Thursday, July 1, 2010
Random thoughts from a warped and fevered mind...
Let's say that you had a major problem, a crisis even, and were looking for help from any source that could provide it. And let's suppose that a proven, effective form of assistance arrived in your hour of need and was just about to go to work to help with your problem when all of a sudden a government inspector showed up and said that assistance could not be used until they- the government- decided if it was effective. Your problem continues to grow and relief is at hand, and you are paying for the assistance, but it is idled until the government says it can go to work. Ludicrous? You bet. Reality? Unfortunately, it is. The world's largest oil skimming vessel, a Taiwanese based ship know as the "A Whale" arrived in the Gulf to assist BP with oil skimming operations but was sidelined because of Environmental Protection Agency concerns about its effectiveness. Specifically, the EPA was concerned that there would be traces of oil in the water the A Whale skims, cleans, and places back into the waters of the Gulf. Uh, the last time I looked, there was a hell of a lot more oil in the Gulf before the skimming started than there would be after the skimming process occurs. This laughable bureaucratic red tape and snafu is indicative of the ineffectiveness of our government to respond in a timely and potent manner to a crisis. Perhaps we should test the government for its effectiveness before we allow them to implement programs or supervise a disaster cleanup.
The closest I got to a 4.0 in college was my blood alcohol level.
Japan or Greece? From a fiscal standpoint, which will our country most resemble? As the United States ponders its financial future, those are the two options that are becoming more and more likely. Japan was a robust nation that in the late 70's and early 80's looked as if they were going to be able to buy the world. Poor monetary decisions and a contraction in their economy have led to 15 years of deflation that has stymied growth and resisted the efforts of the government of Japan to grow the economy. Greece has been the most recent and egregious example of profligate government spending and largess that was supported by flat to declining government revenues. Sooner or later, when you spend more than you make, you run out of money. This is true for an individual or a nation. Greece has avoided default because other members of the European Union have stepped in and loaned them the money to stave off this dire action. It may only be a temporary solution. In the United States, we are facing a great deflationary spiral that is problematic because we are printing massive amounts of dollars and issuing enormous amounts of debt to attempt to revive the economy. Right now, it's not working. And therein lies the risk to our country: massive debt and falling asset values. Will we be Japan and face a long period of economic stagnation? Or will we be Greece and run the risk of defaulting on our debt? Perhaps we will begin to exert fiscal discipline in our great nation by reining in government spending and providing the environment for our economy to reverse and begin to grow consistently again? These are questions that will be answered in the coming years by the fiscal actions that we are undertaking today.
Isn't impotence just nature's way of saying "No hard feelings"?
The Congressional Budget Office is warning Congress that it is essential that the Federal government begin to curtail spending and start to pay down debt. Quickly. The concern is that there is mounting debt coupled with an aging population and this means that it could be very difficult for the U.S. to pay its bills in the future. Think about it- as our population ages and begins to move out of the work force, earned income typically begins to fall as retirees start to live off investments, retirement accounts, and (hopefully) social security benefits. This means less money is flowing in to the government in the form of payroll taxes and more money is flowing out in benefits that have to be paid. What happens in that scenario? The government is going to have to find other sources of revenue. This means that taxes are going up across the board. Income taxes on the benefits that are paid out via Social Security; payroll taxes on the work force; and a host of other revenue raising methods, such as a means test for the receipt of benefits. Two salient points come out of the CBO's warning: know that our government will have no choice but to raise taxes significantly just to meet current obligations; and that your financial security in retirement will be dependent upon what you do financially. Anyone under the age of 50 should expect virtually nothing out of Social Security and should realize that their financial well being will be dependent upon their actions.
I asked my wife where she wanted to go for our anniversary. She said somewhere she had never been before. I said "How about the kitchen?" The swelling should go down in about a week.
And that, my friends, is my view.