Sunday, October 14, 2012

Memo to the Presidential Winner in November ... 5 Huge Problems for You to Address and Solve

November's election is only a few weeks away, and we're all hopeful that our "choice" will emerge victorious. But whether that proves to be the case or not, the election itself won't solve anything. It will simply move real issues from the background to the spotlight and which desperately need a solution.

So to the winner, let's give him a list of things that need his attention, even though neither he nor his opponent told us during the campaign what they would do if elected. In other words, he'll have to find a way to enable We the People to "pursue happiness" while dealing directly and firmly with five really enormous national financial problems at the same time.

But first, we'll focus on the stark and totally different political ways for us to pursue happiness.The following statement from China's Anti-Keynesianism Insurgent is instructive for voters:

"We human beings always seek happiness . . . . "Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that's the logic of the market. Which way do you prefer?"

{NOTE: If you want a truly enjoyable read on the dangers of public sector government redistribution initiatives compared to private sector individualism, the above referenced interview is worth reading in its entirety.}

But now let's move along to the already existing problems our newly elected president and congress will have to deal with next year and beyond.

To the Winner: Good Luck --- You'll Need It sets forth five enormlously important political and financial issues which simply won't disappear on their own. We've already tried that approach, and those problems have only become worse:

"What sort of agenda will the (presidential) winner inherit? How will he deal with a bitterly divided and partisan political system, a weak recovery, and a raft of pressing crises at home and abroad? . . .

{Dear Mr. President/President Elect,}

1. The fiscal cliff

On Dec. 31 the U.S. federal government is going to hit a potentially disastrous so-called fiscal cliff. Under current law, taxes are set to jump and spending will be cut. This is partly due to the planned expiration of the Bush-era and other tax cuts and partly to spending cuts agreed to last year.

This must not be allowed to happen. . . .

Middle-class taxpayers would see a big jump in tax bills. . . .

Clearly, $1 trillion-plus budget deficits cannot go on indefinitely. And Congress is likely to demand some form of deal as the price for approving yet another increase to the debt ceiling early next year. . . .

2. Jobs

According to the Labor Department, about 15% of the workforce, or one worker in seven, is either unemployed or stuck working part-time because he or she can't get full-time work. And 23% of prime working-age men—about 14 million ages 25 to 54—lack a full-time job. Think about the lost output in the economy—and lost taxes to the government. . . .

Over the last four years, the U.S. government has thrown billions and billions of borrowed money, and billions more of printed money, at the economy. Yet according to a recent study by the Associated Press, this has been the weakest recovery since the War.

The public has just elected you to sustain a jobs recovery in these circumstances. And the public is looking for you to bring the estimated five million long-term unemployed back into the economy.

3. Retirement

If you think the jobs crisis is bad, look at the looming retirement crisis.

Social Security and Medicare, most agree, are on unsustainable fiscal ground. Taxes will have to be raised, and spending reined in, to ensure the systems stay solvent. This is a major item on your to-do list.

But here's the problem. There's only so much you can cut, because 80 million baby boomers are starting to retire—and very few of them are prepared. According to the latest survey by the Employee Benefit Research Institute, an independent think tank, "a sizable percentage of workers have virtually no money in savings and investments."

Sixty percent of all workers surveyed have less than $25,000 in savings and investments, and 30% have less than $1,000. The figures for boomers—those over 45—are better, but not by a lot.

To put this in context, $25,000 will buy a retired couple an annuity of only about $118 a month. Add that to an average Social Security check of $1,230 a month, and you are potentially looking at mass poverty among the elderly.

4. Debt

You've probably heard that Americans have been paying down debts and shoring up their balance sheets. You've probably heard that corporations are meanwhile sitting on a ton of cash. It all sounds promising.

The trouble is that it's mostly a mirage.

According to the Federal Reserve, total household debts have fallen 6% from their peak at the top of the bubble. They are higher today than they were at the end of 2006. . . .

Throw in U.S. government debts, and you have a system that in total owes $39 trillion—an unprecedented two and a half times gross domestic product. This poses serious risks, including weak growth and even another financial crisis.

5. China

In the short term, you face the risks of a "hard landing" for the Chinese economy. For the last few years, it has been a major engine of the global economy. In the coming months, many on Wall Street worry, that may be interrupted as China switches from an economy dominated by infrastructure spending to one with more consumer spending.

In the longer term, every president since Ulysses S. Grant has presided over an America that had the biggest economy in the world. You will probably be the last.

Based on International Monetary Fund data, China's real output is set to hit $20.2 trillion by 2017, surpassing $19.7 trillion in the U.S. And China is still seeing faster long-term growth than the mature U.S. economy. The gap will widen year after year. Our share of global output, which was 24% in 2000, will by 2017 be down to 18%—and falling.

This poses enormous economic, political and strategic challenges. Yes, our military is still No. 1—but you can't run a first-class empire with a second-class economy, as the British and the Soviets learned years ago."

Summing Up

Yes, as a nation we have genuinely big political and financially related problems which must be addressed --- both successfully and soon.

So let's get this fall's circus like campaign and election over, then quickly move into a solution oriented national discussion of exactly what to do. And then in Nike terms, let's "Just do it."

(But in the meantime, doesn't Joe Biden make for an entertaining circus clown? Bozo perhaps?)

Sometime shortly after November 7, a serious debate must take place concerning the five huge issues highlighted above.

On a personal note, I prefer the kind of personal happiness that makes others happy. I hope most of the rest of We the People do as well.

Hayek and Friedman have always made a lot more sense to me than Keynesianism ever did.

Free lunches (OPM) are never free. And they never taste as good as those we're able to buy on our own (MOM).

Thanks. Bob.

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