November 11, 2012

 

The elections are over and regardless of which candidate you favored we all win because the ads have stopped.

 

That said we do have some issues to be concerned about. The deficit for one and the growth in entitlement programs for another.  Sometimes we, the electorate, act like little children. I want, I want, I want. That is all well and good IF we are willing to pay for it. Based on the budget that the Senate has yet to pass, we would be spending more each year than we are getting in tax revenue if we closed down all branches of government except the entitlement programs of Social Security, Medicare, Medicaid and Welfare. It is not the military budget (although we could trim fat there for sure), it is not the other branches of government or even pork barrel spending (although all of those could be cut by eliminating fraud and waste) it is rather a short fall of revenue. We want to pay as little in taxes as possible while getting as much in terms of programs to help our kids, old people, poor and sickly. That simply does not compute.

 

Congress is going to have to “man up” and be the adult here. Of course this is the Congress with an 8% approval rating that we just returned in this election. What were we thinking? Anyway, they are going to have to make tough decision about the future of the entitlement programs and taxes. Raising taxes is tricky with such a weak economy and could tip the economy back into recession (recession is a technical term for shrinking) but feels a lot like this painfully slow growth we have experienced for the last two years. Cutting spending has the same potential. So it is certainly a quandary. It will likely require a multiyear plan beginning in 2013 and lasting through 2018 or 2020 to get the job done. If we deal with the growth in entitlements coming in the future, it allows people to prepare. If we raise taxes slowly by broadening the base (reducing deductions slowly over time) then we can begin to trim the deficits in 2013 and begin to reduce the debt by 2020. If we don’t start now, then the pain will be deeper and more abrupt when we are forced into it. (Check out the street riots in Greece). By then MickeyD’s may have a $5.00 value menu instead of the $1 deals today because the dollar will be so devalued. Don’t think it can happen? How much was gasoline when you started driving? A stamp? A gallon of milk? For me it was 33 cents a gallon for gas, 7 cents for a stamp and milk was 50 cents for a gallon. That was 48 years ago. Look where we are today and think about where we can be by 2060. Oh, and by the way 2060 is only 48 years from now. If you are in your 30’s (or younger) you are likely to be here so it will affect you and very personally at that.

 

I know it is hard to believe but today’s prices were unimaginable 48 years ago. In 2001 oil at $40 a barrel was only becoming a frightening potential. Today we have seen prices well above $100 and today settling about $85. Will it be $160 (gasoline at $7.00) in 2020? Will steak be $25 -$30 per pound? Milk $8 per gallon?  Those are the realities for which we must be prepared.