Segment 1: Beware of the Pitfalls SEGMENT BEGINS AT 00:39 Over the years, investor/trading coach Jerry Robinson has encountered several pitfalls that have interfered with achieving financial success. Today he shares five of these pitfalls that may not be readily...
I must admit that as I sat down to watch the State of the Union address last night, I was more hopeful than usual that the President would at least propose a handful of ideas for effectively reducing our budget deficits and our collective national debt. I was more than disappointed. At one point during the speech, I think my jaw literally dropped.
Friends, you have no idea of how wrong I want to be about Washington and where they appear to be leading us. I want to believe in the viability of our republic and in the decency of our leaders. It is only natural. However, last night’s speech did more to cement my concerns than to fan the flames of my idealism.
As the speech began, Mr. Obama came out swinging for revitalizing the American dream. His polished oratory skills were obvious for the first ten minutes of the speech. He encouraged the need for “American innovation” and claimed that the future was “ours to win.” Recalling the days of America’s early space race with the Soviets, Mr. Obama compared the nation’s current situation to “our Sputnik moment.” In essence, he called for new massive investments into information technology, clean energy, and biomedical research. Specific recommendations included cutting oil subsidies, providing incentives for clean energy investments, and putting 1 million electric cars on America’s roads by 2015.
Mr. Obama pointed to the state of our nation’s educational system and called for more reform. He proposed training 100,000 new science, technology, and math teachers and encouraged new college graduates to consider a career in education.
Other proposed investments included road and bridge construction, transit, and high-speed rail systems. He even suggested a “national wireless initiative” which would give 98% of Americans access to wireless internet.
I agree that investing in “American competitiveness” is a worthy goal. The question is: How can we afford it? After all, coming up with bright ideas has never been a problem for America. The problem of late has been funding them in ways that do not involve loans from the Federal Reserve, Social Security, China, or unborn citizens. For me, this is where the speech dove headlong off of the cliff. I sat in utter amazement as I watched the chief D.C. pollyanna continue to spout his illogical optimism to a wary and debt-ridden American citizenry.
Obviously, the funding proposals for these new spending ventures required at least a few minutes of explanation. The proposed funding mechanisms were trivial, non-sensical, and in the end, highly inflationary.
#1 – A BOGUS SPENDING FREEZE First, Mr. Obama called for a spending freeze similar to the one he proposed last year. This time it was a “five-year” spending freeze on a tiny portion of government spending; namely, non-discretionary and non-security spending which makes up less than 15% of annual government spending. The savings from this “spending freeze” – $400 billion over 10 years. Obviously, this is a drop in the bucket. When you consider that our Federal government currently spends $9.5 billion PER DAY, perhaps you will share in my lack of enthusiasm that we are going to shave the equivalent of 40 days of spending from the next decade.
#2 – MEDICARE CUTS? Next, Mr. Obama stated that cuts would need to be made to Medicare and Medicaid which he admitted were “the single biggest contributor to our long-term deficit.” He then said that his trillion dollar Healthcare law was a first step in that direction… This ridiculous claim was then followed up with a suggestion to implement medical malpractice reform “to rein in frivolous lawsuits.” The President obviously has no intentions of making major cuts to Medicare or Medicaid.
#3 – SOCIAL SECURITY CUTS? I quote: “We should… strengthen Social Security for future generations… without putting at risk current retirees… and without slashing benefits for future generations.” What does that mean, exactly? This may be the most politically correct statement that I have ever heard. Apparently, no cuts here.
#4 – RAISE TAXES Next, Mr. Obama provided his first real solution to the deficit of the evening. Unfortunately, it had nothing to with cutting the size of the government. I quote: “If we truly care about our deficit, we simply can’t afford a permanent extension of the tax cuts…”
Friends, it is crystal clear. In Washington’s mind, the $3.5 trillion that the government spends every year is vital to maintaining America’s global “competitiveness.” The problem, according to Washington, is their current level of incoming revenue – a paltry $2 trillion. (For more on this topic, see our latest Youtube video: Debt, Deficits, and Denial: The Truth About Washington.)
So when you hear about “spending cuts” and “austerity measures” and “shared sacrifice,” ask yourself the question: “What is being cut and who is sacrificing?”
The answer: You will be asked to sacrifice and your salary is what is going to be cut through increased taxes. Once you realize, as Mr. Obama does, that Washington has a revenue problem and not a spending problem, it all begins to make perfect sense.
Now, let the economic “recovery” continue!