The new normal? More like the new crazy normal
It’s time to direct your attention toward our dysfunctional Congress, once again.
Over the next several weeks, our economy, not to mention our savings and financial security, will be endangered by the next two Washington-created financial crises.
As the responsible adults in the room, we'll have to decide how to prepare.
Run for cover or stay the course?
Luckily, we now have some experience with these moments of government-inspired mayhem.
During the "fiscal cliff" crisis of late December and early January, who didn't fear that the stock market would collapse and take our savings with it?
Was another job-destroying recession right around the corner?
Cable news raced to bring us the latest apocalyptic prediction.
It all seemed very grim.
But at the last moment, a messy, imperfect resolution was reached and the crisis passed.
It was almost a rerun of August 2011 when Republicans in the House and Senate refused to raise the debt ceiling without major cuts in spending.
The federal government nearly defaulted on its bonds and the markets tanked, contributing to an absolutely abysmal third quarter for all of us.
(Go back and look at your 401(k) plan's 3Q 2011 statement. You'll see what I mean.)
Indeed, it was the messy, imperfect resolution of that crisis that has led to the one looming on March 1.
Democrats and Republicans agreed to automatic across-the-board spending cuts if they couldn't find a better way to reduce the federal deficit by then.
Well, guess what? In today's politically polarized Washington, they couldn't do it.
At least not yet.
If sequestration, as it's commonly called, actually comes to pass on March 1, the government will have to reduce its spending by $85 billion over the next seven months.
If allowed to run their course, the nonpartisan Congressional Budget Offices says the cuts could eliminate 750,000 jobs and stunt economic growth for the rest of the year.
Then the continuing resolutions that have authorized virtually all federal spending (we haven't had an actual budget for years) expire on March 27.
Without some agreement on how to keep paying for everything, we'll be facing a major government shutdown and all of the chaos that comes with it.
This is scary stuff. How do we make it through March without sticking our savings in the mattress and burying our head in the sand?
Don't panic. That's the answer we've learned from previous crises.
If we stay calm and focus on our investment goals, we'll emerge on the other side of the latest Washington-created chaos stronger and more financially secure.
My college students have an interesting perspective on all of this.
They view a highly partisan, dysfunctional Congress as normal. It's the only government they've really known.
As a result, they're not terribly stressed about it. They view the fiscal craziness in Washington, D.C., as many of us reflectively view the Y2K scare.
We were told that faulty software could crash critical computer systems around the world on Jan. 1, 2000, but we prepared for the worst, kept moving forward and everything turned out fine.
The banking crisis and recession are behind most of us. Our perseverance and commitment have paid off.
Fidelity Investments says the average balance in our 401(k) plans hit a record high at the end of last year — or right at the height of the fiscal cliff crisis.
Mohamed El-Erian, the co-chief investment officer of Pacific Investment Management Co., first used the phrase "the new normal" to describe an era of slower growth and higher unemployment.
Perhaps we ought to amend that phrase to "the new crazy normal" to reflect Washington's contribution to all of that.