Let’s Make A Deal – Taxes, Spending and No Real Solution

David Frost // Additional Articles


December 7  

So the Dems and Republicans sat around the table and crafted the much anticipated deal of the year.  They decided to extend the so called tax cuts that have been in existence for 10 years.  Isn’t there a statute of limitations that says if something is in existence for an extended period of time, its no longer called a tax cut, but rather the current tax rate.  Therefore I opine that the conservatives won the battle to keep tax rates the same, in exchange for extending unemployment benefits for those who have been out of work for an additional 13 months.

So there, on one hand they refused to raise revenue, and on the other hand they spent more.  Some deal.  Did anyone actually win this argument?  Not sure, but the real losers are the American tax payer.  Don’t forget, the only way for the Federal Government to continue funding itself is to either borrow or tax.  Heads they win, tales you lose.

The best (or worst) part of the entire deal is that they left out one of the least talked about, but most dire things, states and local governments are imploding before our eyes.  In 2009 the federal government created a program called BABs.  Build America Bonds, remember all those shovel ready projects that were never ready?  Well, that program is scheduled to end this year and the state and local authorities can’t print their way out of the mess.  Our local communities cannot operate without balanced budgets – what a concept.  The only way these entities can raise the needed money for services is to either tax its residents or borrow the money by issuing more bonds.  Sound familiar?

Since the real estate market hasn’t gotten any better, the tax revenue is down, and the borrowing is slowing down because mom and pop are starting to catch on to the munis bonds ponzi scheme.  Issue more bonds to pay for the interest on the old ones.  Many of the state and local pension funds are on the brink of collapse, not because of poor market performance only, but because they have obligations that just simply can’t be met.

Keep kicking the can down the road and see what happens.  Sooner or later the can falls into the gutter with the all the other garbage.

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About the Author

Trading and investing in markets is second nature to some, but a mystery to others. The goal is to provide a forum where everyday people aspiring to be part time or full time traders will learn how view markets differently and profit beyond their wildest dreams.

David Frost