The Cost of Political Grandstanding

Raising numbers, anyone? One of the quirky side effects of this ridiculous shutdown/debt-ceiling standoff is that only a total stooge company would give a positive outlook, now that earnings season has begun. How can you not waffle or hedge on your future sales and earnings estimates? There are enough articles in the media right now about how the government will either default or prioritize payments that almost no company should feel safe letting expectations get ahead of themselves right now.

Think about a retailer: If people are worried about Social Security checks, do you think that they will go spend? And how do you not worry about Social Security, given that so many worried in 2011? It's natural. The Social Security payments are the mainstay for so many, and it isn't like the recipients have a lot of other income coming in.

How about tech? Almost every company has some dealings with the federal government. You want to be on hold with them and tell people all is well?

What does a bank do? How much is lent out every day on margin on Treasuries that would suddenly trigger a margin call? Who knows what mortgage rates should be? How do you know where to store your cash? What's prudent? You can't just ride Treasuries through this if you really think about it, because of how much interest is on the line and how you are trying to match interest with payments to depositors. If this goes on, the havoc of the banks that report soon should be palpable and the number cuts so obvious -- to the point where default is a reasonable possibility -- that the group is going to be so difficult to own.

Now, I know that there are Republicans who think defaulting is a wake-up call. There was an amazing article in the Washington Post recently about veterinarian turned congressman Ted Yoho (R., Fla.) from one of those really safe conservative sections of Florida, who seems on a mission to get us to default to teach everyone a lesson, whoever anyone is. Starve the beast!

He's the kind of guy whom every business person in the country should fear, because the lesson he teaches is going to be borne by private business, not the federal government. He has tremendous conviction of the righteousness of his position, and no one should fault him for that. But if I were in business down in his district, working as a manager at the local Wal-Mart or the Target or a local bank in the area, I would be working tirelessly to defeat this guy, because he is basically voting to slow down private business. Voting to cut your numbers. They can literally take numbers down because of Yoho and his ilk.

Now, those who don't care about stocks, at least for the short term, those who don't care about retirement accounts, those who don't care about savings, can argue that Yoho is about preserving the long-term value of these assets. But that's not how the market works. If Yoho gets his way, he crushes current earnings and current savings with his view, he scares the wits out of people, lowers confidence and increases layoffs, all in the name of long-term solvency. He raises the price of interest dramatically for the Treasury, all in the name of lowering it later on.

Maybe that's a good trade-off. Maybe default is the way to sober up the nation in the way that the collapse of Lehman Brothers woke up the banking system to the dangers of leverage and off-balance-sheet holdings. Maybe Yoho's stance, if it prevails, will do the same. But does anyone think that Lehman was the best way to straighten out the banking system? The layoffs, the losses, the chaos, was that a good way to sober up bankers and regulators? If you think so, then Yoho's for you. Otherwise, I think there are better ways to go. And business better start fighting for them, or this is going to be a long and awful earnings season.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.