Let's Try This Again

I have kids, ages 4 and 7, and I am embarrassed that I am leaving them a country that is heavily in debt and it got there because of idiotic policies, rampant financial institutions with too few controls, idiot borrowers who borrowed more than they could afford simply because a bank would lend it, etc. etc. The list is very long but the bottom line is we pretty much all were very stupid financially since the turn of the millennium and the odds are pretty good that our children, grandchildren and perhaps beyond will have the suffer the consequences.

At the same time the disparity, commonly called the gap, between rich, middle-class and poor as well as between white, Hispanic and black has grown leaps and bounds. The medium net worth of Hispanics is down over 60% in the past several years with this recession and for blacks over 50%, whereas for whites it is down less than 20%.

http://pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/

More disturbing is that the aggregation of wealth in the top 10% of the wealthy versus what the rest of us make are making is widening drastically. The top .1% of the folks making money saw incomes go up nearly 400% between 1970 and 2008; the lower 90% only 1%.

http://blog.reidreport.com/2011/06/the-rich-vs-the-rest-americas-huge-and-growing-wealth-gap/

So I say as a compromise, Obama limit his tax increase to those over $1million or so a year, versus $250,000, and limit increases in corporate tax increases or end of credits to those businesses over say $5 million. These are just ball parks that the pros can figure out. Small businesses build the most jobs and I would think most are under $5 million but someone who study this should set the bar where small businesses by and large are safe and the big boys pay the price a bit.

Now I say this with a couple of thoughts in mind. As mentioned, small businesses build the jobs in the U.S. and protecting them from tax increases makes sense so we can spur economic development. It makes sense and I am all for it. In terms of taxing the big boys, go for it. Most of big corporate America is doing pretty well and has a good amount of money in the bank. Big Ben in the helicopter rained down a lot of money on this group and a lot of it went out of the U.S. A good bit went to improving productivity so big corporations could cut jobs too. Moreover, a lot of the jobs and investments for these companies are leaving our shores, so them having to pay just a tad more in taxes to thank us taxpayers for all of our help in saving their collective arses seems pretty simple. Yes, their profits are increasingly coming from outside the country, but they need to pay their taxes and politicians need to know - despite the campaign contributions - their current status is in no small part due to the U.S. taxpayers funding a recovery from the spoils of the past.

http://seekingalpha.com/article/281944-u-s-corporate-profits-are-being-earned-offshore?source=email_authors_alerts

And for the individual tax category, who - other than those in this category, who are contributing to politicians - can complain about a tax increase for those individuals making over a million a year. Sure, the deficit reduction will be less than under the Reid proposal, but let the Republican right justify protecting individuals making over a million a year and corporations over $5 million. They will lose a lot of public support and it will still raise a lot of tax revenue. I am not saying here we should tax them at 70%, but increasing rates for these categories by say 5-10 percent should not force them to cut back too much.

And let me note this. Republicans are running with the deficit reduction banner, but because they are not including tax increases the Democratic Reid plan in the Senate actually achieves far more deficit reduction than the Boner proposal in the House. Go figure.

At the other end of the candle is spending cuts. Reality tells us that entitlements need some work. I have plenty of relatives dependent on them but a shot needs to be shot across the bow that folks need to not depend on them in the future. I am not saying to end them or reduce them now but we need to be honest with people with the fact that at some point we will not be able to afford them and they will be reduced - probably significantly. People need to know now, so they can, if possible, prepare.

And here is the last thing I have to say. High schools and colleges need to start forcing students to take classes in personal finance, which includes managing debt, retirement planning, estate planning, and the like. This is stuff vital to someone entering the work force and we are sending these kids into the world with no understanding of how to financially survive. I know I was sent in as a:

• financial virgin



• financial idiot



• financial target



• financial failure

You pick, they all apply. I knew crap about what really matters in terms of living a comfortable stress free life. People do not need to be millionaires to achieve this status but they certainly need the tools to financially plan out what they can and cannot afford and what they need to put away for their financial future and for their kids. This is essential stuff and we really do not teach it like we need to teach it. It should be mandatory, especially for budding politicians.

Disclosures: None