Thursday, November 29, 2012

I went to the Fiscal Cliff and all I got was this lousy Sequestration T-Shirt.

The fiscal cliff really is something to worry about, but like most cliffs you don't have to go over it. The U.S. doesn’t have to do a “Thelma and Louise.” It could do a “Rebel Without a Cause” where James Dean rolled out of the speeding car before it plunges over the abyss.

If you don't know what the "fiscal cliff" is, see a brief definition below. *

I’m not convinced that going over the fiscal cliff is such a bad thing. We need to wipe clean the slate of the Bush/Obama tax cuts to facilitate a responsible budget compromise. The mushrooming federal debt, like global climate change, is too big to conceive and grows too slowly to scare most Americans into dramatic action.

In World War II, there was a collective sacrifice to meet a formidable and unmistakable foe. Today, every side is busy protecting their interests and suggesting what the "other guys" should sacrifice.

I'm tired of the "no new taxes" mantra of Republicans. Expiration of temporary tax cuts is not a tax increase. I'm tired of Democrats saying you can't change Social Security and Medicare. It's been changed in the past to keep it viable for future generations. I'm tired of President Obama wimping out and saying we can only increase taxes on the rich. I'd also like to see him suggest simplifying the tax code and eliminating the kind of Romneyesque loopholes available only to the super-rich.

The military budget is the largest component of federal discretionary spending, prudent cuts here would make it easier to balance the budget. The expanding federal debt is also a major threat to national security that can make us vulnerable to pressure from countries like China who own a large portion of our debt.

We all have to pay more. We all have to accept less from government. If we don't do both, we could face a day when the entire budget of the United States is spent on interest on the debt.

This is theoretically possible if interest on the debt becomes a larger percentage of federal expenditures and interest rates rise dramatically--and they will at some point.

I thank preceding generations for not being selfish - the way we are today. Our children and grandchildren deserve the kind of society those generations built for us. That cannot be done without collective sacrifice. I wish our leaders had the political courage to explain our situation and ask us all to help us rescue each other.

*Fiscal Cliff defined by Wikipedia, the free encyclopedia
In the United States, the fiscal cliff is a newly coined term (neologism) referring to the effect of a number of laws which, if unchanged, could result in tax increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013.[1] These laws include tax increases due to the expiration of the so-called Bush tax cuts and spending cuts under the Budget Control Act of 2011.

The year-over-year changes for fiscal years 2012–2013 include a 19.63% increase in tax revenue and 0.25% reduction in spending.[2]

Some major domestic programs, like Social Security, federal pensions and veterans' benefits, are exempted from the spending cuts. Spending for federal agencies and cabinet departments would be reduced through broad, shallow cuts (referred to as budget sequestration).

The Congressional Budget Office reported an increased risk of recession during 2013 if the deficit is reduced suddenly, while indicating that lower deficits and debt over time improve long-term economic growth prospects. The deficit for 2013 is projected to be reduced by roughly half, with the cumulative deficit over the next ten years to be lowered by as much as $7.1 trillion or about 70%.

Thursday, November 1, 2012

Comparing Stock Market Returns by Presidential Terms

If I was President Obama's campaign chairman, I would run would ads showing a crawling line representing the movement of the Standard and Poor's 500 stock index from when President George W. Bush took office to the present. As you can see from the chart below, the S+P increased by 75% during Obama's 3 3/4 years in office. During Bush II's first term, the market index declined by 32%. During his second term, the S+P declined 12%.

If you look at the stock market performance by presidential terms going back to 1960, you'll see that the stock market has performed substantially better when Democrats were in the White House. During the last six Democratic presidential terms, the average return over four years time was 53%. For the seven terms Republicans were in office, the average return was 15%.

These statistics are surprising given that Republicans are generally perceived as better for businesses and the stock market. I'm not advocating for a candidate, though some of you might be aware of my political leanings, I'm just pointing out some surprising statistics. Be sure to vote.

Stock Market Returns by Presidential Terms

Presidential Term S+P 500 Index 4 year Gain/Loss %
Obama +75% (3 years + 9 months)
G W Bush (2nd term) (31%)
G W Bush (1) (12%)
Clinton (2) +73%
Clinton (1) +79%
G H W Bush +51%
Reagan (2) +64%
Reagan (1) +33%
Carter +28%
Nixon/Ford (13%)
Nixon (1) +14%
L Johnson +23%
Kennedy/Johnson +40%

Democratic Administrations are in bold

Source: Yahoo Finance (October, 2012)