What Obama can learn from Canada
Managing voter expectations is the key to restoring stability in the U.S.
When I was a kid, I used to love an A.A. Milne poem called the King's Breakfast. The King wanted some butter for his bread and there was a long chain of entwined blame for why it wasn't on the table, ending with a very sassy cow.
It's a rhyming version of what's going on right now in financial markets — especially those in the U.S. The politicians blame the credit rating agency for failing to understand a long-term deficit reduction plan that's doesn't exist. And people in general blame the politicians for causing the mess with their partisan bickering.
But the uncomfortable truth is that all those who are rattled by the roil in stock markets have no one to blame but themselves.
It's hardly a news flash that capital markets are hyper-sensitive to expectations and reflect them immediately and dramatically. When investors expect a company to produce a certain result and it's not forthcoming, they inflict the punishment of a sell-off. Even if companies over-perform, they can be criticized for failing to "manage expectations" appropriately.
Governments are also very careful about managing expectations. Budget measures are telegraphed long in advance of their delivery. And policy changes are also crafted and flagged over several months.
But what hasn't fallen into place this time around is the imperative adjustment of public expectations — and that's what is at the root of the political mess that's caused gridlock in the U.S.
Folks want, as my granny used to say, their penny and their biscuit: they refuse to consider a cut in the level and scope of government services and they're equally reluctant to accept an increase in taxes to cover the cost of their entitlements.
Oh wait, that's not quite accurate. They're willing to accept cuts in government services just not any cuts that affect them.
The U.S. isn't alone in confronting such deeply ingrained expectations. In France, for example, it's been clear for quite a while that the government can't afford the elaborate social services that French citizens consider their right.
All of that, of course, is at the root of the political standoff that's caused Standard & Poor's to downgrade Americans credit rating. Faced with voters who are unwilling to adjust their expectations — and a presidential election in 2012 that's already ramping up — President Obama is unwilling to take the required steps to correct an alarming problem. And the Republicans, already divided into rival factions, are unwilling to compromise and give him the support he needs.
MSN.ca Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.