There have been several questions the past few days concerning the fiscal cliff, Tuesday's election results, the stock market's decline, economic growth prospects, unemployment and Sandy. Even the price of Apple stock.
To all of which I answer, look past today and look forward to somewhere around January 1, 2018 instead. In other words, let's keep a perspective about all this "noise of the day" and look for the broader meaning.
Given a five year and not a five day time horizon, I'm a big time optimist about our American future. Short term, however, I have no clue about what politicians or the stock market will do.
In fact, pundits and politicians included, nobody knows what the short term events and ramifications thereof will be, politically, economically, or otherwise. For example, who predicted Sandy a few years or even a months ago? Nobody.
WHY POLITICS SUCKS
So my best advice is for us to look over the short term horizon and pretty much ignore what the pundits, politicians and media "experts" are saying about today's happenings. But if we want to pay attention, let's treat all this stuff as a spectator sport and not get caught up in the political, media and stock market crisis du jour.
The daily noisy news about the fiscal cliff, stock market gyrations, rehashing the meaning of Tueday's elections and so forth will merely be good TV, political and talk show theater. Don't take what's being said all that seriously. I don't.
In other words, let's all try to have a time perspective which is measured in years rather than days, weeks or months. We didn't get manage to get this economy, our national debt and deficits fiasco screwed up in a few weeks or even years, and it will take at least a few years to get back on track.
That said, my bet and strong belief is we'll begin to do the right things now. In fits and starts perhaps, but we'll at least get started.
But what if I'm wrong and we don't now get serious about fixing all things that need repair? Well, then We the People will see clearly the results of our politicians continuing to do nothing, and as a self governing society, we can take appropriate action at election time, if necessary. Tuesday wasn't THE final election; it was just AN election.
So while I believe the politicians will come together and act as adults in the next several weeks and months, in reality I have no clue what they will actually do.
FISCAL CLIFF ISSUES
The fiscal cliff is a result of our dysfunctional political and governance system. It's an artificial man made disaster which will happen at year end unless our "public servants" decide not to let it happen. It's that simple.
The reasons for the cliff are simply that our government spends more money than it takes in and that we don't want to have to live within our means, either as a nation or as a government. Therefore, we don't decide to either reduce government spending, including entitlement programs, defense and other government services, or pay for them in full. We play kick the can instead.
If taxes increase across the board at year end, we'll have a recession in 2013, and perhaps a severe one. But if government spending isn't brought into balance with tax receipts over time, we'll become another Greece, Spain, Italy, California, Illinois or other financial banana republic.
If the politicians avoid the cliff by can kicking, something at which they excel, instead of bipartisan problem solving, something at which they stink, and don't reach an agreement on a balanced approach to remedying our financial "imbalance" issues, we'll all be the worse for it.
Much worse, in fact. All hell will break loose as We the People and the rest of the world witness just how reckless our "public servants" have become. Markets will take really big hits and unemployment will get much worse as economic activity grinds to a halt. It won't be pretty, but it won't be fatal either. It will be one hell of a wake-up call though.
And by the way, it will be the responsibility of We the People that this wreckage occurs, should it come to pass. It's our country and the politicians work for us. We own it and "on our behalf," our "public servants" have caused us, our kids and grandkids to owe the money "we" borrow so we can continue to spend more than we have.
BACKGROUND FACTS ABOUT THE "CLIFF"
The so-called fiscal cliff was "engineered" by our politicians in the summer of 2011 when they were unable and unwilling to come together and deal with our fiscal problems. Now the cliff represents an imminent problem. Whatever the pols do or don't do between now and whenever they finally solve the problem, perhaps sometime in 2013, by our "perspective" target date of January 1, 2018, the problems of today will be but a distant memory.
Focus Shifts to 'Fiscal Cliff ' gives us the background about the cliff:
"The Speaker (Boehner) came close to agreeing to an increase in tax revenues in his talks with Mr. Obama in the summer of 2011. . . .
Because of the election, there have been few, if any, serious budget conversations between the White House and Republicans since talks between Mr. Obama and Mr. Boehner broke down last year. The fiscal cliff, in fact, grew out of the collapse of those talks: To get enough votes in Congress to raise the U.S. government's borrowing limits in August 2011, Congress passed and the president signed a law requiring either the approval of $1.2 trillion in deficit reduction over 10 years, or the across-the-board cuts in domestic and military spending at the end of 2012. On the same date, the expiration of all sorts of tax cuts will mean nearly all taxpayers will pay more"
{NOTE: But as of yesterday, new talks to resolve the fiscal cliff dilemma are scheduled to begin next Friday. So let's put aside the fiscal cliff issue and consider it solved. The only remaining question is when it will be solved, and the answer is probably sometime in 2013. But to repeat, if you enjoy good theater, watch the circus as it unfolds the rest of this year and perhaps well into next year as well. Otherwise don't sweat it.}
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STOCK MARKET RETURNS AND VOLATILITY
Similarly, let's not get carried away with Tuesday's election results and the 300 and 120 point drops in the stock market Wednesday and Thursday. Assuming we get our act together, going from less than 13,000 on the Dow now to 18,000 to 20,000, excluding dividends, isn't a stretch target by the end of this decade. Again, look past this week's and perhaps year end noise and try to see things from a longer term perspective.
And with respect to Apple's stock price (and the share price of many other blue chip companies, too), which has dropped more than 20% the past few months, let's keep our perspective there as well. Three years ago Apple sold for $200 and one year ago it was around $350.
This week it fell again to ------------ $547. My own view is that by decade's end Apple's share price per share (before any splits, of course) may well surpass $1,000, and the company will by then be paying a decent cash dividend as well. So once again, let's focus on five or so years from now and not get too exercised about the daily market news.
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UNEMPLOYMENT
Unemployment is down to 7.8% or up to 7.8%, depending on one's timeframe. It could be down to 5% by decade's end. Progress may be slow, but it should be steady, and we are finally headed in the right direction. In time we'll be just fine and certainly before our January 1, 2018 due date.
SANDY
And let's remember that those pundits who are saying that the cleanup of Sandy will promote additional economic growth through rebuilding efforts are into the make believe effects associated with "stimulating the economy" through "hole digging and refilling" efforts. Tearing something down and then repairing it doesn't create anything new.
It just enables us to put things back to where they were before the destruction occurred. Nothing gained. No new investment occurred. No real lasting economic "stimulus."
On the other hand, new domestic energy development would be an entirely different matter. When we drill for more energy, something of value is created or discovered which will increase economic growth, thereby creating new U.S. jobs and laying the foundation of a permanent increase in jobs, income and tax revenues. All at no cost to the government, aka taxpayers.
DISCUSSION
So if we're able and willing to have a five year perspective and outlook, the "noisy" stuff happening today won't be all that important. Because in reality it's not.
However, if you're into spectator sports, by all means enjoy the developing fiscal cliff political B.S. chatter and analysis which will now be taking over from the political campaign B.S. we've endured the past several months.
TV talk show hosts and pundits have to have something to fill their on air time. So it's going to be all fiscal cliff, all the time, at least for now. Until the next big thing comes along, whatever that may be.
The untimely resignation yesterday of CIA head General David Petraeus, perhaps? Who knows? I sure don't.
But if you're not into excitement and instead interested in substantive matters like real economic growth and promoting a prosperous future for our nation and its citizens, focus instead on what happens to encourage private sector initiatives and limit government spending growth these next few years.
For example, important questions must be answered between now and January 1, 2018 or thereabouts. Such as the following:
Will we decide to live within our means as a nation and bring our debt and deficits under control? Will we reform our outdated tax system? Will we promote economic growth led by the private sector? Will we encourage energy independence? Will we reduce unemployment rates? Will bipartisanship become a reality? Will we encourage global competitiveness in our manufacturing sector? Will we deal with our unaffordable entitlements? Will we tackle the cost and quality of public education? And will we take care of those who need our help?
Of course, we will do all of those things. We're Americans.
SUMMING UP
I do in fact believe that We the People will now begin to come together and solve our many problems, but we also have to accept the fact that these problems were a long time in the making and can't be eliminated quickly.
But if I'm wrong and our public servants don't take the lead in a responsible bipartisan manner, We the People always have an effective fallback position.
That's because there will be several elections between now and January 1, 2018, so we can simply remove our failing "public servants" and choose some new ones. Self governance is indeed a powerful weapon.
So for those who are disappointed about Tuesday's election results, keep the faith and maintain a longer term perspective as well. At least five years.
Again, here's my simple take on what happened Tuesday.
Most Americans don't blame President Obama and the Democrats for our economic woes. They merely want someone to feel their pain and who will try to help them through the tough times. Besides, they didn't see any good reason to change horses in the middle of the stream. Better to stay with the devil you know than elect a rich businessman like Mitt Romney who "doesn't understand us and doesn't feel our pain." Republicans were painted as the fat cats catering to the wealthy and being hostile to minorities at the same time (especially Hispanics but including Asian and African Americans).
In any event, by January 1, 2018 another five years will have passed. By then we'll have low unemployment, a solid fiscal situation, much higher stock prices and a confident and optimistic group of Americans.
At least that's what my crystal ball says. And it would have said that regardless of whether Obama or Romney had won Tuesday's election, because the president has some developing economic tailwinds due to a steadily improving economy.
Our problems can and will be solved. Economic growth is the answer. The private sector is the key. Limited government is essential. Living within our means is imperative. Energy independence is within our reach. Equal opportunity is the American way. And that includes immigrants, too. After all, aren't we a nation of immigrants?
It's up to us now to agree to do the right things. All that's lacking is the political will to do so. What we need to do is clear. Or as Pogo said, "We have met the enemy and he is us."
Oh, and let's never forget three other important things:
(1) Politics still sucks -- very much so;
(2) Self reliance is great -- very much so; and
(3) America is still the greatest nation in the history of the world and always will be -- very much so.
Thanks. Bob.
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