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Scott Tapley
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Scott Tapley, CFA, has 15 years' experience as a portfolio manager at 1st Source Investment Advisors in South Bend, Indiana and Busey Wealth Management in Champain, Illinois, and is currently looking into buying into an existing RIA or starting an independent RIA.
  • Simple Solution For Fiscal Cliff--Shared National Sacrifice

    The so-called "fiscal cliff" the U.S. is facing at the end of 2012 isn't America biggest looming problem. That would be the Fiscal Cliff the U.S. will eventually plummet from if it does not soon and permanently address its trillion dollar annual structural budget deficits (e.g., see Greece).

    Solving our budget travails wouldn't be that difficult if Congress stopped fighting to stick someone else with the tab and just required help from everyone. That's right. Everyone. Not just the rich. Not just the "takers." Not just the Defense Department. But everyone-Medicare, Medicaid, education, the environment, Social Security, defense, rich taxpayers, middle class taxpayers, small business, big business. No one needs to be decapitated, but everyone needs to feel some pain.

    It's a simple concept called shared national sacrifice. It's all that is needed to get the country back on track, and to get everyone pulling in the same direction.

    No one group has the resources to fill the hole by itself, and no group should be exempted from pitching in to fill it. Our national political system has been stymied by an "us versus them" mentality that has been fostered by the two-party system. If you are reading this article, you are partly to blame (along with the author).

    We all need to stop advocating that someone else take most of the bullets, contact our elected officials and tell them to fix the problem and skewer everyone in the process. Affecting every constituency as equally as possible is not only a fair solution; it's also the most politically practical and even-handed resolution.

    For those readers who like numbers, here's what it could look like using some simple math:

    Assumptions:

    1. Budget deficit reduced to <3% of GDP by end of Obama's second term
    2. Federal revenues grow at 5.0% annually
    3. Nominal GDP grows at 1.5% annually
    4. Federal spending adjusted to reduce deficit $150 bln annually
     

     

    ($ in Billions)

    Actual
    2011

    Actual
    2012

    Proj
    2013

    Proj
    2014

    Proj
    2015

    Proj
    2016

    Federal Revenue

    $2,302.0

    $2,449.0

    $2,571.5

    $2,700.0

    $2,835.0

    $2,976.8

    Federal Spending

    $3,599.0

    $3,538.0

    $3,511.0

    $3,490.0

    $3,465.0

    $3,456.0

    Budget Deficit

    -$1,297.0

    -$1,089.0

    -$939.6

    -$790.0

    -$630.0

    -$479.2

    GDP

    $14,930.0

    $15,600.0

    $15,834.0

    $16,071.5

    $16,312.6

    $16,557.3

    Deficit as % of GDP

    8.69%

    6.98%

    5.93%

    4.92%

    3.86%

    2.89%

    Actual 2011/12 Revenue, Spending and GDP Numbers from U.S. Treasury Department

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Dec 12 3:21 PM | Link | Comment!
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