The debt ceiling deal is unlikely to make much difference in the private equity and venture capital markets, and it may make things worse, peHUB readers believe.
Responding to our question of the week yesterday and this morning, more than half of you, 52.1%, said the vote this week to avert a potential default on the federal debt will make “no difference” in the markets where you work, and another third, 33.3%, said it will make things worse. (We didn’t ask what the outlook would have been like had the debt deal failed.) A slim 14.6% of you said the deal will improve the environment.
Now, it probably didn’t help that we chose to ask this question on a day when the Dow Jones Industrial Average fell by more than 512 points, its worst performance since the financial crisis. And it did appear that opinion deteriorated during the day; at mid-day Thursday, when I tweeted about it, sentiment was 62% neutral, 28% negative and 10% positive.
A number of you included comments in the survey tool, with taxes, entitlements and the deficit being popular themes. Here are some of your thoughts:
- “What debt deal? Looks more like kick the can.”
- “Increasing the debt ceiling was necessary to keep things from getting worse, but it isn’t going to make things better. What we need is clear. A major restructuring of the tax system which is roughly revenue neutral, but eliminates as many of the distortive effects as possible. Coupled with a reduction in the actual level of spending, not a reduction in planned growth. Something like the Mack 1% plan makes a lot of sense. Achieving this will require restructuring entitlement programs to reduce actual spending from current levels. This has to be achieved while keeping a strong national defense capability. It just isn’t possible to keep spending at 1.5X revenue.”
- “In the short term, it will be painful, aggravating and maddening to watch Washington try to address government spending and borrowing. However, anything that forces our politicians to face long-term entitlements is a plus. Something’s got to be done.”
- “We were on a bad glide path and are still there but it has been factored in.”
- “The economy has some severe structural problems of which the total national debt is one. This is a first step to bringing it under control. However, economic growth is currently very soft. Certain segments, most notably Silicon Valley technology is booming, but the kind of robust widespread uptick is not yet happening. The consumer is still recovering.”
- “You really need four categories to make the poll interesting . . . does it make matters worse because it is too tight a ceiling or because cuts needed to be greater?”
- “Our fiscal situation is far worse than most people seem prepared to recognize. Factor in slower growth forecasts and normalized interest rates and the proposed cuts—even if real—are woefully inadquate. There will be more drama on this front.”
- “The impact may not be felt right away, but matters will get worse. Look at the Dow today—that says it all. There is no confidence in anything that is going on in the market and today there was nowhere to hide.”
Steve Bills is a senior editor at Buyouts Magazine. Any opinions expressed here are entirely his own. Follow him on Twitter @Steve_Bills. Follow Buyouts tweets @Buyouts. For information on how to subscribe, contact Greg Winterton at email@example.com.