, employee or shareholder rights – not to mention the environment. In
these instances, the government often steps in to pass legislation or adjust
policies to restrict detrimental behavior or activities that impact people or
the economy as a whole.
Our political system is designed
such that neither political party holds control for very long, which serves as
a check and balance for political ideas and policies. Keep this in mind when
managing your own portfolio – particularly as we enter campaign season and
approach November elections. It’s usually not a good idea to make alterations
based on which political party is in power. We are here to help evaluate your
options; give us a call if you’d like to sit down and discuss your financial
After the severe impact of the outlier
economic downturn dubbed the Great Recession, in 2007 through 2009, Congress
passed regulatory reforms designed to enhance the resilience of America’s
financial system and make it less vulnerable to another crisis.2
However, since the recovery and ensuing strong economic growth, some of those “lender
stress tests” have been relaxed both in the United States and abroad. Opinion
columnist Elisa Martinuzzi, former managing editor for European finance at
Bloomberg News, says that could be putting the world economy once again at
In recent months, the Federal
Reserve has pumped more money into the U.S. banking system via interest rate
cuts and the purchase of $60 billion in Treasury bills each month through
spring 2020 to bolster its shrinking balance sheet. The Fed’s infusion of money
is credited with juicing the stock market and sending investor portfolios
soaring back to record gains.4
However, some people believe that the real market mover and
shaker may be the American people. Whether by vote or consumer decisions about
what to buy/view/support, the government and corporations are inevitably
policed by the people, for the people – and how they choose to spend their
Content prepared by Kara Stefan
1 Tamara Keith. NPR. Dec. 27, 2019. “Trump Vs. Toilets
(And Showers, Dishwashers And Lightbulbs).” https://www.npr.org/2019/12/27/791707318/trump-vs-toilets-and-showers-dishwashers-and-light-bulbs. Accessed Dec. 30, 2019.
2 Knowledge@Wharton. Sept. 11, 2018. “A Decade After
the Great Recession, Is the Global Financial System Safer?” https://knowledge.wharton.upenn.edu/article/ten-years-great-recession-global-financial-system-safer/. Accessed Dec.
3 Elisa Martinuzzi. Bloomberg. Dec. 16, 2019. “Bankers
Are Playing With Fire, Once Again.” https://www.bloomberg.com/opinion/articles/2019-12-16/why-fake-finance-is-not-yesterday-s-news. Accessed Dec. 30, 2019.
4 Matt Egan. CNN. Nov. 22, 2019. “The $4 trillion force
propelling US stocks to record highs.” https://www.cnn.com/2019/11/22/investing/stocks-market-fed-overnight-lending-rescue/index.html. Accessed Dec. 30, 2019.
5 Antony Davies and James R. Harrigan. US News. Jan. 3,
2018. “A Better Kind of Regulation.” https://www.usnews.com/opinion/economic-intelligence/articles/2018-01-03/true-regulatory-power-resides-with-consumers-not-the-government. Accessed Dec. 30, 2019.
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