Tag Archives: debt ceiling

We Have Been Scammed Again!

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Both political parties are crowing this morning about how they won the debt showdown. In reality, they both did. The real losers are the American people and future American genreations.

Jeff Harding wrote:

This is the fun stuff about politics. Basically our politicians are being forced to do something they don’t want to do, and our job is to cut through the obfuscation to uncover the fact that they are doing exactly the opposite of what they say they’re doing.

It is fairly obvious that despite what they are saying publicly, they aren’t making significant cuts to the budget. And S&P and Moody’s know this. Which means that we’ll see our gilt-edged credit rating (a curious term since there is nothing really golden about our national debt) be cut anyway.

There is nothing being cut here. What is happening is that the automatic growth of some spending in our “baseline accounting” method is being reduced. But understand we (The United States of America) will still be spending a great deal more money next year than this year.

We were scammed by both parties with the exception of the tea party members, those “terrorists” as Joe Biden calls them.

What do we have so far?

$917 billion in cuts over 10 years. 2012 spending is capped at $1.043 trillion, $44 billion, or 4.2%, below the CBO March baseline of $1.087 trillion. 2013 spending is capped at $1.047 trillion, $62 billion, or 5.6% below the CBO March baseline of $1.109 trillion.

Then there is this bipartisan committee of politicians who will wrangle over how to cut another $1.5 trillion. If they can’t agree by January 1, 2013, cuts will be automatic across the board, one-half from defense and one-half from discretionary spending. Social Security, Medicare, and Medicaid won’t be cut. The debt limit would be increased dollar-for-dollar by the amount of the cuts.

So the ruling elite get more of the taxpayers money to spend. What do the American people get.

The shaft!

They promise to have a vote on a balanced budget amendment by year-end.

Will the Bush tax cuts be allowed to expire? Yes, at least that is what Obama says will happen. I believe him.

Obama in a speech this morning laid out his “vision” of more “investments” (read a lot more spending on things other then job creation) to help our economy. I think his “investments” have just about bankrupted us. And I worry for my teen-age daughters’ future. Greece can happen here and in fact I think it already is.

All I can hope for is that we can elect more “terrorists” tea party people to defeat the grandiose plans of the Washington D.C. ruling elite. Republicans and Democrats alike.

Would You Short America If It Was Publicly Traded?

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Mary Meeker wrote:

In February, we published a report (nearly 500 slides) that describes how America’s spending exceeds our revenues, how and why our debt levels are rising, and how we got here. The report, called “USA, Inc.”, is intended to be fact-based and bipartisan. We do not provide policy recommendations but instead endeavor to provide context about America’s financial trends.

The summary is clear: Our country simply spends more than it brings in; we have lost money in 40 of the past 45 years, and we can’t keep boosting our borrowing indefinitely. If we look at America as if it were a publicly traded company that had to manage its finances responsibly, investors should be rousing for a clear plan to steadily and slowly reduce the budget deficit.

The numbers imply:

  1. Expenses need to be reduced.
  2. Operations need to be restructured so they run more efficiently.
  3. Incentives need to be put in place to drive economic growth which should help spur job growth and tax revenue.

I think this is a great way to look at our problem, like you would evaluate a business. Would you buy more shares in this business or would you short it?

If you work in a business or manage a household you likely think about these types of numbers often.

The fact is our leaders clearly need to make some tough decisions.

And therein lies the problem, our leaders. The people we have in Washington DC, with a few notable exceptions, think more of getting re-elected as opposed to what is good for the country. They will not make the tough decisions, because it may not play well at home, even though it is the right thing to do.

America’s financial challenges are headlined by a negative net worth of $44 trillion (or $371,000 per household) and gross debt as a percent of GDP in excess of 90%.

I don’t think our spending and debt problems can be cured quickly, but I do believe that we can start down that road and maybe in 20 years you would want to buy shares in America instead of wanting to short it.