So how are we going to fix it?
How will Washington turn the battleship and move the Federal Budget towards something sustainable? We can’t run 10% deficits forever, when our economy only grows, on average, 5% per year.
The President is on the right track. He’s asked two veteran pols to head up a commission that will give political cover for some unpopular recommendations. It’s not just the current negative cash-flow. If the government accounts for its promises like businesses have to, they’d report a deficit almost five times the size of the economy.
So some promises have to change. That means entitlements need to be adjusted. And revenue, a.k.a. taxes, has to go up. Policies like this are often a path to minority status. So it’s no wonder that Washington has kicked the can down the road for years.
Nobody likes austerity. But when the bills come due, they have to be paid. And when there’s not enough cash to vacation at Disney, you just might have to go camping instead. If you don’t want your creditors to decide for you, you need to make some hard decisions yourself.
Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!
Follow me on Twitter @GlobalMarketUpd