Big issues

The big financial issues of the day are the economies of the US and Europe and both are facing similar decisions. Will they print more money or cut spending. Right now print more is winning in both places. Europe was the first to choose the clever words of “austerity” for cut spending and “growth” for print more and now the US has adopted those terms. Can you imagine a poll question asking would you rather we cut your benefits or grow the economy. So it appears that both will set up plans to spend themselves into prosperity, which sounds like an oxymoron to some people. When you hear about absurdities like this you can bet that it is driven by politics and you would be right. In modern day USA, politics trumps county, so we will play a game of chicken as both parties refuse to compromise. The first test comes at the end of this year when the country will face the largest tax increase in history and the largest spending cuts in history. This coming in the face of a slowing economy will cause serious problems and both parties know this but they are betting that the other side will get the blame and once again party trumps country. Next year as the country goes from bad to worse, the winners will say it was the other guys fault and most Americans will believe them and possible solutions to the problems will be lost in the fog of blame. This happens frequently and I call it the “teenage syndrome”. Mom everyone is doing it. A politician from one party gets caught in some unscrupulous activity and the first thing that happens is they point out how someone else in the other party did the same thing and that makes everything OK. In this coming presidential election we will decide if we want to continue down the path toward European style Democratic Socialism or do we want to reverse the 50 year trend and go for reining in government. Right now one third of all households receive government benefits not counting Social Security and Medicare. If these people vote we will continue with more government. Alexis de Tocqueville said: Alexis de Tocqueville.A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy. The president wants to keep the Bush tax cuts on families earning less than $250,000 and this will bring in 70 billion a year from those earning more than $250,000. This money will not be used to offset the deficit as Obama has already said he would use it to hire more state employees including teachers and these union groups mostly vote democrat. Even if Obama wanted to use the money to offset the deficit it would reduce this year’s deficit from 1,350 billion to 1,280 billion. Hardly a significant change. Everyone knows that the only way to face up to the deficit is to tackle entitlements and Obama will demagogue the Republicans to death on Ryan’s plan to take on Medicare.