Mike Conlon
Senior Instructor
instructor@mywealth.com
Cash for Clunkers. Universal Healthcare. Social Security. Medicare. Medicaid. The list goes on and on. For every minor success, there is a complete disaster lurking in the wings. Meanwhile, the economy in the US is shrinking almost twice as fast as had been previously estimated, according to Bloomberg. And the stock market loves it.
The S&P 500 Index (SPY) is up some 12% since the beginning of July as we head into the Unemployment figures due out later this week. I wonder how “less bad” it will be this time around?? Which brings me back to the point: who is going to pay for all these “stimuli”? As is no surprise to anyone with a modicum of common sense, tax revenues are plummeting as corporate revenues are down and unemployment continues to rise. What’s going to happen when the government runs out of stimulus money if the economy doesn’t return to pre-recession levels? Who's gonna pay for this mess?
*****Question of the Week! *****
(Take a shot!!….Chance to Win a FREE Investing Course (VALUE: $200.00!!!) by Emailing Us your answer no later than 7/30 9AM EST and 3 Names will be randomly picked and named as Winners!! (Must be a blog subscriber) Do you think the government is doing too much and over-stimulating the economy? a) No, the government is no doing enough b) the government is doing just enough c) the government is doing too much d) the government has gone nuts with spending and bailouts
The US consumer's spending represents some two-thirds of economic activity, yet has to be bribed into making purchases through programs like “cash for clunkers” or the “first-time homebuyer tax credit”. These are all temporary solutions creating artificial conditions that are giving consumers a false sense of confidence in the health of the economy. Isn’t this what got us into this mess in the first place?
How many first-time home buyers are going to be foreclosed on because they are unemployed? How many of these new cars are going to be repossessed because people are being laid off? Now the "beneficiaries" don’t have ANY transportation as they traded in their fully-paid-off hunk of junk for a nice shiny new vehicle which now has lost a third of its value because it will be marketed as a used car after it becomes repossessed!
In the meantime, the government continues to rack up debt at a ridiculous pace and thinks that they will be able to pay for it all by taxing “the rich”. And corporations. What they don’t realize is that in doing so, they will make “the rich” less productive as the rich can afford to sit on the sidelines and not participate in productive activities while waiting for the next election cycle!!!
Corporations are now global and because of technology can move operations overseas very quickly. They already pay the second highest corporate tax rate in the world here in the US. For what? This could even further reduce the tax base.
And that’s what this administration doesn’t seem to understand: that they should be trying to expand the tax base and not decrease it. It is unfortunate that politicians need to incite class-warfare in order to keep themselves employed.
So what’s the solution?
Take our medicine. Do what’s unpopular. Stop spending like drunken sailors, reduce taxes on the productive class (“the rich”) and corporations who employ people, and not raise them. Allow the free markets to determine prices, and not the government. Give people tax incentives to afford healthcare, go green, and make responsible purchases.
Because if the government continues to go down this path, they may find that there is no one left to tax as all of the jobs formerly held by “the rich” are now overseas or eliminated, and no one else makes enough money, if they are employed, to make a real difference to the deficit. Not to mention the unemployed.
This could lead to a “tax revolt” whereby people refuse to pay because of all the frivolous spending that responsible (employed, hard-working Americans) do not take advantage of.
It’s time to reduce government, and not expand it. Now that’s change I could believe in!
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