Balance

Obama plans on reducing the federal budget to $533 billion by the end of his first term. And I plan on winning the lotto. Who do you think has the best odds?

Now I like the idea of taxing the rich more and cutting spending on Iraq (though I think we are looking at increased Afghanistan spending), but even with both of these I cannot fathom reducing the deficit. A better goal would be to reduce the rate at which we are increasing it, but even that seems like folly at the moment. Obama himself noted that we could be incurring a trillion or so in deficit per year for years to come. Still, I agree it make sense to let Bush's tax cuts to the rich lapse. We cannot afford them right now and the rich, despite all their losses of late, can better afford the pain than some elderly poor person trying to decide between food, heat and medicine. That trickle down thingy just does not work too well until it is government enforced through taxes.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKS2yjxfkmjU&refer=home

I am not trying to upset the Reagan fans who liked his trickle down thoughts, but even George Soros is now tracing the roots of our current economic decline back Reagan, back to regulators abdicating their responsibility and back to a philosophy that the markets are best left alone. The markets are driven by greed and greed has a nasty backlash. Everyone needs someone to watch over them.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay0FPxGdth_k&refer=home

Moreover, I am a major fan of balance. Economists like to doctor it up with words like mean and the like, but I prefer to refer to it as balance (though I do talk about mean from time-to-time). What do I mean by balance? Well, let me give you an example. The disparity in the U.S. between the rich and the poor has been increasing for a very long time. Stats show that the average "Joe the plumber" on the street has no more net value or income than he did eight years ago. Yet over the past decade the rich, by-and-large, have grown richer. The gap has grown. But the rich, who are free to spend their money here or wherever in the world they please, have at times failed to recognize where their bread is buttered. Those groveling masses supply about 70% of the U.S. GDP, so when they cannot spend, the rich also feel the pain. When the lower and middle class get in over their heads in debt to manage a semblance of a decent life, the rich prosper for a while. Yet while the rich get richer, those supporting them simply go more into debt. Eventually the cycle breaks and things must return to a better balance. The poor and middle class spending allows the earnings of the rich. And the rich need to understand that. We need a balance and things have gotten out of balance. We are reverting to mean, we are reverting to balance. Two slightly different ways to view the same proposition. When the rich realize better that their wealth depends on the survival of those on whom they are standing, the sooner we will build better balance.

Disclosures: None