My children, as most children, would eat as much ice cream as possible when they were young. Even though they didn’t understand the consequences of eating ice cream, they knew it tasted good. They would later feel sick and have no energy after the sugar high wears off. They knew that eating ice cream made them happy.
We have enjoyed a high standard life, especially for baby boomers. And we’ve been blessed with many free things over the years. If I am too lazy to work, I simply tell the government and get an unemployment check. The government will cover the majority of my medical costs even if I’m 200 pounds over, smoke like a chimney and am not retired. Government programs can guarantee that a loan is available to me in order to purchase a house. Fed policies will keep the interest rates artificially low. Many Americans forget that someone must pay for this. Other countries, such as the Chinese or Japanese, loan us the money through the purchase of government treasuries. But the taxpayers will eventually have to pay.
The discussion about the “fiscal Cliff” is a reflection of Americans’ lack of understanding or care about basic math. It states that you can’t spend less than you earn and you cannot spend your money to achieve prosperity. The term fiscal cliff was created to describe the challenges the U.S. government faces at the end this year when Bush-era tax cuts expire. They were already extended once in 2010, and automatic spending cuts kick into effect. The fiscal cliff must not be allowed to stand, as both the presidential candidates and the majority of members of Congress agree. Republicans will eventually seek to reduce spending in large numbers, while Democrats want smaller spending cuts and larger tax increases. The Congressional Budget Office (CBO), which predicts a drastic cut in GDP, increased unemployment, and negative growth that could lead to a recession if the fiscal cliff cannot be avoided, has made the following predictions. The CBO predicts that GDP will fall by 4 percentage points, and unemployment will rise by almost a full percent.
Rather Keynesian
I find the CBO forecast, and political jawboning to be too Keynesian. This means that the assumption is that economic activity is driven by government spending and programs. Although I don’t deny the potential impact of the fiscal cliff in the near term, I don’t think it would be as devastating as Wall Street and politicians have told me. Perhaps we can rappel down to the edge of the cliff and jump to the other side. Then, we can begin our climb out from this hole of debt. CBO estimates that the fiscal cliff would reduce the deficit to $560 billion. This seems like a great start in getting our finances in order.
Isn’t it time we stopped ignoring the nation’s problems and reacted like adults to get our medication. To keep peace and prevent income inequality between the rich and the poor from getting too large, tax increases for the wealthy are necessary. The problem lies on the spending side. This is especially true with our out-of control entitlement programs and our military acting like the world’s sheriff. These are costly and we should have dealt with them long ago.
I am willing to wager that nothing will occur before the election, and that the Congress will have extended and eliminated spending cuts by Christmas, increasing our debt problem. It is impossible to predict whether politicians will behave exactly as they did in the past.
Adam Mcbrian a national mortgage note buyer, will purchase mortgage notes from all 50 states. He can also purchase mortgage notes for properties of all types, including commercial and residential.