Dueling Budget Proposals
Research for Online Investors

by John Dalt

4/13/11

The President is scheduled to release his budget proposal after lunch today.  Sadly, this will be after we go to press, so I will not be able to comment.  Perhaps it is better.  The ultimate truth is the government could take ALL of the assets of the Forbes 400, and not have enough money to pay the DEFICIT FOR ONE YEAR.  After they take everything the richest Americans own, who would pay taxes next year?

The U.S. government does not need more money; they need to cut spending…a lot.  Spending has exploded before, during and after the credit crisis of 2008.  The upcoming debt limit maneuvers may be interesting.  Contrary to popular ‘talking points’ by democrats and talking heads on television, the government will not shut down if the debt limit is not raised.  Without a debt limit increase the government will continue to operate on a cash basis.  Bills will get paid, when cash is available.  The executive branch would need to cut spending to match the money available to fund operations.

This would not be fun.  Ask any executive that has had to cut budgets because sales slowed, but that is how it works.  Ask any housewife who manages the family budget.  Unexpected expenses or reduced income, mean you have to cut somewhere else.  No restaurant meals next month!

I am sure my cuts to the government would be different from President Obama’s, but with his vast experience in business…I am sure he can make the hard decisions.

Congressman Paul Ryan has proposed a budget for 2012 that cuts spending over the next ten years by $4.4 trillion dollars.  Quite honestly, this is a joke also.  Only in Washington can slowing the increase in spending be called a cut, but that is a different discussion.

Rueters reports that the President will propose tax reform, defense savings and changes in government healthcare spending.  Tax reform is code for tax increases, either outright bracket adjustments or through limiting deductions that allow taxpayers to reduce their tax bill.

White House Press Secretary Jay Carney said, "What is not acceptable ... is a plan that achieves serious deficit reduction only by asking for sacrifice from the middle class ... while providing substantial tax cuts to the very well-off.”

The debate and politics will be spellbinding, if you like this stuff.  Can you imagine the market reaction if the debt ceiling were not raised…if it was the end of business as usual in Washington.  We think business would be unleashed to grow if government regulators were put on a tight leash.  It sure would be nice to try it…once again.

The promise that America held for individual accomplishment and unlimited opportunity has been whittled away by laws and regulations over the past 100 years.  We have become accustomed to a monstrosity in Washington.  Our lives are ordered by central planning in the name of fairness and a social safety net, which becomes a harness on anyone that seeks to excel.

The market is up this morning, but we don’t know if we can trust it.  J.P. Morgan’s earnings were better than expected, but revenues were short of analyst’s numbers.  It feels like we need to dip and test support at 1299 on the S&P 500.

The Mailbag:
I continue to be impressed with your recommendations in the Long Term Portfolio.  I work in the nuclear industry, and have attached a fact sheet from the Nuclear Energy Institute (NEI) for your information.---paid up subscriber “Rubba”

John’s reply:  Thanks for the kudos and information.  I have posted the NEI fact sheet under Investor Resources.  We don’t publish proper names on any of our posts to protect our subscriber’s privacy.  Our endearing term above is for an old college roommate and fraternity brother.

“Not for college days alone.”

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

MarketToday Archive

Back to Top