2/27/2013 6:30 PM ET|
Why there's no way Obama can win
The easy steps have been taken
If there's a silver lining in all this, it's that since the budget fight broke out in 2011 Washington has enacted $2.7 trillion in budget savings over the next 10 years by picking the low-hanging fruit -- steps like rolling back the Bush tax cuts on the wealthy and freezing the pay of government workers.
But that's not enough. According to the Committee for Responsible Federal Budget, we've enacted only a little more than half the minimum deficit reduction needed over the next 10 years to stabilize the debt situation, about one-quarter of the reduction needed through 2040 and only one-sixth the reduction needed through 2080.
Overall, we need an additional $2.4 trillion in deficit reduction to merely stabilize the debt -- the "minimum path" shown above. Otherwise, if we follow the current trajectory, the debt is set to rise from 73% of GDP today to 130% by 2040 and to nearly 350% in 2080. Already, the debt totals nearly $53,000 for every man, woman and child in this country. What's your family's share? Think about it.
Now think about this: Any further reduction requires hard choices. Do we cut the mortgage interest deduction or do we cut food stamps? Do we mothball a few aircraft carriers or do we increase the Medicare eligibility age? Do we further close loopholes or raise taxes on the wealthy, or do we increase out-of-pocket costs for seniors?
Of course, Trekkies know that Kirk beat the Klingons and conquered the no-win Kobayashi Maru simulation by changing the rules of the game. Essentially, he cheated. (Search on Bing to learn more about the Kobayashi Maru test.)
Obama similarly needs to change the playing field. Instead of an either/or dichotomy, we need to find a third way out of this mess. Thankfully, the bipartisan team behind the Committee for a Responsible Federal Budget and Obama's 2010 Fiscal Commission have released a new, balanced road map out of this mess that doesn't blow up the economy or explode the debt. (Read it on the Moment of Truth Project website.)
It calls for lower tax rates but higher tax revenue via reform of deductions and credits. It calls for health care savings via cost sharing and means testing. It trims fat from the budget by tackling farm subsidies along with civilian and military health and retirement programs. And it changes the way the government accounts for inflation.
The hope is that by easing into this balanced plan, instead of accepting the sequester budget hatchet and suffering the political gamesmanship that will surely follow, the economy will be able to keep its head above water.
But Obama's task doesn't stop there. His to-do list includes boosting business confidence, aggressively tackling our infrastructure problems using private capital (see my column "Smarter ways to tap the rich"), and above all, embracing the idea of primum non nocere or "first, do no harm" by putting a moratorium on confidence-bashing ideas like a minimum wage hike, new energy regulation and Obamacare requirements for small businesses.
Unfortunately, given the tone in Washington, I'm not confident this needle will get threaded, so to speak. It certainly won't happen by Friday.
We do have a narrow window in which to find a way out of the overall budget mess. With Japan and Europe succumbing to new recessions, time is short.
Until I see signs that Obama "gets it" and pushes Congress and the country in this new direction, I maintain my bearish outlook on both the markets and the economy in 2013. For investors, that means focusing on defensive, beaten-down assets like Treasury bonds, the U.S. dollar and precious metals -- all of which have started perking up this week on new turmoil in the eurozone.
In my Edge Letter Sample Portfolio, highlights include a near 30% gain in my short against Cliffs Natural Resources (CLF) and a 7% gain in the Direxion Daily 20+ Year Treasury Bull 3X (TMF) exchange-traded fund.
At the time of publication, Anthony Mirhaydari did not own or control shares of any company or fund mentioned in this column. He has recommended Direxion Daily 20+ Year Treasury 3X ETF to his clients.
Meet Anthony Mirhaydari at the MoneyShow Las Vegas MSN Money columnist Anthony Mirhaydari will be one of dozens of financial experts on hand at the MoneyShow Las Vegas, May 13-16, at Caesar's Palace in Las Vegas. And admission is free for MSN Money readers. Just click here to register, and click here to see what Mirhaydari plans to talk about. Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at email@example.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Meet Anthony Mirhaydari at the MoneyShow Las Vegas
MSN Money columnist Anthony Mirhaydari will be one of dozens of financial experts on hand at the MoneyShow Las Vegas, May 13-16, at Caesar's Palace in Las Vegas. And admission is free for MSN Money readers. Just click here to register, and click here to see what Mirhaydari plans to talk about.
Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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The Dems got a tax increase 7 weeks ago. Now they want ANOTHER tax increase just a few weeks later. Money is a funny thing - you can ALWAYS spend more than you've actually got, always asking for more is not the answer.
The government is like a lottery winner with poor money management skills. We've all read about them, they get a hundred million dollar jackpot, and a couple years later, they're broke again. That's the way our government operates- - no matter how much they take from us, they spend that AND THEN SOME, always wanting more more more. ENOUGH ALREADY - LET THE CUTS GO THROUGH!!!
I find it so hard to comprehend how so many can be fooled by this demagogue! He promotes nothing but divisiveness in America (but then what can you expect from someone who's playbook was Saul Alinsky's "Rules for Radicals").
His actions and rhetoric have brought about class warfare, race warfare and a host of other problems. One truth that has come out is that half of this nation are f*****g idiots!
If the Democrats want to welsh on their deal, then all of Obama's tax increases need to be rolled back... spending needs to be cut FAR more. Hopefully sat the end of March we can slash another 85 billion out of the budget. There should be NO WAY that the House will pass a continuing resolution without additional cut.
Obama got his MASSIVE tax increases, now it is time to cut HIS massive spending. We spent 2.9 trillion in 2008, now we are spending 3.8 trillion, ALL of it Obama's NEW Spending. Obama is a Lazy, Arrogant, CORRUPT, economically clueless Imbecile...
The American economy will really tank once all of Obama's massive tax increases slam on the economic brakes, and his Obamacare sends us into a depression.
Forget the government. How do the people say "No more spending increases. No more tax increases. Cut spending. Balance the budget. Bring down the deficit. Kill the FED." mean it, and have it stick?
No more distractions until the government has resolved the above.
That means stopping with the distractions like gun control, immigration, public and private pensions, out-sourcing, in-sourcing, globalization, abortion, voting rights, birth control, condoms in the classroom, Planned Parenthood, Social Security, Medicare, Medicaid, bailing out Europe, engaging in anymore wars, messing with the Amendments. Leave the Bill of Rights and the Consitution alone.
Unfunded liabilities threatens the countries finances.
Social Security, Medicare, and Medicaid, public employee pensions are a large part of the unfunded liabilities.
Unemployment and welfare benefits may be a little too generous and provide a disincentive to work.
Step 1) Have a realistic budget and pass it..
Step 2) Stay within or even God forbid under that budget. There will be no "Debt Cieling" or "Sequester" because there will be a budget.
Step 3) Both sides will now have the time to actually govern and pass laws and get back to what they are supposed to do in Washington.. Sorry but you can not blame the republicans when the President couldnt propose a realistic budget when he controlled both houses of congress.. H is the first sitting President to not pass a budget in his first term.. Good thing the media is on this..
MADDCOW PMSNBC IS DOING A STORY ON RACE! WHAT A SHOCK! NOTHING ABOUT OBAMA'S LYING SEQUESTER RANTS!
MORE RACE HATE CRAP! NOTHING BUT COMMUNIST! NBC!
The whole point is.....If federal budget cuts are going to affect the economy in such a huge and negative way, the private - public sector is TOO LOPSIDED. If we do not do something now, the tables will never turn until a revolution in the not to distant future occurs.
The president can instill fear regarding job cuts all he wants, the truth is the first responders etc are not the first needed to be cut or the ones which will be cut. The old saying of 'no pain no gain' could not be any more significant than it is right now. The cuts need to start today, and legislation needs to change the way government does business to put it on level playing field with private enterprise practices. The long history of government spending habits are the reason for inflation to begin with.
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