With the big fight behind them, it’s time for the leaders in Washington to sit down and get to work in order to prevent another confrontation in January. Haha! I know, it’s always best to open with a joke, so I hope you liked that one.
Well, if you’re like most people this isn’t a joke at all. The Federal budget deficit is serious business and one of the most pressing problems facing this nation. There are a lot of myths being repeated, however, and many people will be surprised to learn that the deficit was reduced dramatically in 2013. With some growth happening it’s down to just 4% of the economy – from a high of nearly 10% in 2008. But it’s still critical to get a handle on things before the median Baby Boomers start retiring in 2017 if we’re going to realize a new era of growth.
Ready to get serious?
Borrowing money isn’t bad. When it’s used to purchase something big that will last for years, like a house or a car, it often makes sense to do it now and pay the finance charge. Borrowing to buy equipment or a build to be rented is an investment – as is borrowing money to learn a good trade.
When we look at how the Federal government borrows to keep itself going we can and should be able to ask the same questions – was this an investment? Did we get anything good for the money? Unfortunately, the accounting practices used by the Feds lump capital and other investment into the same pot as operational expenses, making it impossible to tease everything out. It’s a procedure the Founding Fathers would recognize, if you wanna get all Tea Party on the practice. But it’s still a dangerously stupid way to run things – and totally counter to the way any business or state is run.
As we talk about the need for serious reform in Washingtoon, we should add this to the list.
Sequestration. It’s a big word that most people have never heard before. Constant repetition in the media doesn’t help explain or define it, and the implications of what is pending (barring a last minute deal) are brutal.
The word “sequester” means to “set apart”. In this case, $108B per year is planned to automatically be set aside from the US Budget, half from the military and half from other discretionary programs (that is, not including Medicade and other entitlements). This is not a sequestration, it is a meat axe to the budget.
Assuming there isn’t a plan to stop this at the last minute, either by delaying it or passing a real budget for the first time in four years, what we have is the axe. You’re probably tired of hearing about it by now, but the use of words is important. The lack of a clear, common talk shows just what this is all about – an inside game that has to stop. How do we get past it?
The phrase is often credited to Ben Bernanke, but variations of it have been around for decades. The “Fiscal Cliff” that went largely unmentioned during the campaign now dominates the talk out of Washington. It is probably the most important thing that will happen in the next Congress, and it will certainly set the tone for the end of the Obama administration. Yet almost no one has taken the time to explain what’s at stake in plain language.
The Presidential election is tightening. That’s only to be expected as we get closer, especially through the debate weeks. It was predicted here that Romney simply showing up and looking like a human would give him a bounce after weeks of demonizing, and he did better than that. Obama will have to find his A-Game to seal this thing.
But it is still Obama’s to lose. The “toss-up” states are nearly all ones that Romney should be ahead in already, and he will have to win almost all of them to pull this thing out. The big money is going to continue to flee his campaign and look to the more interesting races, particularly for the US House.
The race for the House is very close by the only measure we have, the Generic Congressional Ballot. That could make for something very interesting this January no matter which party manages to pull it out. In a big world of speculation this is worth thinking through.