Friday, November 12, 2010
Random thoughts from a warped and fevered mind...
The mid-term elections have focused the attention in Washington on reducing the deficit, making it clear that the taxpaying public is serious about getting the nation's fiscal house in order. The President appointed "deficit commission" called the National Commission on Fiscal Responsibility and Reform with the charge to find ways to reduce the deficit. This commission is led by former Congressmen Erskine Bowles, a Democrat, and Alan Simpson, a Republican. The intitial draft of their proposal has just been released, and it is shocking. The proposal calls for tax hikes over the next ten years of nearly $1 Trillion (I capitalized that on purpose). These tax hikes would not just be on the "rich, but in nearly every tax bracket. Additionally, there is included in the proposal a substantial increase in the gasoline tax; a provision that automatically raises taxes if the budget is not balanced in any year (Yikes!), raising the age to collect Social Security, and substantial cuts in government spending (non-defense) and military spending. Our government has spent us into a precarious financial situation, and to remedy this will require some painful choices. The debate about the solution is just starting. It is important for all of us to be engaged in this process, be cause it will have a significant impact on our personal financial situation.
I told my wife I would go through anything for her. She said, "How about the door?"
If one looks at the voter map after the mid-term elections, the pockets of blue that depict Democratic strongholds are evident on both coasts and in most major metropolitan areas of the country. The interesting aspect- and little discussed fact- is that these are the same areas, either individual cities or entire states, that are facing a substantial budget crisis. Budget problems are limited to those that lean to the Democrats, but they are concentrated in them. There are lots of reasons for this: the economy has tanked, resulting in less tax revenue coming into state coffers, but spending has not declined; funding exorbitant public sector pensions; and rising healthcare costs are just some of the contributors to this situation. States were able to smooth over this problem when Federal stimulus money rolled in, but the day of reckoning is now at hand for many of these governments. Governors and state legislators are being forced to cut spending in an attempt to balance their budget.Given the dire financial condition of states like New York and California, it would not surprise me to see some defaults occur in state debt. Municipal bond buyers should be very cautious in this environment.
After 18 years, I have started to play golf again. I will confess, it takes a lot of balls to play golf the way I do.
The interesting aspect of the discussion about bringing our financial house in order is that, until just recently, the discussion has centered on "raising revenue". Friends, that means taking more of your hard earned money and giving it to the government. There has been scant mention of cutting back the size and cost of government at any level, state or federal. The conversation about getting our states and our country back on sound financial footing is no different than the conversation a family has to have in the same situation. The first step to financial health is to get spending under control and live within the means that you have. This fact, this reality, has for too long been lost on politicians at all levels. As such, we have now put our nation in a situation that will require drastic measures to correct and great political will to make those corrections. And it will require you and me to get involved and realize that the changes that we will see not be easy. Regardless, this is the way to reverse the negative financial situation and creeping socialism that we face in this country. Guard your wallet and demand that government start to downsize to bring the deficit and spending levels under control.
My shampoo promised me extra body. So far, I've gained five pounds.
And that, my friends, is my view.