Tuesday, December 7, 2010

A Political Turn

Not a Left turn, and not a Right turn. But a change in direction.


With snow blanketing our state we dream about warmer times and plan for the return of ice-less roads while our iron steeds are tucked away in garages or undergoing seasonal maintenance. The lack of riding has me in the gym frequently and there I listen to podcasts of all sorts - motorcycle, financial, political and fun. I read articles. And I frequently hear things that really piss me off and get me thinking "I should blog about this". 


So here I am, blogging about it, and it will most likely be political. Politically I am a pessimist because I rarely see anything good come out of Washington or St. Paul, and today's resolution of the tax-conundrum faced by our country triggered this post. 


Here's an article that summarizes what our "leaders" have agreed to:

http://www.nytimes.com/2010/12/07/us/politics/07cong.html

When our politicians act like this I lose what little hope I had.

On one hand, I will agree that it would be devastating to increase taxes and cut off unemployment benefits in a down economy. In a consumption-based economy like ours, we need to find that delicate position between saving for rainy days yet spending enough to maintain modest growth. Raising taxes when most families are on a spending-binge-hangover, and cutting unemployment benefits when there are no jobs to be had, will not get money flowing again.

On the other hand, adding $600+ billion to an already bloated deficit is alarming, clouding your childrens' future. This is "the mother of all credit card bills" which will someday require a lot of pain to repay, and like credit card bills, the deeper you dig the hole the harder it will be to get out of it - until you have to file bankruptcy to get out (maybe that's our leaders' plan?).

While the Democrats are disappointed they weren't able to tax the rich more, the Republicans must be tickled pink at   having pulled a fast one on the American people. Not more than a month after campaigning on the promise to cut spending, they hold out for extending tax cuts our country can't afford. 

Don't get me wrong, our country should be able to afford these tax cuts. They should be permanent across the board. However, decades of unbridled spending has left us with a huge bill to pay. With a thrifty congress and a political genius for a president, we exited the 90's with a 'surplus' (a fake surplus because we were still borrowing money from Social Security - but it was still the closest thing we've had to a balanced budget since ... I don't know .. the 60's ???). After it was all downhill. Two major wars, generous welfare programs, mismanaged mortgage backers, misguided stimulus funds, etc. have since dug a hole we might not be able to exit from. What I am getting at here is that we have a spending problem, and to solve it we need to spend less. 

But our elected officials - Republicans and Democrats alike - have spent ALL of our money (and most of your childrens' money) that we simply can't "un-spend" our way back to prosperity. Our taxes must also increase.

Yet .. as I stated above, this is a bad time to increase taxes. Ideally they would stay low long enough for most of us to financially recover, then they should increase. Unfortunately I have no confidence there is any political will to lay such a foundation for a stronger future. Nor do I feel the average voter has the foresight to understand why this needs to be done. And finally .. just like the 2008 presidential election (also known as the "popularity contest") and Minnesota's race for governor, we clearly don't have anyone who is up to the job.

I told you I was a political pessimist.

Maybe I shouldn't be surprised that our elected officials are handling our nation's finances the way American's have been handing their personal finances. Josephe de Maistre (1753-1821) wrote: "Every country has the government it deserves." 

Indeed.

When we have to choose between "tax and spend" Democrats or "tax and borrow" Republicans there are no good choices (except stockpiling food, water and ammunition).