With the presidential election ballot boxes still warm, America plunged directly into what became popular as the fiscal cliff debate. By the way, who coined the term “fiscal cliff?” It was none other than Ben Bernanke, President of the Federal Reserve. The nation has been entrenched in this debate for weeks with pundits from all corners decrying the dire consequences of going over the fiscal cliff. Many followed the play-by-play negotiations only to have Congress and the President reach an agreement in the twelfth hour. You might have let loose a heavy sigh thinking, “Problem solved and on to a better 2013!”
Not so fast! Yes, they reached an agreement, but as the dust settles we are left to wonder what was really solved. If you think all is well, think again! Other than making permanent most of the current income tax rates and preserving the $5,000,000 estate tax exemption, our beloved politicians kicked the can down the road once again on the nation’s most pressing economic woes. In my opinion, we are right back where we started. Nothing has really changed; in fact our problems are likely worse!
There was no agreement or plan to fix Social Security, Medicare or the out of control growth of Medicaid spending. Medicaid now covers nearly 60 million people (roughly one-fifth of the US population) and Social Security Disability payments now go to almost 9 million people and that is predicted to rise to over 12 million. There was no agreement or plan to trim the size of government that continues to spend almost 50% more than it takes in. By the way, the government currently spends approximately $3.7 trillion and takes in $2.6 trillion each year. That is like making $7,000 a month and spending $10,000! What American family can survive doing this? And was there a plan to begin reducing our $16.4 trillion in outstanding debt? No! What about dependence on foreign oil, a remedy for our languishing housing sector or fixing our unemployment problem which has been hovering around 8 percent for 4 years?
If you listen to the mainstream media they will tell you that all is well and the economy is improving. Don’t believe it! Let me ask you this, if the economy is doing so well, why is the Federal Reserve continuing to print $80 billion a month? Why do we have such chronic unemployment? Why are business start-ups at an all time low? Why do we have such a trade imbalance? Why are so many people dependent on government? And why do we keep raising the debt ceiling? My father always says, “You can’t borrow your way into prosperity.” My father is right!
The fiscal cliff that we just avoided was nothing, a mere bump in the road to insolvency, unless we demand our leaders take seriously our economic challenges. America is facing an incredible fiscal crisis and unless we wake up and recognize where we are headed, we could be another Europe.
It is easy to predict that taxes will have to increase dramatically and that benefits will be reduced. The only way entitlement payments can continue is if the government keeps printing more money. That portends massive inflation and continued market volatility! What does this mean for the future of our children and grandchildren?
I know this all sounds like very bad news, especially for seniors. It is and it isn’t! It is if you don’t plan; it isn’t if you do plan. In fact, it can become an opportunity. All of the above can be planned for. Developing meaningful strategies that do not lose money and that have enough liquidity to participate in the recovery of each of these various crashes is essential.
Wouldn’t it be great to know a crisis was coming and be able to prepare before hand? Yes! Have you ever known people who profited in difficult times? Yes! Wouldn’t it be great to know something bad was going to happen before it happened? Yes! Warren Buffet said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Begin 2013 by making a commitment to effective planning.