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TomasViewPoint
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Chop your own wood. It will keep your warm twice. Henry Ford. Over 25 years of investment activity beating averages while minimizing risk. Degree in Economics with emphasis in Finance.
  • Fiscal Cliff And Transparency 3 comments
    Nov 23, 2012 12:31 AM

    The fiscal cliff has been another crisis event that has brought a lot of focus and also revealed a lack of leadership and dysfunction in Washington DC that many Americans are all too familiar with. On the upside it is also bringing to light some of the spending and investment decisions by Washington DC that would likely not pass muster at most dinner tables.

    The Wall Street Journal ran an article on November 21st called Most Households Face 'Fiscal Cliff.' You can find it here and it is worth a read.

    http://online.wsj.com/article/SB10001424127887324851704578131413033855182.html?mod=rss_com_mostcommentart

    In the body of the article are people who were claiming to be negatively impacted by the fiscal cliff. The list includes a retired pediatrician who lives in a gated community and went back to work and makes $200,000 a year but feels he will have to cut back on spending. A 20 year old college student who is afraid her mother will have to help her out more get through college and therefore have to delay retirement. A 42 year old single mother going for a Master's degree, which indicates she has a Bachelor's Degree, while she is making $30,000 per year working part time and a 54 year old woman who has had the state of California pay her mortgage for 9 months while unemployed but believes she will lose the home because of the fiscal cliff. A local contractor is also profiled as perhaps cutting back on expansion because of the fiscal cliff.

    It is amazing that government support and thereby taxpayer support is being extended to life decisions that people are making that are not desperate but rather are more like inconveniences. The woman who could lose her house is probably the closest to desperate but in this case it looks like taxpayer support is only delaying the inevitable if she does not get a job soon and she appear to be in over her head in any case. The taxpayer is not supporting desperately poor people but people who are living reasonably well if not very well and just want the extra spending money and no inconvenience or sacrifice on their life journey.

    CNBC also reported on the 21st that the CDC would lose around $480 million of funding that screened 33,000 women for cervical and breast cancer. My initial glance makes me challenge the numbers as this means each screen cost around $14,500. And secondly why only 33,000 women? Where are the other millions of women? And why is this run by CDC?

    There are a lot of arguments that taxes need to go up just based on high level numbers and people should pay more but putting aside those arguments and taking a look below the surface seems to reveal that people are extracting support from the government with no clear foundation that they really need help. And government programs directed at unknown subsets of people that could be millionaires for all anyone knows.

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Comments (3)
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  • Ronin.
    , contributor
    Comments (1487) | Send Message
     
    Hi Tomas,
    I think that given our fiscal problems that any reasonable approach needs to include both the stimulus (some might argue overdone in the last Fed actions), some tax increases, as well as cuts in spending. In other words a compromise between the entrenched points of view on the subject...as Bernanke has called for, congress needs to step up to the plate and do their part in the solution...

     

    Like you are focusing on here, it is hard to argue that our current government support probably needs to be more targeted (perhaps on keeping our lower middle-class from slipping?), but also with more attention on reducing abuse and fraud. With taxation, there is the deterrent effect of an IRS audit, but for other areas, where is the accountability or disincentive for abuse?

     

    However, the cuts in spending need to be quite significant to help get us back on track, meaning that we should all be called to sacrifice something in entitlement programs, since that, along with military spending make up the bulk of government spending. Even if abuse were much reduced in all the socioeconomic levels, entitlement spending would swamp any efficiency gains in the other areas.

     

    Entitlement reform needs to go hand-in-hand with some tax increases and closing tax loopholes...this is the political compromise which needs to occur between the Democrats and the Republicans...ending the need to extend the debate until we are at a precipice....

     

    Also, it is easier to pass legislation that only impact future beneficiaries, of lets say, social security...yet I consider that unfair. This should be considered a national emergency with a sense of shared sacrifice on everyone's part, not just the young...
    23 Nov 2012, 03:37 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Author’s reply » Ronin

     

    My point is that I don't think we know what we are spending money on any longer which makes sense given the government increases in size every year without any sound rationale. The increased government spending drives the deficit and the need for more revenues. But increased revenues is very difficult for a number of reasons.

     

    Tax increases will have to fall inevitably on the middle and lower class the latter which really don't pay any income tax at this point. The % increase they will see in taxation will be extremely high. Sure the top brackets will pay more which will help in the short run but they will also likely lower their taxable income over time which will leave us in the approximate same position again.

     

    Government has to be right sized and tax revenues need to be stabilized. These are the critical success factors that need to happen together. It is not obvious to me that this will happen.
    23 Nov 2012, 12:39 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2007) | Send Message
     
    Tomas

     

    I concur with your viewpoints. At this writing, there are only 15 working days left in 2012 for Congress to be in session. I do hope that lawmakers would come up with a decent solution. To continue with incurring an additional $1T plus for each fiscal year moving forward is unacceptable.

     

    It is a death spiral for this nation.

     

    Regards,
    TK
    23 Nov 2012, 02:28 PM Reply Like
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