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TMFFlushDraw (87.50)

On Politics and the Economy

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March 01, 2011 – Comments (11)

Since we try not to delve too deeply into political issues in our fool.com articles I'll use this as a forum to give a few thoughts and see what fellow Fools think. 

- Tired of Hearing About Spending

I am all for cutting budget deficits but the talk in our nation's capital is absolutely absurd these days. If you were going to cut your monthly spending would you focus on how to lower your utility bill every month or big expenses like groceries, car, gas and housing? Yes, cutting a few bucks by shutting off the lights is a great idea but it isn't going to save anyone from bankruptcy. 

On the same line I would like both Republicans and Democrats to stop talking about domestic spending until something is done about Social Security, Defense and Medicaure/Medicaid. We have seen in recent months that cutting government spending has a real impact on unemployment (private sector has been adding jobs while state and local gov'ts have been cutting) and I'm afraid we'll send ourselves into a double dip if we cut domestic spending too fast.

If we want a recovery we need to have more people employed, not more money at the top of the food chain. The rich have demonstrated over the last ten years that lower tax rates doesn't lead to a trickle down to Joe the Plumber. 

As for the thought that investment would increase in the US if we lowered taxes I say, "sure a little bit". Do you think money is going to start flooding back to be invested domestically when emerging economies are growing much faster? I highly doubt it. The money will always flow where the growth is. That doesn't mean I wouldn't love to see a lower tax rate for less subsidies trade off. I think that would be great.  

- We Need Regulation 

Today 3M CEO George Buckley is in the news for ripping Obama as "anti-business". Buckley would like less regulation and lower taxes to justify building plants here. 

Let me remind you that 3M is the same company who poisoned the water around its headquarters and the effects weren't even discovered until ~30 years later. The EPA (one of the agencies Republicans want to cut) was formed for a reason. If there's profit to be had, corporations don't care about the health of consumers. That's why lead used to be used in paint. 

I used to work as a research engineer at 3M and have worked in one of it's US plants so I have a little credibility when I say, you don't want companies like 3M to be able to put whatever they want in your products. Some of the chemicals I worked with were extremely dangerous and one in particular I advised not using at all because I felt the risk was too high (no one listened). If 3M had its way we would be using all kinds of toxic products and our rivers would be green like they are in China. 

Again, I am not saying things couldn't be done more efficiently. I am saying blanket cuts to regulatory agencies is dangerous. (see financial meltdown)

- We Need a "somewhat" Big Government 

I love the talk of how big government is bad. It has it's downside and government is anything but efficienct, but government is also the reason we didn't have a 2nd Great Depression. One of the reasons we had a 1st Great Depression is that government spending was such a small portion of the economy that when companies started cutting jobs there was no end in sight. Government provides a base line of demand and economic activity. It's a balancing act and government probably needs to be smaller than it is today but let's also appreciate the role the government played in saving us from disaster.

- On Wisconsin

How stupid are Republicans these days? You win back power and then you go after the little guy for everything they've got? I'm not saying unions are great but when you try to take away people's rights, that pisses them off. Apparently Republicans only want to be one-term elected officials because the Democrats haven't been able to rally their own base the way Republicans have.

Take the concessions they gave and put this issue to bed. It's in your best interest.  

- Final Thoughts

It isn't likely we will be able to cut our way out of budget deficits. We haven't done it in the past and we won't this time. We will slowly grow our way back to break even with cuts to domestic spending playing a small role in the process. Bottom line is we should focus on the SS, Defense and Medicare/aid before taking a hatched to the rest of the budget. I drive over enough potholes the way it is.

TMFFlushDraw 

11 Comments – Post Your Own

#1) On March 01, 2011 at 5:35 PM, Melaschasm (55.96) wrote:

Nice post.

 Where would I cut?

If I owe the mafia $2,000 per month and I my monthly spend is:

$500 for transportation

$400 for food

$200 for entertainment

$100 for clothing.

Then I suffer a 10% pay cut, what spending should I cut from the budget?

 

PS in this example SS, Def, & Med are the mafia.

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#2) On March 01, 2011 at 5:55 PM, TheDumbMoney (54.96) wrote:

Sigh.  All so true.  So depressingly true.  It seems like everyone knows this, yet no politician will act on it. So we get a dance about financially meaningless earmarks and nearly-as-meaningless other cuts to discretionary spending.  All these cuts do is hurt us in the short-term, without helping us in the long-term.  I wish somebody, Republican or Dem, would take leadership on the only fiscal issues that matter, which are the three you state, all of which need to be cut back or reformed.  The fiscal commission was right, too, reform of those three probably has to be combined with tax reform/simplification to make all sides suffer. 

However, in reality, as long as our nation's borrowing costs stay low, Democrats are likely not going to try to fix these problems.  And Republicans aren't going to fix them because what many are really holding out for is a true bond-vigilante crisis that will allow them to cut medicare almost completely and privatize or eliminate social security.  Don't kid yourselves, the very last thing at least half of the Republican caucus wants to is to do anything to make either of those programs sustainable for another fifty years. 

So, "bawk,bawk, bawk," our game of national financial chicken continues.

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#3) On March 01, 2011 at 9:21 PM, devoish (97.62) wrote:

So there is no consideration of restoring taxes back to a level that led to surpluses.

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#4) On March 01, 2011 at 10:36 PM, russiangambit (29.31) wrote:

> Bottom line is we should focus on the SS, Defense and Medicare/aid before taking a hatched to the rest of the budget.

Defense and SS need to be cut back by 30%, I believe that will  balnce them. Medicare tax needs to be increased to 10% since we are not going to let destitute people just die on the streets like it is done in other countries without universal healthcare. Or alternatively we should just switch to universal healthcare and accept lower quality and more hassle. Nobody is entitled to best and most expensive healthcare in the world unless they are willing to pay for it and many don't. Also, we should promote tax free savings accounts for medical needs. If we have them for education and retirement why not healthcare? The current FSA set up where you lose the money after 1 year is a joke. 

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#5) On March 02, 2011 at 1:31 PM, whereaminow (45.39) wrote:

So there is no consideration of restoring taxes back to a level that led to surpluses.

When did these mysterious surpluses happen?

David in Qatar

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#6) On March 02, 2011 at 1:59 PM, SkepticalOx (99.46) wrote:

David, 

I think devoish is referring to the budget surpluses at the end of Clinton's terms, which are disputed amount some right-leaning groups (I think you know about this already and was just asking sarcastically). Whether or not the surpluses actually happened, whatever deficit that was there was small(er) and the growth in the national debt slowed down during the Clinton years. He was also helped by a massive bubble that let the government reap in huge amounts of capital gains taxes.

It would be nice if the American people actually made up their mind. They want to cut taxes and cut spending but not their entitlements (it makes no sense). 

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#7) On March 02, 2011 at 2:00 PM, SkepticalOx (99.46) wrote:

amount = amongst*

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#8) On March 02, 2011 at 3:54 PM, leohaas (33.49) wrote:

We are the problem. Here is why:

When asked to rate Congress, about 10% say they are doing a good job. When asked to rate their own Congressman/woman, about 60% say he/she deserves to be reelected and over 90% of representatives typically do.

When asked to rate education, most say we fail. When asked to rate the teachers of their own kids, most say they are pretty good.

When asked about Washington's spending, most say it is out of control. When asked if their state should get more money from Washington, most say: "Yes!"

When asked about taxes, most say they are too high. When asked about cutting spending, most say: "Don't cut what you are spending on me, cut the other guy!"

When it comes to Defense, most say: "The Cold War has ended, why is that not reflected in the military budget?" But when the outcome of the Base Realignment is closure of a base nearby, we protest.

When it comes to Social Security and Medicare, many see that these programs will be in trouble in the future. But when someone proposes to make even a modest change to these programs, many say: "Don't do that: I paid for that all my life!"

We must face it: spending must come down. And taxes must go up. 

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#9) On March 02, 2011 at 7:04 PM, devoish (97.62) wrote:

Leo,

So basically, at least judging by the first four, we are so stupid that we believe what the news tells us rather than our personal observation.

As to the last two. SSI is basically solvent and a very minor tax increase could easily fund any bookeeping shortage.

Medficare/medicaid's insolvency assumes that the cost of healthcare continues to outpace inflation, despite the number of people heading into poverty. There was a time this Country had the sense to provide funding to educate Doctors if a need was seen. And there was a time this Country had the sense to raise taxes to pay for it, rather than finance a lending institution.

Pertaining to defense spending, energy independence from corporations and foreign countries would make our first centurys leaders proud.

The only reason not to divert money from defense to renewable energy subsidys is foolish politics, purchased by oil companys in their own self interest, at America's expense.

IMHO anyway.

 

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#10) On March 02, 2011 at 7:14 PM, truthisntstupid (93.32) wrote:

devo,

I nearly always find myself in strong agreement with everything you write as long as we aren't talking about unions.  

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#11) On March 02, 2011 at 9:50 PM, devoish (97.62) wrote:

truth,

First, thanks.

My support for unions is from recognising that they were directly responsible for building the celebrated middle class of America and as unions have declined, so has that middle class.

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