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A few months ago, finding myself in Chicago with nothing to read, I picked up the book "Where Does the Money Go? Your Guided Tour to the Federal Budget Crisis" in a bookstore. I didn't just pick it up; I bought it. And I read it. For a financial book, it's light reading, with plenty of graphs and pictures, all geared toward getting regular people to think hard and intelligently about a major problem.
The problem, of course, is that the U.S. is deeply in debt and digging itself deeper every year, thanks in large part to the decisions made by our elected representatives in Washington.
For 31 of the past 35 years, we've spent more than we've earned. Our national debt is now more than $9.5 trillion, or more than $31,500 per person. And it's growing. The obligations already stand at $175,000 per person!
If you think stopping the War in Iraq will fix the problem, you're wrong.
If you think returning all illegal aliens to their home countries will do it, you're wrong.
And if you think taxing all millionaires at higher rates (pick any number) will work, you're wrong.
If you think drilling in Alaska will solve it, you're wrong.
The biggest factors in our debt problem are the Social Security and Medicare obligations that will come due in the years and decades ahead. The only course of action that will get us out of our hole is a multi-pronged approach that combines serious spending reduction with revenue enhancement.
Getting Out of Debt
At the top of my list are the following:
Increase the retirement age gradually.
Reduce Social Security and Medicare benefits for the richest Americans.
Reduce Medicare drug coverage.
Simplify the tax system dramatically.
Tax the richest Americans more.
Spend less money on defense by reducing our presence in foreign countries.
Spend less money supporting foreign countries.
Reduce federal aid to farmers.
Further down on my list are some fringe ideas.
Reduce the cost of the War on Drugs-and get young men back in productive occupations-by legalizing marijuana ... and taxing it.
Sell off some public lands to the highest bidders, who would then pay taxes while getting the greatest economic value from the land.
Move to the gold standard, which would curtail the easy printing of money by our Treasury. As Alan Greenspan said, "Under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth... The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit... In the absence of the gold standard, there is no way to protect savings from confiscation through inflation."
Admit Mexico as our 51st state ... or break it into several states. Remittances from immigrants already account for nearly 3% of Mexico's revenue, yet we spend billions of dollars trying to keep their workers out.
These are not new ideas, but every one has its proponents and detractors, who lobby hard to protect their turf. In short, politics gets in the way of the greater good. And in the end, we all suffer. The goal of the non-partisan authors of "Where Does the Money Go?" is to raise people's consciousness so much that they pressure the folks in Washington to act more responsibly.
Unfortunately, it doesn't seem to have made much difference yet. The book has been out since February, and I don't see any noticeable impact. Most people are still unaware of the book ... and of the problem. In American's minds, our biggest problems are the economy, education, jobs, health care, energy, Social Security and Iraq. The national debt ranks a lowly eighth.
Fortunately, there's a new player in the fight against our growing national debt. It's called I.O.U.S.A., and it's a movie ... which means it just might be as successful as Al Gore's "An Inconvenient Truth."
Unfortunately, it doesn't have Al Gore; it has Peter G. Peterson. The 82-year-old billionaire, formerly the United States Secretary of Commerce and currently Senior Chairman of Blackstone Group, doesn't star in the movie; there are no stars. But Peterson's foundation recently bought the movie, which was nominated for a Grand Jury Prize at the Sundance Film Festival, and opens at 400 theaters across the country on August 21.
Interestingly, Peterson has been singing this song for a long time. In 2005 he wrote a book titled "Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It."
In 2000 he wrote "Gray Dawn: How the Coming Age Wave Will Transform America - and the World."
In 1993 he wrote, "Facing Up: How to Rescue the Economy from Crushing Debt and Restore the American Dream."
None of them, of course, was a bestseller. They seem to have made no more impact on the American psyche-or behavior in Washington-than "Where Does the Money Go?"
I think the movie has a better chance. The Sundance name helps. And obviously, when it comes to getting inside the hearts and minds of Americans, movies are far more powerful than books today. Now all we need are some high-profile celebrities climbing on the bandwagon.
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"Trucking firms have enjoyed some heady gains in the past couple of weeks, and many of them have stretched out to new peaks. So why the strength? First, investors are clearly anticipating higher earnings now that gasoline prices are beginning to come down. But that can't be the only reason-we think it's likely the market is looking ahead toward a faster-than-expected recovery in the economy, or at least in shipping volumes. In its recent quarterly report (which beat expectations by 25%), Werner's management noted that prices are firming up, likely a result of decent demand and fewer trucks on the road. Analysts are estimating that Werner's bottom line will jump 29% next year, but in a cyclical industry like trucking, that could prove to be conservative if energy prices continue to decline."
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Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory