I Dreamed Last Night: An Essay From David Gardner

Written early the Sunday morning of the weekend in which the United States of America, for the first time in its history, had its credit rating downgraded.

I dreamed last night that a church group asked me to give a talk on financial stewardship. I hadn't really prepared anything to say, so I was composing notes during supper at the church so my words would at least have a little structure. What I said was for another time and is not pertinent to what's below.

As dreams are wont to do, over the course of my small church talk, the setting transformed. With no rhyme or reason, it got larger. I had no microphone, but after a few minutes I desperately needed one because what had once been a modest church sanctuary had now become the equivalent of a large cathedral. Recalling my own summer travels to Barcelona last year, this cathedral may have been designed by Antonio Gaudi; in the whimsical setting of my dream, I was having practically to kneel down to take questions at the end of my talk, kneeling down in order to see rows of pews located down a set of stairs that led to a basement level that I hadn't even known I was addressing, and that went as far back as the eye (and craning neck) could see.

It's not lost on me that there's a parallel to this in my own life, to The Motley Fool community we have built. What began as two brothers answering questions for free on a small AOL discussion board has today, 18 years later, transformed into a setting where every day the space equivalent of 3,000 cathedrals of Fools gather to think and talk further about ways to improve our own financial lots in life and that of those connected to us.

Before I get to the point of this essay, I just want you to know that I realize the above may sound self-aggrandizing, or that the cynical may suggest I'm here to promote something. Once you see what I have to "sell," I hope any such comments are put to rest. That said, I am committed with fidelity to being true to "what I saw" (in my dream), so unabashedly I present the below.

***

On the eve of the stock market reacting to the unprecedented downgrading of U.S. debt, I have four points.

The first comes indirectly by way of Warren Buffett -- one of my favorite lines of his, paraphrased: Before you buy a stock, ask yourself if you would be willing to put every last dollar you have into that company and leave it there for 10 years. Never intended as straight advice (since every investment advisor would tell you it's horrible advice to follow directly), the line is instead intended to provide us a great "gut check" prior to buying any stock, to see if we really have long-term confidence in it.

I believe we should now be asking, as we elect public officials, something very similar. Of any candidate, before you cast your vote, ask: Would you be willing to put every last dollar you have into the hands of this particular public official to manage on behalf of our future? I have to admit that heretofore I haven't used this lens to view politics; I largely haven't concerned myself much with politics at all, frankly (and won't much in future). But however much of a political creature any of us is, we stand a far greater chance of improving, rather than further undermining, our creditworthiness as a nation if we as its citizens begin to ask this Buffett question of ourselves prior to casting votes.

Second, a quick question for you. Which message do you hear from your state government more often? Is it (a) financial literacy is a critical study -- a gift even -- for our youth, and we are every day testing and graduating kids who know what they're doing with money, or (b) "You could be next. Gotta play to win" ... your state lottery. If you're in my home city of (ironic?) Washington D.C., you know you get pelted by the D.C. Lottery message (with its horrible payout) 100 times more frequently than any similar message about the importance of financial literacy (with its outstanding payout). I bet your city, your state, is the same way. A nation of financially illiterate citizens who are democratically electing their government seems to me to be hoping for lottery odds that things will "all work out." Ignorance isn't bliss. We now have the domestic financial condition to prove it. Good news, fellow Fools: It doesn't take a great deal of time or effort to teach ourselves and our children the basics of money -- whether you're reading the 13 Steps at our site, visiting the SEC's Beginner Investor guide, or reading the basics at Investopedia, these resources are both freely available and absolutely critical, I believe, to our future independence and prosperity.

Third, did you know you have a label on your ear? Me, too -- can't help it. Whoever you are and wherever you live, whether it's your county or information you have freely given up about your own political convictions, the political world has labeled you and divided us all up like livestock: Democrat, Republican, independent. These labels pinned to our ears are used by handlers to group us together and manage us more effectively. This includes proper "messaging" to us, which involves finding out what we want to hear, playing on our biases, and wherever possible encouraging us to feel both superior to and alienated from those other creatures with the different ear labels over in that other pen over there. We have all let this happen to us.

In our own Motley Fool community, we have grown and strengthened in part because of the extremely apolitical nature of our founders and community leaders. What characterizes our own "Fool Nation" is a love of the principles of investing, which clearly rise above partisanship and enrich us all in so doing. We celebrate the motley -- what others often call "diversity" -- because we have seen how the encouragement and appreciation of diverse viewpoints make us STRONGER, not weaker. Dear Fools -- and in this case, dear fellow Americans -- I urge you to encourage this very same spirit in your community and civic efforts. Your handlers won't like it at all, but: Lose the ear labels. Gain the strength that says we're all in this together and have something new to learn from each other and that even when we disagree -- which inevitably occurs -- we are far stronger together than we are divided, in pens, by rival handlers.

Fourth and final, I believe a new wind must and will blow through this nation's alleys and cornfields. It is nothing more or less than the simple and strong conviction that we as citizens and that our governments at every level must spend less than we earnEvery year. All the time. I will say it again, full stop: We must spend less than we earn. This is the only dependable strategy for you and me to find financial independence and greater happiness in our own lives. And as we're now reminded with shocking force, the same is just as true of our government and our nation.

***

At the end of my dream, as I began to come out of sleep (in the way that we all remember our dreams when we wake up prematurely), I took a question from a woman down on that cathedral's basement level. She asked, simply, "What are you selling?" It's a question I love because I encourage all consumers to have the guts to ask that directly to the face of anyone talking about financial services to them (since we almost always are selling something), especially because we always should want to know what and how we're paying. But in this essay, I truly have nothing to sell. No stocks to mention, no ticker symbols to include, ma'am. No intended plugs for anything.

I wrote this motivated by shame personally and corporately because, on our watch, we have allowed what I believe is the greatest nation in the history of the world to stumble badly. This is a small effort by one Fool, without a microphone, to help.

David Gardner is co-founder of The Motley Fool. David holds shares of AOL.


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  • Report this Comment On August 09, 2011, at 12:21 PM, joeCLC9 wrote:

    Thank you.

  • Report this Comment On August 09, 2011, at 12:25 PM, DocMonsta wrote:

    There are many of us who think like this, but unfortunately we are not the ones with the megaphones, big budgets, and agendas to take over the world and shove our viewpoint down everyone else's throat. Reasonable, logical folk always get crushed by the loudest minority (that is political minority, not racial minority).

    DocM

  • Report this Comment On August 09, 2011, at 12:36 PM, 5forfighting wrote:

    You may be on to something that we can all embrace for our common good. "spend less than we take in" to me = "balanced budget". We should all be supporting and pushing our representatives towards this one national goal. Keep in mind a balanced budget should be the base line of the goal. To truly prosper we should not only be spending less than we take in we have a massive accumulated debt to retire.

    I too Am embarrassed that we as country and more importantly as citizens have allowed this "Holy Land" of the United States to arrive at such a perilous place. I share your shame and determination.

    Thanks for the reminder.

  • Report this Comment On August 09, 2011, at 12:49 PM, JDM62 wrote:

    Hopefully our representatives will read this. In fact, can I send this to my representatives here in Michigan? If so, perhaps we all should. The rest of the world is laughing at us...how much further will this once great nation fall?

  • Report this Comment On August 09, 2011, at 12:49 PM, TMFKopp wrote:

    @DocMonsta

    "but unfortunately we are not the ones with the megaphones, big budgets, and agendas to take over the world and shove our viewpoint down everyone else's throat."

    Perhaps, but we are still the ones with the votes. Polls seem to show again and again that the average American is waaaaay more moderate than Fox News or MSNBC would have us believe. We still have the ability to put the keys in the hands of those who will act reasonably and sanely -- perhaps even cooperatively!

    Personally, I think that the idea of a career politician is insane. Anybody that *wants* to be a politician should immediately be barred from office for life. Get folks in there with knowledge and experience gained from the real world, not the Washington political bubble.

    Just my $0.02...

    Matt

  • Report this Comment On August 09, 2011, at 12:55 PM, bluebare wrote:

    This is nicely stated and I feel the same way with this small caveat.

    A whole bunch of us "reasonable, logical folk" (Republicans and Democrats alike) worked our butts off to force the President and Congress to balance the budget around 1996 during the Clinton administration. While there was some slight smoke and mirrors involved in that balancing act, our national finances WERE in much, much better shape than they are today BECAUSE enough responsible citizens kept the pressure on for years until the necessary changes were made.

    I was one of those folks and I won't apologize for my part in helping it happen and I won't waste time pointing fingers at the people who undid it that excellent work. The scale of our financial crisisis more dire now than it was in 1996, but that is all the more reason to TAKE ACTION AGAIN knowing that there is a modern precedent for a people's movement to demand that the U.S. government enforce fiscal discipline. This is NOT a time to throw up one's hands and apologize and make excuses. It's time again to e-mail, write, and call your Congressman and Senator and let them have a piece of your mind. Here's all the information you need to do this today:

    House:

    http://house.gov/representatives/

    Senate: http://www.senate.gov/general/contact_information/senators_c...

  • Report this Comment On August 09, 2011, at 12:57 PM, dkalis wrote:

    I know you have nothing to sell, nothing to recommend....but if you did have anything what would it be :) throw us a bone :)

  • Report this Comment On August 09, 2011, at 1:03 PM, mtheadedfool wrote:

    A sense of crisis often leads people to revert to instinctive reactions, tunnel vision, and strident positions. Unfortunately, I think we're seeing a lot of that these days, including (albeit to a lesser degree) in this essay.

    By the criteria suggested here, individuals would not have mortgages, companies wouldn't borrow to expand, and the U.S. would not have gone into debt or purchased bonds for long-term capital projects, like roads, schools, and power generating dams.

    If something like a school gets used for 50 years, it makes sense for the costs to be spread out among those who benefit from its use over that period. Conversely, it does not make sense to borrow for on-going, day-to-day expenses.

    Public finance, like personal and corporate finance, is complex. There is "good" debt and "bad" debt... and a gray area where reasonable people can disagree. And there are accounting procedures, such as tax expenditures, that blur the line between spending and revenue.

    My point: the advice on never spending more than you earn is reasonable to a degree, but I'm not sure it's helpful in the context of public policy. A more productive discussion might focus on what the borrowing is going toward, what the cost of the borrowing is, and who'll be paying for it. Borrowing for certain things, especially when treasuries are at or near 50-year lows, can make a great deal of sense. For other items, or at other prices, not so much.

    Personally, I think under the current economic climate it would make a lot of sense to invest in infrastructure projects now, when labor and interest rates are relatively cheap. Then, when the economy gets back into gear, cut back on infrastructure projects to below normal levels. A road, airport, or school built today is going to be a lot cheaper than one built a few years from now.

  • Report this Comment On August 09, 2011, at 1:03 PM, TheoryMeltFool wrote:

    Great article! There's a reason why us fools rely on our own investing prowess (with a little help from MF Stock Advisor in my own case).

    But in addition to investing in stocks, i've also begun to turn to agorism and voluntarism (anarchism). I won't go into detail here, but you can send me a message if you're interested in learning more about these concepts. I also vote for libertarian/independent politicians, as i find both major parties are corrupt.

  • Report this Comment On August 09, 2011, at 1:08 PM, wolfman225 wrote:

    A lovely thought David, as well as being solid common sense (becoming increasingly rare).

    The question is, "How do we get from here to there?"

    We, as a country--and in some cases personally--have spent generations instilling a sense of entitlement in our children. Children who are now running the country according to the tenets of: "it's not my fault", "it's someone else's responsibility", and (my favorite) "I know my rights!", as opposed to: "I am fully capable of providing for myself and my family", "I am soley responsible for my own success/failure", and (my favorite) "How can I help you learn to help yourself?"

    Children who have been mentally and intellectually crippled by the popular emphasis on "self-esteem" at the expense of developing a real sense of self respect resluting from true accomplilshment.

    How do we go about reversing this? Is it even possible? Or are we condemned to "reap what we have sown"? It's hard enough to stem the tides, much reverse them.

    I do know one thing. All we need do is look to Greece, Spain, and the UK to see our future, should we fail.

  • Report this Comment On August 09, 2011, at 1:19 PM, wolfman225 wrote:

    @mtheadedfool

    <i>If something like a school gets used for 50 years, it makes sense for the costs to be spread out among those who benefit from its use over that period. Conversely, it does not make sense to borrow for on-going, day-to-day expenses.</i>

    No one is saying there should be no responsible borrowing. The idea of not spending more than you take in includes not borrowing more than you can afford to pay back. Right now, we are borrowing money to make payments on money we have already borrowed. It's an unsustainable path.

    <i>Personally, I think under the current economic climate it would make a lot of sense to invest in infrastructure projects now, when labor and interest rates are relatively cheap. Then, when the economy gets back into gear, cut back on infrastructure projects to below normal levels. A road, airport, or school built today is going to be a lot cheaper than one built a few years from now.</i>

    The problem with this (other than the nearly $17T we already owe) is a problem than Keynesians always ignore. Government NEVER volulntarily gives up power/money after it has gained it. Proof of this lies in the fact that spending never actually declines, regardless of economic situation; boom or bust, government always has a "reason" to spend more.

  • Report this Comment On August 09, 2011, at 1:31 PM, wolfman225 wrote:

    <<Children who have been mentally and intellectually crippled by the popular emphasis on "self-esteem" at the expense of developing a real sense of self respect <resluting> from true accomplilshment.>>

    Uh, that should read "resulting". Finger stutter :(

  • Report this Comment On August 09, 2011, at 1:33 PM, TMFBent wrote:

    "we as citizens and that our governments at every level must spend less than we earn. Every year. All the time. I will say it again, full stop: We must spend less than we earn."

    Many espouse a similar sentiment, yet I can think of no one (I mean, no one) who can live this way, or who does.

    Everyone I know who espouses a pay-as-you-go mentality for federal spending and claims that Americans need a similar personal finance carries or has carried a mortgage or auto loan -- meaning that at some point, they spent more than they earned. Every business I can think of needs capital to begin, meaning it spends at some point more than it earns.

    Even assuming that a federal government could or should operate in this way (I submit that it can't, and shouldn't), polls show that Americans are completely unable to make the spending cuts or revenue increases that this would require. They're both too ignorant (they believe, for example, that foreign aid constitutes a large portion of federal spending) and too self-interested to make these hard decisions.

    The answer, to every grim and serious-faced individual budget balancer, is always "tax someone else and cut someone else's government support." Well, it used to be that. Lately, thanks to Tea Party-type, never-tax pledges, it's "never raise taxes at all, close no loophole, no matter how ridiculous, and cut someone else's government spending."

    Medicare? Don't you dare. ("Keep your government hands off my Medicare" read one sign carried to a town-hall meeting to oppose Obama's "socialized" medicine.)

    Social Security means testing? Why? I paid in for all those years. Surely I'm entitled to a guaranteed payout. And don't you dare make me wait a couple of years longer for it to get to my mailbox.

    Military spending cuts? Heck no! We need to teach those terrorists a lesson (even if they never were in that one country), and over here, we need that Army base and that Lockheed Martin factory so the employees and soldiers will come to our hamburger joint. And lifetime socialized medicine for everyone who ever wore a uniform? The least we can do.

    Farm subsidies? Don't you dare touch those. Farmers are the soul of America, and we owe it to those small towns to make sure that family and factory farms are insured against business risks, like weather.

    School lunches? You really want malnourished kids in this "first world" country?

    Infrastructure spending? No one likes to pay for roads, but they sure don't like traffic and potholes.

    Small business loans? Hey, these entrepeneurs are the future of our economy.

    Support the big banks during a complete credit freeze? Well, you have to, right? Or no one will have credit for capital plans or even day-to-day operations.

    Housing-market support? Gotta have that, because the promise of a cheap mortgage is something we've built into the American dream.

    What's nearly as embarrassing as this unselfreflective collective selfishness is the ignorance that the average American has regarding the government's ability to fund current spending and raise debt -- which is just fine, actually.

    This recent downgrade is not simply the result not of out-of-control spending, which has been going on for years. It’s a result (longer term) of tax rates being slashed to next to nothing during good times (because Alan Greenspan said we had to, or we’d have a budget surplus so big the government would end up owning too much private enterprise!) at a time when spending was getting more out of control.

    More immediately, it's an intentional, self-inflicted wound and the triggermen are those who decided not to rein in spending (through appropriations legislation long past) but to hold the entire country hostage by threatening not to pay the bills it already racked up.

    And irony of ironies, despite the "downgrade," brought to you by the same yahoos who rated junk bundled mortgages AAA, the entities which actually loan the U.S. money (via the bond market) so far don't believe it. Yields dropped.

    What's needed isn't a commitment to never spending more than you earn. It's a commitment to sanity and sound planning. That's the same thing whether you're an individual or a government. Debt can be a good tool when used responsibly. Debt is not inherently bad. And governments are not individuals (or EU member nations). The ability to "print" more money mitigates much of the risk of insolvency, though it can bring other ills.

    Do we need to be more responsible? Absolutely. But the time to cut spending is not when the economy is in danger of tipping over the edge, it’s when times are good. Unfortunately, there will be no change of any kind coming unless Americans are willing to look deeper, consider the longer term, and think more critically than simply embracing the shrill, “stop spending now” calls of the debt alarmists on pundit TV.

    I invite all those who think this is so easy and simple to visit this page and balance the budget themselves. http://www.nytimes.com/interactive/2010/11/13/weekinreview/d...

  • Report this Comment On August 09, 2011, at 1:38 PM, sgt1917 wrote:

    @wolfman225 hit the nail right on the head.

    In addition, I agree completely that the US Government MUST get spending under control. There is a lot of work to do, but its not going to get done by the people currently with the most power.

  • Report this Comment On August 09, 2011, at 1:41 PM, teeba11 wrote:

    Great comments @wolfman225. I too, do not know how we go about reversing this. It has come to the point that our 'leaders' cannot even have a sensible discussion about how to reverse the track we are on.

    We need to take a long term view (just as we do with investing) in turning our country around financially. We can't do it with the type of brinkmanship we have seen lately.

  • Report this Comment On August 09, 2011, at 1:49 PM, wolfman225 wrote:

    ^ I appreciate the comments.

    @TMFBent--

    I am one of those who you say doesn't live by a balanced budget (because I bought a house, car, etc.). I do. In fact, I am running a surplus! There is no problem with the government borrowing short-term for it's Consititutionally required obligations, but we've gone wll beyond that.

    My earlier point was that we can NOT continue to borrow at this rate. To reference another post: "It's kinda like using MC to make the (minimum) payment on our VISA while we run up the balance on AMEX."

  • Report this Comment On August 09, 2011, at 1:57 PM, ShaunConnell wrote:

    The idea that the Tea Party doesn't support cutting military spending is either completely ignorant or just a falsification.

    Even Standard and Poor's publicly said that Ryan's plan would have saved our credit rating.

    You're wrong.

  • Report this Comment On August 09, 2011, at 1:58 PM, JeanDavid wrote:

    "I believe we should now be asking, as we elect public officials, something very similar. Of any candidate, before you cast your vote, ask: Would you be willing to put every last dollar you have into the hands of this particular public official to manage on behalf of our future?"

    I started voting as soon as I got my U.S. citizenship about 1961. Since then, IN EVERY CASE my answer would have been NO. For the first 20 years or so, I voted for the lesser of two evils. I think when I voted for LBJ was the last time. I voted for him to keep Barry Goldwater out. And then LBJ did everything I was afraid would happen if Goldwater was elected. In retrospect, while I disagreed with him, at least had intergity and said what he meant. Since I vote for someone I thnk might indicate to the eventual winner (since no one I vote for ever has the slightest chance of being elected) that I am dissatisfied with both the Democrats and the Republicans and do not trust either of them to have any interests, other than their own personal ones, at heart. If they even have hearts anymore.

    The problem is that it costs so much to run a successful campaign that the politicians are sold out to those people (now inclucing corporations) with the money to buy an election. Someone with the interests of the country and the majority of its citizens will never get any of that money. The oligarchy ensures that any candidate with a chance of winning will be owned by them. So it does not even matter, as a practical matter, which one is elected. Voting is a crock of #$%^ meant as entertainment and distraction. Nothing else. The rot is taking over our political system like a virulent cancer. It is probably too late to do anything about it.

  • Report this Comment On August 09, 2011, at 2:02 PM, cariocadagema wrote:

    Well put David but might be fair to put things into global perspective. I have travelled and lived on all continents and have not yet seen a country that matches the US. Sure not all is perfect but it never is-nowhere!

    So as a global community, let's learn from our mistakes and fool on!

  • Report this Comment On August 09, 2011, at 2:12 PM, TMFBlacknGold wrote:

    "Personally, I think that the idea of a career politician is insane. Anybody that *wants* to be a politician should immediately be barred from office for life. Get folks in there with knowledge and experience gained from the real world, not the Washington political bubble."

    Wow! This should be put on billboards across the country! How can you not agree with this? What other titles can you attain without true real-world experience?

  • Report this Comment On August 09, 2011, at 2:12 PM, TMFBent wrote:

    Wolfman, I did not posit that one should never spend more than one earns in a given year, the writer of this article did, and that is the sentiment I'm disagreeing with.

    You and I actually agree, though it may not be obvious. You are saying that some borrowing is OK. So do I. The difference is in what constitutes OK. You say you're running a surplus and able to pay your debt. So it has been the U.S. at various times in U.S. history, including the era ended by the Bush tax cuts and the giant, unfunded wars.

    This was viewed as responsible policy by majorities of our legislators (including many who are now stumping for spending cuts) precisely because it DID NOT seem like it was spending beyond our means. Tax receipts were still fairly high due to a housing-inflated economic boom.

    What is and is beyond our (or a government's) means is never clear until later. Unfortunately, projections -- like those that predict unmitigated doom now, but back then predicted no real problem -- are based on events that may or may not happen, and don't incorporate other events that may occur.

    That's why, to my mind, the solution is never to give in to contemporary hysteria and try to set policy based on the fears of the day. (During good times, it's also idiotic to base policy on the rosy projections du jour.)

    Unfortunately, many years of study of human brains show that this is precisely how we do behave.

    I'm still looking for volunteers to pony up their own sacrifices, either in higher taxes or lower government handouts, in order to balance the budget.

    It would be interesting to me to see what the very passionate commenters on this thread are willing to do for their country's financial future -- other than point the finger of blame at others.

    I'll start. I'll pay 5% higher taxes and give up 50% of the only tax deduction I get: a mortgage interest credit. Moreover, I'll be happy to pay $5,000 a year tuition to send my kid to public school. I'll also kick in $0.25 per gallon on a gasoline tax for road infrastructure products. Finally, I'm fine with a 2% national sales tax on all goods and services.

    Sj

  • Report this Comment On August 09, 2011, at 2:13 PM, guixiu wrote:

    If we slash spending when the economy is already on it's knees--as we did in 1937--we'll get the same result as we got then. We need to invest in our future just as we invest in a house or our children's education. When we invest wisely in infrastructure (which is fast falling behind; compare the new airports in Seoul and Beijing with decrepit LAX), in education, in jobs, we flourish in the long run. Sometimes debt is wasteful and sometimes it's wise. We need to learn the difference. We need to tax fairly and spend wisely, not cling to simplistic slogans in an increasingly complex world.

  • Report this Comment On August 09, 2011, at 2:15 PM, TMFHousel wrote:

    <<Right now, we are borrowing money to make payments on money we have already borrowed. It's an unsustainable path.>>

    To be fair, the government takes in well over $2 trillion in tax revenue, and total interest paid on the national debt is $200 billion. We don't have to borrow to pay interest. And since money is fungible, it's illogical to say the deficit borrowings are funding interest payments. As a percentage of GDP, interest paid on the national debt is near a historic low. That's what plunging interest rates will do.

    And great article, David!

  • Report this Comment On August 09, 2011, at 2:19 PM, BeSmarter wrote:

    Beatifully said.

    We the People have an insatiable appetite for leadership; those with perhaps less selfless motives happily fill this troubling vacuum.

    If only our elected representatives spoke truth to power in this way more often...

    Bravo.

  • Report this Comment On August 09, 2011, at 2:31 PM, cooncreekcrawler wrote:

    I'm 68. Still working and still paying and will continue to for a long time. TMFBent got it right.

  • Report this Comment On August 09, 2011, at 2:43 PM, atarheelfool wrote:

    We simply have a government or at least the legislative part (Congress) that truly believes it's not accountable for anything to anyone at anytime. Make no mistake about it, there is NEVER a time when or where a politician is at work that the agenda isn't to further the good of the party. It's never about what's in the best interest of the people such as you and I, it's always about what's in the best interest of the party. Washington is a vaccum that draws in what it needs to sustain it's own existance at whatever expense. The only time you and I matter is during the every two or four year election cycle. Very sad to think about.....................

  • Report this Comment On August 09, 2011, at 2:57 PM, uaku wrote:

    Who is John Galt,

    Of of the pages of Atlas Shrugged

  • Report this Comment On August 09, 2011, at 2:58 PM, wolfman225 wrote:

    @TMFBent: "You and I actually agree, though it may not be obvious. You are saying that some borrowing is OK. So do I. The difference is in what constitutes OK. You say you're running a surplus and able to pay your debt. So it has been the U.S. at various times in U.S. history, including the era ended by the Bush tax cuts and the giant, unfunded wars."

    Actually, I don't think it's all that obvious. We've never had a surplus, other than as an abstract accounting entry. I define surplus as "receiving more than enough for your needs". As long as we have long term debt, we do not have a surplus. IMHO. I have no debt, therefore I have a surplus. The "surpluses" in the Clinton era, if real, should have been set against existing debt levels. Instead, they were used by politicians (both parties) as justification for embarking on new/expanded programs. Also, no war has ever been "funded", as that presumes all expenses being budgeted for, an impossibility.

    @TMFHousel:"....it's illogical to say the deficit borrowings are funding interest payments."

    We are borrowing as much as 43 cents of each dollar we spend. A portion of every dollar we collect goes to service our debt. That means a portion of those 43 cents goes to service existing debt.

    -----------------------

    To all TMF: I fully realize that I am not as classically educated as those on the TMF staff, or those who have decades of investing experience. I am a simple man, with a simple man's basic understanding of right/wrong and common sense/fairness. That being said, I think that we sometimes get lost in esoteric argument of minutae at the expense of addressing core issues.

    I've learned much in the last couple years being a member. Much from exposure to other viewpoints and I fully expect my education to continue. Fool on.

  • Report this Comment On August 09, 2011, at 3:03 PM, pmzang wrote:

    TMFBent,

    Love that NYT balanced budget link. with 50% savings and 50% revenues in various proposals,

    a dumb guy like me balanced the budget, both short and long term. It's just ridiculous how stubborn, ideological, uncompromising, polarized, and inflexible OUR political leaders are today. My parents if they were alive would be ashamed of ALL

    "party leaders" today, whether they were, Republican, Democrat, or Tea Party. Pure demagoguery

  • Report this Comment On August 09, 2011, at 3:06 PM, TMFBent wrote:

    Wolfman: "As long as we have long term debt, we do not have a surplus. IMHO."

    Doesn't this directly contradict what you said just prior?

    "I am one of those who you say doesn't live by a balanced budget (because I bought a house, car, etc.)"

    I'm presuming you mean you funded these purchases with debt (as do the vast majority of people, including those who decry debt when others borrow), which was the point I was making, and to which you were originally responding.

  • Report this Comment On August 09, 2011, at 3:06 PM, Mliaom wrote:

    TMFBent,

    Amazing comments. You hit the nail on its head but the reason no one is responding is precisely the reason no one is doing anything except complaining. Lets go folks, what are you willing to sacrifice to balance the budget. TMFBent gave his take, here is mine.

    I will be more than happy to pay a national sales tax of 2% and raise my taxes by 5-7% but only if we can raise taxes for people earning million dollars a year by at least double that.

    Lets quit talking and start sacrificing. Lets balance this budget and get our AAA rating back.

  • Report this Comment On August 09, 2011, at 3:06 PM, Teo123 wrote:

    Nice piece.

    We really need to be clearer to the American public. I mean, how much do things like the mortgage interest deduction cost every year? And what do we get from it? How much do the child tax credits (i.e. daycare and per-child credit) cost?

    Everyone wants to spend less than they take in but what happens when the spending is in the form of credits for behavior? It seems to me that everything needs to be on the table -- including tax expenditures

    The most frustrating aspect of the debate is that the same people who claim victimization for 47% of us not paying federal income tax refuse to consider getting rid of the very deductions and credits that allow the 47% to pay no federal income tax.

  • Report this Comment On August 09, 2011, at 3:08 PM, koolkrissy wrote:

    Thank you, David, for your words of wisdom. If only we could get the information out to the general public. It is time that we who have been so conveniently "earmarked" let those who have done so know that we are first and foremost Americans who love our country and will do whatever it takes to save it. We need so badly to cast off our divisive earmarks. The damage of it can clearly be seen in Congress. Wouldn't it be wonderful if those who make our laws in Washington would do what was best for America instead of their narrow minded party interests.

  • Report this Comment On August 09, 2011, at 3:26 PM, TMFTomGardner wrote:

    You cannot solve America's problems exclusively by a) taxing more or b) spending less. You absolutely need both. David has eloquently made the case for a government led by people trained in financial matters. Don't be surprised that they aren't. We don't teach these lessons in high schools and we don't hold our elected officials accountable. No surprise that our spending is completely unchecked and unsustainable. More on that in a second.

    TMF Bent makes eloquent points about how you can't choke the sources of revenue (taxation) and expect to balance a budget. You simply can't go to war, twice (actually, we might want to count Libya to make it three), without generating the revenue to pay for it. I think Bent is almost halfway on target with his suggestion -- and we thank you for paying more voluntarily.

    Ultimately, though, the much larger issue facing America isn't about taxes. We absolutely have to cut down loopholes, simplify the tax code, and ask more of our wealthier citizens. We aren't going to get back on our feet without more capital coming in.

    However, the much larger challenge is tracking that capital -- carefully -- through the system. The accounting systems in government are comically bad. Check with the GAO. Fraud is rampant. And this administration is every bit as beholden to special interests and lobbyists as the last. The problems we have have reached the systemic level. This is an absolutely critical point to understand. Unless you fix the system, you cannot fix the problems.

    For this reason, I am much more aligned with the author of this column (even though he is my older brother). We need accountability, radical transparency, and fundamental changes to how capital is raised to run campaigns. He came across as a little wacky, but if you watch the old debates, this is precisely what Ross Perot was getting at. You have a systemic problem that is polluting the process and will have absolutely dire consequences.

    I have no political dog in this fight. If my taxes are raised, I won't throw my fist in the air against it. Certainly not. However, I will object to an utter lack of accountability and to the continuing outright fraud that is an obstacle to intelligent capital allocation (particularly when the technology is available to bring dramatically greater transparency to how our dollars are spent).

    I have never felt so surely that the driving forces in both major parties are narrow in their thinking and blinding themselves from or ignorant of the realities we face. Without moving to fix the system, we're just upping the odds that the next generation will not enjoy the quality of life of the last. Unfortunately, it looks like it'll take one more damaging blast before we agree to tax reform and radically transparency on spending (and lobbying). - Tom

  • Report this Comment On August 09, 2011, at 3:30 PM, wolfman225 wrote:

    TMFBent--

    "Wolfman: "As long as we have long term debt, we do not have a surplus. IMHO."

    Doesn't this directly contradict what you said just prior?

    "I am one of those who you say doesn't live by a balanced budget (because I bought a house, car, etc.)"

    I'm presuming you mean you funded these purchases with debt (as do the vast majority of people, including those who decry debt when others borrow), which was the point I was making, and to which you were originally responding."

    Where's the contradiction, sir? A balanced budget doesn't equal surplus. A company can have long-term debt for capital expenditures and still have an operating profit. I went into debt for items I needed and could reasonably afford within current income streams. I never paid my MC with a cash advance from my VISA, and I never had a surplus until I became debt free. I don't (never have) decry anyone going into debt, for whatever reason, as long as they could reasonably expect to repay and fully intend to do so. I'm not directly impacted if they over borrow/spend (unless I co-sign). With government, it's different.

    Aside from the question of whether what government wants to spend our money on is justifiable (a separate argument), there has been absolutely no indication on the part of any of our representatives of real intent to repay what we've already borrowed. All we hear are arguments about whether the debt payments are "sustainable". I submit they are not.

  • Report this Comment On August 09, 2011, at 3:30 PM, SeeElsie wrote:

    Received an e-mail the last week of July with the proposed figures that would change our unbalanced debt to China. For the entire month of August, buy only Made in the USA. Easier than you think. It has had the result of making me think twice before I purchase anything from anywhere. Contains the imports and creates job on our own shores. I ALWAYS VOTE. As someone mentioned before, mostly against a candidate rather than for. There is nothing in the books that says "the empire of USA" will not fall as others long before us have done. Arrogance is a dangerous attitude. Will be 70 years old in a couple of months and have lived through many, many setbacks, both personally and nationally. With due diligence, as is so often advised, we shall prevail. One citizen at a time taking on their own responsibility. Thank you, David. I knew there was a reason I joined the Fools.

  • Report this Comment On August 09, 2011, at 3:41 PM, GiftOfNewLife wrote:

    @TMFBent

    Good comments and thanks for sharing the balance the budget link.

    It is amazing that people do not want to put their ideologies aside and compromise for the sake of the country. Everyone needs to learn from people in our military who put their ideologies aside, risk their lives, and team up to protect us.

  • Report this Comment On August 09, 2011, at 3:50 PM, SteelHead43 wrote:

    FYI, as a country with experience in this situation http://www.reuters.com/article/2011/08/08/us-crisis-canada-i..., there are no easy answers. In Canada's case, spending was cut in a 7:1 ratio to tax increases (despite being referred to as a socialist government). We had the benefit of a stronger economy at the time, but unfortunately a weaker economy means it will just take longer to dig out, but you need to start digging.

    Canada needed the low point as being referred to as a 3rd world economy by the Wall Street Journal to wake up our politicians but we had the benefit that majority governments can implement policy without the multiple levels that need to be satisfied in the US.

    My primary point is that action is required, endless blame (and TV interviews) and rhetoric do not create solutions.

  • Report this Comment On August 09, 2011, at 3:53 PM, ibuildthings wrote:

    Quoting mtheadedfool: "Personally, I think under the current economic climate it would make a lot of sense to invest in infrastructure projects now, when labor and interest rates are relatively cheap. Then, when the economy gets back into gear, cut back on infrastructure projects to below normal levels. A road, airport, or school built today is going to be a lot cheaper than one built a few years from now."

    =============

    I would agree, but then they supposedly did that in 2009 with the stimulus bill. They promised "shovel ready" jobs and spent money and got near nothing to show for it. It isn't that I don't trust Keynesian economics, its that I don't trust the current administration to spend the money where it is needed most. They blew it and remain unapologetic.

  • Report this Comment On August 09, 2011, at 3:55 PM, wolfman225 wrote:

    @SteelHead43--

    Thanks for the link. I believe we could learn a lot from the Canadian example.

  • Report this Comment On August 09, 2011, at 3:55 PM, ibuildthings wrote:

    All those roads they could have built and fixed with the stimulus money? Are the schools any better? Where did that money go?

  • Report this Comment On August 09, 2011, at 3:57 PM, wolfman225 wrote:

    BTW--anyone watching the DOW? Fed promised to keep rates at near zero for the next 2 years. Dow up 345 and counting

  • Report this Comment On August 09, 2011, at 4:00 PM, wolfman225 wrote:

    Up 435.

  • Report this Comment On August 09, 2011, at 4:02 PM, TMFMmbop wrote:

    Additional financial education is something both voters and pols.

    I'll throw in one more structural improvement that *they* will never vote for: term limits.

    At this point I think the only way career politicians would be willing to make career-ending votes (given all of the interests Seth, Tom, et al outlined above) is to be informed ahead of time that their careers will be ending.

    Tim

  • Report this Comment On August 09, 2011, at 4:05 PM, ibuildthings wrote:

    It would be interesting to me to see what the very passionate commenters on this thread are willing to do for their country's financial future -- other than point the finger of blame at others.

    I'll start. I'll pay 5% higher taxes and give up 50% of the only tax deduction I get: a mortgage interest credit. Moreover, I'll be happy to pay $5,000 a year tuition to send my kid to public school. I'll also kick in $0.25 per gallon on a gasoline tax for road infrastructure products. Finally, I'm fine with a 2% national sales tax on all goods and services.

    =============

    The problem isn't people's willingness to pay more. Not mine. My problem is how foolishly they spend money. Give money to one kind of capital allocator, you get one kind of result. Give it to another, you get another result. Money is spent on schools, security, so-called environmental protection to satisfy political needs, not social or engineering needs.

    If Buffet himself thought the US Congress was a wise allocator of capital, he would have donated his $50 Billion to the Treasury Debt Reduction Fund, instead of the Gates Foundation. But he isn't blind or stupid. On the Gates Foundation board, he can control where the money goes so that is where he donated his tax deductible $50B.

  • Report this Comment On August 09, 2011, at 4:44 PM, JDM62 wrote:

    Let me throw a wrench in all of this...wouldn't it help to stop giving away BILLIONS AND BILLIONS of the American Taxpayer Dollar to countries that may or may not be our friend? What about the billions we give to Pakistan, or the millions in weaponry we give to Egypt every single day? Not to mention the rest of the world.

    What about the billions lost in just Iraq alone? Where did all that money go? I would give more in taxes to balance the budget or repair our infrastructure, but would it even make it there?

    http://articles.cnn.com/2005-01-30/world/iraq.audit_1_iraq-r...

    We tried to buy our friends in Afganistan when they were fighting the Russians, now we're fighting those very same people we gave weapons and money to. How would you feel if you were one of those families that just lost their husband or son on that chinook helicopter?

    I don't have the answers by a long shot, but I do know that it can't be 'business as usual' in our government any longer.

  • Report this Comment On August 09, 2011, at 4:45 PM, DBrown7 wrote:

    TMFBent

    Well said. Many good points were made by you and others in this thread. Thanks to David G for starting this conversation. It's too bad our Congress and Administration seem to be unable to engage in similar constructive dialogue. If they did , I'm confident many of the issues we face today would be resolved in a way that would benefit the citizens as a whole.

  • Report this Comment On August 09, 2011, at 4:50 PM, JDM62 wrote:

    @ ibuildthings: AMEN!!

    Most of that stimulus money spent on rebuilding any roads here in Michigan, was spent rebuilding sections of highway that wasn't in need of it.

  • Report this Comment On August 09, 2011, at 5:22 PM, SwanPondBottom wrote:

    Thanks for sharing this, David.

  • Report this Comment On August 09, 2011, at 5:25 PM, GardenSolitude wrote:

    "We, the people..." definitely fits the Motley Fool I know. I am extremely grateful to be under the sure-footed guidance of such a great group as our Income Investor team.

  • Report this Comment On August 09, 2011, at 6:06 PM, TooPoor2 wrote:

    David - I couldn't agree more. Thank you for a well written article sans the usual sales pitch. This is a time when everyone need to give honesty a try for a change.

    The comments here are also outstanding and respectfully written. A very nice change from some mudslinging I often witness.

    Is debt bad? No, not if handled responsibly and it helps improve the quality of life. Home ownership is an investment in the future and can be done within ones means. It should not be a vehicle for investing but rather a place to enjoy life when not earning a living. We got way off track when the lending rules changed and everyone decided they could be a millionaire.

    Investing in housing for rental and income is a business and should be handled as such.

    Best to all you fools. I leave this with a smile

    Cheers

    Bob

  • Report this Comment On August 09, 2011, at 6:12 PM, bretco wrote:

    Trouble is, for the most part the responders here are preaching to the choir. The masses are ignorant

    and easily led around according to the eartags suggested earlier.

    Excellent piece non-the-less; we can continue to

    try educating the less learned and hope for the best.

    Kudos to MF for their contributions.

    TMB

  • Report this Comment On August 09, 2011, at 6:36 PM, MrBuffyJr wrote:

    I just have the following to say:

    "An honest man is one who knows that he can't consume more than he has produced"

    Ayn Rand

  • Report this Comment On August 09, 2011, at 6:48 PM, bluebare wrote:

    Following is a link to a visual representation of the $4.7 trillion stimulus package that has added so significantly to our debt burden.

    You will see that $3.9 trillion of the $4.7 trillion was used to pay off some, but not all of the bad debts of one small class of Americans who had already proven their inability to manage large amounts of money wisely: lousy speculators.

    You can make your own judgments about the rest, but, in my humble opinion, only about one-quarter of the remaining paltry $800 billion was invested in activities that could be reasonably said to hold some promise of generating any long-term economic payback. If true, this might explain why we experienced moribund growth rates from an investment of $4.3 trillion; only about $200-250 billion was spent wisely.

    Government as usual, really, only on the grandest scale yet. I post this only in the highly unlikely event that there is any Fool out there who is unaware of this information and perspective.

    Here is the link to the illustration:

    http://money.cnn.com/news/specials/storysupplement/stimulus-...

  • Report this Comment On August 09, 2011, at 6:49 PM, jamesloveslulu wrote:

    "Lose the ear labels."

    Well said, David Gardner, well said. Like so many herd animals, every one of us, to some extend, has been unthinkingly swallowing whole a raft of pre-digested philosophies. Many of them conflicting. Most of us rarely take time to review our own idealogies...to test them against the world as it actually is, or to see if our ideas or perceptions hold up under scrutiny. Nobody's perfect in this regard. I'm certainly not.

    I'd say, "Me too," in support of David's call to live within our means.

    I'd also like to add this: we shouldn't keep electing public officials who promise lower taxes in order to win elections and then expect to see balanced budgets that pay for a government that effectively serves the diverse needs of America's citizens.

    Our actual and effective tax rates are the lowest they've been in generations. There are fools that keep telling us that the key to economic growth is lower taxes and smaller government. This discredited supply side mantra has been repeated through two wars, numerous natural disasters, and has lead to failing national and local infrastructures. It's the centerpiece of the most recent bout of political brinksmanship which has so very badly shaken markets around the world, and may very well provide the catalyst for a second recession.

    Supply side economic theory was disproven at least one generation ago. Yet the antitax groups keep successfully influencing lawmakers to keep keep lowering the rates on the wealthy and corporations. This has the effect of shifting the tax burden, and, as public spending and investment make up such a significant part of the economy, the burden of carrying the US economy onto the backs of citizens who make less money for working harder year over year.

    For real: the investor, wealthy or not, is taxed at only 15% for profits generated on the sale of positions held a year and a day. If you are a hedge fund manager, and there are many of you out there, it's possible to structure your entire compensation so that you never ever pay more than this. Likely, if you're in this enviable position, you have the resources to hire the best tax attorneys and accountants in the country in order to structure your investments and compensation in such a way as to pay an effective rate of 0%.

    Many of the largest corporations generating record profits pay absolutely no taxes whatsoever. How patriotic is that? How fair is that?

    I have the sneaking suspicion that most of you Fools out there work for a living. Your paychecks don't arrive with the option of not withholding any taxes until you decide whether or not to pay them. You can't afford to hire an accountant or a tax attorney. You can't afford to hire a lobbyist to fight against the big refinery on the other side of the county that's been appealing to reduce its tax appraisal by $50M, even though its making 20% more revenues year over year. You have to rely on the elected county appraiser to have enough smarts to outmaneuver the oil company's army of lawyers in the arena of public opinion, because he sure doesn't have enough staff to fight this one on his own. The appraiser better win that fight, because if he loses, all the school districts in your county - the ones which did a good job educating you when you were growing up - will take an $18M hit from their already evaporating budgets.

    With the loss of one appeal lacking any merit whatsoever...there goes your daughter's science, phys ed, music and library access. And it won't be coming back anytime soon, unless your community forms an educational foundation to raise the funds needed to make up some of the lost funds.

    The formation of the local ed. foundation, is how politicians have been offloading their responsibility to effectively serve the citizens who elected them. Thus thousands of non-governmental taxing agencies are born...all because a handful of politicians don't have the courage to give it to us straight - that providing a good education to a diverse citizenry is complicated and expensive. Or maybe they don't believe that a good education is a right.

    Some of you will argue that the refinery was just following the tax code and shouldn't had to appeal an unjust business property appraisal to begin with. Not so fast. The oil company's legal council's job is to come up with plausible, if only marginally so, basis for appeals. Society then has to spend its diminishing resources defending its valuation. The clock is on the appellant's side is these situations. If the appraiser's office cannot forge a path through the blizzard of documents to understand and defend against the appeal within a fairly short time span, the oil company automatically wins its case. Hire a bunch of expensive lawyers, drown your opponent in paper, win case. Sound like a familiar strategy?

    In common cases like this, it's us, the non-wealthy, non-corporate taxpayer that is victimized by these amoral, cynical maneuvers.

    I'm not talking about the poor Mom n' Pop shops trying to get by, only to be oppressed by the guv'ment. I'm talking about people and companies who feel entitled to benefit from and take as much from our society and economy as they wish, and to pay as little for it as they choose.

    So the question remains: if we want a government that educates our kids, and provides the foresight and investment in the basic research which businesses and citizens use to enrich themselves, who is going to pay for it? If the corporations that we buy ownership in are going to be able to prosper, they have to have a transparent environment that is supported by a functioning legal and regulatory system. If the very companies we want to rise in value are allowed to set their own rules, and one of them is "Thou shalt not pay taxes - ever", then who is going to pay what should be their fair share? I know I can't...and I don't any army of people that can, either.

    When I was younger, I used to hate paying taxes. I worked so hard, and then saw my weekly paycheck reduced by a pretty fair amount. I thought it was unfair that I didn't have that money to spend. And I fixated on news stories about the $600 hammer and other government procurement scandals. But then,as part of serving my country while in the Navy, I saw how responsibly my shipmates acted with the budgets they were given. And after I left the service, I was able to take advantage of federal and state financial aid programs to attend one of the most prestigious universities in the world. With that education I was able to enter a more lucrative profession and eventually take my place along side the generations that pay back society for the opportunities it has funded all along to help people like me earn a better life.

    There are no free lunches. Society supported the military that gave me invaluable work and life experience. Society funded the educational institutions I went to. Society funds the web of social safety nets that have kept our economy from collapsing. Society picks up the pieces - and yes, the tab - when those operating under the auspices of unregulated capitalism drive our economy off a cliff.

    One tax season, as I was reviewing our tax return for E&Os, I kept seeing all of these numbers which seemed pretty big to me. And then I saw the final tax bill. I could not believe how big it was. And I felt happy. Honest to gosh, I felt happy. I just realized that I paid more in taxes that year than the previous 7 years combined. And I never felt the economic sting at all. I looked around me and saw myself and family living a life that none of us ever dreamt possible. And I reflected on the opportunities that society - you all out there - made possible through institutions supported by generations of taxpayers. And I've been more than happy to pay my fair share ever since then.

    Society funds many good things through the use of tax levies and collections. Good government is one of them. Good government helps its people fulfill the needs that they themselves decide. It costs money to do that effectively. We need a sensible, balanced tax policy to fund our local, state and federal governments.

    Yes, I most certainly agree it's time we started living within our means. It's also high time we started understanding that to pay-as-we go means that we have to have a revenue stream which is adequate to start with.

    So, I'm saying something I never thought I'd say: "Raise taxes! Now!"

    Cheers,

    James

  • Report this Comment On August 09, 2011, at 6:58 PM, lablebraun wrote:

    Thank you, David, for your courage and caring in sharing such a deeply personal experience. I agree, in concept, with your statement that we not spend more than we earn - as long as we understand that to be true in the long term. In the short term, all of us have probably, at one time or another, spent more than we earned - when a loved one fell ill, we lost our job, or we experienced some other emergency. The difference between us and the government, though, is that when we make those emergency expenditures, we understand our responsibility to have a plan for how to make up for the excess spending. I would not support a balanced budget amendment that tied government's hands so restrictively that we could not respond to an emergency. That would cause us to make errors that are equally as stupid as the errors we make now. But I definitely would support an amendment that forced government to make clear (in hard money - not smoke and mirrors) how it intends to make up for the shortfall, and by when.

    Thanks, again, for your thought-provoking observations.

  • Report this Comment On August 09, 2011, at 7:10 PM, mjmac89 wrote:

    "It is nothing more or less than the simple and strong conviction that we as citizens and that our governments at every level must spend less than we earn."

    With this statement, David Gardner proves he does not understand the monetary system of the United States. It is true that the states and cities must balance their budgets. The USA, however, as the monopoly supplier of its own currency in a floating exchange rate system absolutely should not balance its budget, but carry reasonable deficits that do not allow inflation to get out of hand.

    I highly recommend everyone, the author included, invest the time to read the article at the following link for a proper understanding of the USA's monetary system and to become truly financially literate:

    http://pragcap.com/resources/understanding-modern-monetary-s...

  • Report this Comment On August 09, 2011, at 7:20 PM, David369 wrote:

    Good article! Thanks!

    Since you are really close to the Metro would you be so good as to take a couple of hundred copies and pass them out to Congress and throw a bunch in the rose garden (maybe the dog will grab one and take it inside). Not that it would do any good, but maybe a few of those politicians will at least wonder what the heck you were talking about. Maybe they will figure it out when they all get fired next election.

    Of course, if you want to play a really nasty trick on your brother you could tell him we all want him to run for President. Heck, he might get elected. Boy, he would really be mad at you once he figured out what a lousy job it was....

  • Report this Comment On August 09, 2011, at 7:42 PM, TMFBent wrote:

    Oh Tom G, my friend. Voters only want accountability on spending during times like these (if ever). The rest of the time, they want that money spent, so long as it's spent on stuff they like. Shovel ready project are "pork" when they're in the next state, but they're nothing less than what's deserved when they're in your own home town.

    It would be nice to get the outright fraud eliminated, but that wouldn't solve the problem, alas. No one knows how much fraud there is, actually. "improper" payments are reportedly 80 to $100 billion in 2009 (http://articles.cnn.com/2009-11-18/politics/government.impro... but what portion of those is fraud, no one could say. Note that the majority of the problem there is Medicare, a program that is political suicide to touch.

    Sadly, many voters, including many 'stop the spending' types, are completely fine with improper medicare payments, so long as those are payments that get them the care they believe they need and deserve. One person's "death panel" is another's "improper payments review panel."

    Accountability would be nice, and I agree with Tim that term limits for congressmen -- along with a real, sharp-toothed set of rules regarding the revolving door between congress and the exit to high-paid lobbying -- is the only way you can ever expect to get our elected officials to make the unpopular decisions our country needs.

    We can point fingers all we want, but we've got the government we deserve. We put them there, and we reward them for behaving the way they do.

  • Report this Comment On August 09, 2011, at 7:49 PM, wantingtoretire wrote:

    Having read through most of the comments I was going to add precisely the comment that mjmac89 has left.

    The US government does not work the same way as a business entity or a household. This is the biggest mistake everyone is making. When talking about "balanced budgets" you need to think carefully about what you mean. It is by no means as simple as people make-out.

    The US federal government doesn't borrow any money whatsoever.

    Businesses, households, State and local governments do borrow money and they pay for doing so.

    Borrowing has created the best living standards in the world in the US. The US federal government did not create those best living standards, the American people did.

    Currently, the American productivity machine needs a leader. Someone who will provide the confidence to make the wheels turn again. I don't see such a leader. What I do see is a capitalist system where everyone is looking after themselves hoping that when the ship goes down, they will be in a lifeboat. Many will not make it in to a life boat.

    I am so tired of the blame, blame culture that I read in so many commentaries. Blame never solved anything. If you are blaming someone, it means you are sitting on your butt doing absolutely nothing to help improve the situation.

  • Report this Comment On August 09, 2011, at 8:14 PM, mtf00l wrote:

    If the Federal government doesn't borrow, why does it pay interest?

  • Report this Comment On August 09, 2011, at 9:12 PM, wolfman225 wrote:

    <<David Gardner proves he does not understand the monetary system of the United States.>>

    With this one statement, mjmac89 shows his arrogant ignorance and complete lack of class.

    Seriously?

    If the co-founder of one of the premier investing websites in the world "does not understand the monetary system of the United States", perhaps you should dig some of the fortune you have amassed out of that moldy mattress, start your own site, and save all of us poor misled wannabes.

    Up till you came along, the conversation has been a polite, civil discourse and exchange of ideas where even those who hold differing views have been able to avoid name calling.

    Maybe you should go over to the forum over at MSNBC, where your advanced understanding of economics won't stand out.

  • Report this Comment On August 09, 2011, at 9:47 PM, JoseBJ wrote:

    Great stuff from David and community input. I agree with balancing budget, living within my means and borrowing for the future for good cause when it has the potential to return the investment.

    And I note the questions of how do we persuade the voters of what is needed and then get them to elect the individuals that would be empowered to return government controls to the principles and individual rights in our great constitution.

    I don't mean to become political. I don't trust

    polititians. But without an election that swings power away from the current liberal establishment, all the good comments in the foregoing discussions will not come to pass.

    Last year's elected House members that brought Tea Party input into the mix produced financial reality recognition and a credit downgrade to AA+. Without them, the downgrade could have been worse.

    My fear is that the Tea Party advocates, the Libertarians, and GOP "establishment", all with good intentions but significant differences not subject to adjustments will be inflexible and set their own candidates next year. Maybe each gets 20% of the electorate, and that leaves the 'majority' with 40% for the Democratic liberal establishment. Obama will thank all the 'right wing and 'conservatives' for enabling him to implement his global vision for changes and destruction of this great republic. We have had two elections with 'Independents' running that cost the GOP a win this way.

    We need a 'John Galt' (Atlas Shrugged) but I don't see one.

    I don't sense any hands reaching across the lines of the "anti-liberals" groups to focus on the principles of our forefathers to maintain this country's world leadership.

  • Report this Comment On August 09, 2011, at 9:53 PM, chaz572 wrote:

    I've seen multiple comments regarding the need to vote against a candidate, instead of for one. About being faced with only two viable candidates who could feasibly win, one of them so distasteful, that you're forced to pick the other just to keep that one out of office. I agree. Sadly, I see it as a common theme in the U.S. version of democracy. And I think it needs to change. When we vote our fears instead of our dreams, our dreams get crushed, and all we have left is our fears. Sound like politics lately?

    I'd like to put forth an idea that's a partial solution for this.... instant runoff voting. It's the voting system used in some parliamentary democracies where you get a wider array of candidates, and can rank several of them: first choice, second choice, third choice, etc. The candidate with the least number of first choices gets knocked out. All of those voters have their votes reapportioned to their respective second choices, and votes are retallied. Repeat until one candidate remains.

    Why it's good: you can vote your hopes as your first choice, and against your fears as your second. Think how things could have turned out differently if people who liked Ralph Nader, but knew he couldn't win, could have voted Nader 1st choice, Gore 2nd choice. Or voted Ross Perot 1st choice, with either Clinton or Bush 2nd choice. It allows third parties a real chance. It allows independents to be relevant, and their popular appeal to be accurately assessed at the polls.

    Here's why it's a Sisyphean task to make this chance in the U.S.: if there's one thing Democrats and Republicans can agree on, it's don't ever do anything to cede power or relevance to independents or third parties. Ever. No matter how good for the country or the health of democracy. It will only happen if the people stand up and demand it, and beat both Republicans and Democrats over their collective heads about it until they give in on the point.

    Call me naive, but I still hold out hope that it'll happen someday. Maybe I can at least pass some of that hope around with this post.

  • Report this Comment On August 09, 2011, at 10:58 PM, wolfman225 wrote:

    ^The problem with IRV is that you could, and likely would, end up with a winner that could only gain a minority of 1st place votes, which mean having a President that a majority didn't want in the office.

    Wouldn't happen, you say? Evidence of voter fraud/intimidation was plentiful in the last Presidential election (see: New Black Panthers/Philadelphia polls. Also, the election that put Al Franken in office--one precinct had more Franken votes that there were registered voters). Now imagine that spread across multiple candidates. If one party or the other can "overweight" turnout in certain districts/states, they can virtually guarantee the victory of at least a few extremists.

    Example: if the candidates preferred by the "activists" can't individually gain enough of a following to win on their own, a strong enough turnout can garner enough 2nd, 3rd, and 4th place votes to ensure that only their "side" participates in the runoff.

  • Report this Comment On August 10, 2011, at 12:01 AM, 123spot wrote:

    wolfman, you are a poet. Bent, you are on a roll. And David, good job. Spot

  • Report this Comment On August 10, 2011, at 12:20 AM, wolfman225 wrote:

    ^poet? If only my HS English teacher could see that! LOL I appreciate that.

    I second the opinion for David. Thanks for getting this conversation going. Even if we're not going to solve the country's problems in this forum, getting people talking (and, hopefully, thinking) is a great start.

    TFMBent: I don't really think we disagree all that much. I think it's more a difference of opinion on how to achieve similar goals. Thanks for the lively debate.

  • Report this Comment On August 10, 2011, at 12:35 AM, Kiffit wrote:

    The thing is, in a crisis, everybody has to step up to the plate, like the Koreans did during the financial meltdown in '96. Large numbers of Korean women gave away their jewelry to the state, because they thought it was their patriotic duty. America seems afflicted by a much more sectional interest view of the world; that the other guy can pay to save the budget and the country's financial standing.

    If, across the country, there had been a sentiment of, "What can I do to make a difference in saving my country?", we wouldn't be having this discussion.

    While I am a fiscal conservative, am suspicious of welfare statism and can think of a lot of bureacractic waste and process that could be profitably done away with, I notice that the twenty percent of the US population who own eighty percent of its wealth want the eighty percent who only own twenty percent, to make most of the sacrifices.

    I suppose keeping the investor class strong so they can invest more in jobs is good, but then one of the reasons the US is in a jam right now is that much of that class was more into hedge funds and 'funnystuff' financial packages than real economic activity.

    I guess they have taken a bit of a hit already, but that doesn't stop them from donating some jewelry, at very least. I mean a lot of the 'other guys' have lost their jobs and homes in the General Financial Debacle, and stand to lose more in the continuing shakeout.

    So, fair is fair, a little bit of jewelry makes the medicine go down, the medicine go down.........

  • Report this Comment On August 10, 2011, at 12:54 AM, TMFTomGardner wrote:

    One side says, "Just tax the wealthy and corporations more!" The other side says, "Demonstrate fiscal restraint, long-term thinking, and shrink the size of government."

    The sad news is that they are both right, but they've become too narrow, too stubborn, and too certain of their position...and completely resistant to losing the label on their ear.

    I want to say that the truth IS in the middle. I'm worried that we'll likely someday be saying - the truth WAS in the middle.

    I hear the sounds of an empire creaking.

  • Report this Comment On August 10, 2011, at 6:54 AM, JBKirtley wrote:

    I think what keeps the majority of us Fools incredulous is that the financial responsibility most of us exhibit around our kitchen tables seems to be absent in Washington. Thankfully, I can recall the words of my father, a blue collar guy all of his life: "Tough times never last, tough people always do". We will get through this.

  • Report this Comment On August 10, 2011, at 10:02 AM, tnk4800 wrote:

    Since we are all in this together. Throw out our current tax system, eliminate all deductions and exemptions, writeoffs. for everybody and all businesses set taxes proportionally across the board. end Davis Bacon, institute a national right to work law, and end collective bargaining for all government positions, federal and state workers. Tax the Chinese imports 25% and all other imports if there countries if they run a surplus in trade, and or lock us out of doing there. Our corporations can pay there fair share of taxes to those countries. Tax corporations for outsourcing jobs from country. Privatise all government services except the military. Bring all our troops home, close the military bases to protect our airports, sea ports inspect all shipping containers for conterfeits and illegal drugs. Have them assist our police, fire departments and all emergency services. Protect and maintain,power plants power grids, cyber systems,water treatment and railroads. Provide special forces for Nato eqaul in numbers to that of the other countries. Create special forces to aid in national desasters equal to that of other countries. Universal Health care for all americans is absolutely necessary it's not an entitlement nor a right, Itjust the right thing to do. Leave Retirement with social security alone for those who paid in and require support to live with dignity. Get the government out of education and labor disolve those departments. Education must be supported by our businesses whether its technical vocational trade medical or corporate.

    Infastructure should be supported through txes but privatised. Unemployment income received only if you are receiving retraining and you are capable of being retrained. unemployment to be paid 50% from taxes and 50% from corporate funds for retraining. Legalize pot and tax it like alchohal and cigarettes for production and consumption. Tax all vehicles for transportation use of roads equal to use. tax for oiln gas 15% more vs natuaral gas and electric run vehicles.

  • Report this Comment On August 10, 2011, at 11:09 AM, TMFVicki wrote:

    Regardless of whether you believe the S&P should have downgraded America's credit rating, they have put together a decent outline about how we could get ourselves back on a better track.

    <http://www.msnbc.msn.com/id/44060990/ns/business-eye_on_the_...

    >

  • Report this Comment On August 10, 2011, at 11:31 AM, ActFoolishly wrote:

    It's hard to believe that we are in a democracy right now. Poll after poll shows that the majority of the country wants one thing, yet the exact opposite keeps getting pushed into law. As an outside observer, and following the power, in this case money, it seems that the politicians are doing what their bosses (i.e. people who pay them) are asking of them.

    As anyone who has ever been employed knows, you do what your boss tells you or you're out. In this country, the boss is supposed to be the American people. Part of the wonders of the Motley Fool community is that we can discuss what's the root issue of the problems with companies we invest in are. And in the past, we can always spot where there is an issue with management goals not being aligned with the investor goals. From what I can see, the root cause is the incentive structure for these politicians which means that it seems the only way to ensure that the investors (i.e. the American people) actually get their votes heard, is to push through campaign finance reform. What I see here is no different then when management elects their buddies to a board and the board in turn repays those favors. The investor is left out in the cold with their interests not being met. Can you imagine if 80% of shareholders wanted one thing and the management team and board did the exact opposite? It's not acceptable in business so why accept it in government whose actions do affect business.

    I used to try my best to avoid politics because I said it didn't affect me but I realized now how naive I was. In a country where over 70% of the economy is based on consumer spending that has fewer and fewer consumers with the ability to spend which in turns affects some of my investments, I now most definitely care about politics. Government has its place, and normally, it should be there to play the role of referee in a game to keep the playing field fair. When there's an issue with the ref, the entire game starts coming into question. The system is fundamentally flawed and it will continue to impact our investments if its left unchecked.

  • Report this Comment On August 10, 2011, at 12:04 PM, Donichigo wrote:

    Bravo David, bravo! Well said! Thank you for taking the time to share!

    "One of the penalties of not participating in politics is that you

    will be governed by your inferiors." - Plato

  • Report this Comment On August 10, 2011, at 12:22 PM, RSue wrote:

    Hear, hear David. Your article resonated with my thoughts exactly -- to the point that it gave me goosebumps. Along these same lines, here is a reply that I posted on the Duke Street discussion board to a thread about about the S&P downgrade:

    <i>My bottom line takeaway is that sadly, there are really no good guys in this rotten scenario. None of the key players have done the American people (nor the global community for that matter) any favors nor looked out for the best interests and common good of our citizenry. It would be helpful if we, as voters, could somehow press a reset button, throw out all of the self-serving bums and give the whole system an overhaul. I think that as a country we have just grown too big, too polarized and too difficult to manage with any sensibility or efficiency.

    The only problem is that in a democracy, "we the people" are also complacent collaborators if we don't get more involved in our political process. We are so busy and wrapped up in our own frenetic lives that the average person doesn't tend to carve out time for direct political involvement. I believe that we need to better educate our children in the essential practice of critical political thought process and democratic activism if we want to preserve our freedoms for generations to come. As in many aspects of life (like investment!), if we relinquish control to "so called" experts and specialists and don't make it our own business to understand the details and advocate for ourselves, then sadly we also have ourselves to blame.

    Foolishly lamenting,

    RSue</i>

  • Report this Comment On August 10, 2011, at 2:18 PM, rabbitt0 wrote:

    David (and Tom)[and Fools],

    I know something you can all do (if you have the means...

    Put these thoughts in a full page ad in your local newspapers! Or, in the NYT or WSJ or USAToday if you really want to put your money where your thoughts are!

    Education will eventually improve the situation...

  • Report this Comment On August 10, 2011, at 3:06 PM, DivingDan wrote:

    Amen brother!

  • Report this Comment On August 10, 2011, at 3:25 PM, wolfman225 wrote:

    @TMFTomG--

    "One side says, "Just tax the wealthy and corporations more!" The other side says, "Demonstrate fiscal restraint, long-term thinking, and shrink the size of government."

    The sad news is that they are both right, but they've become too narrow, too stubborn, and too certain of their position...and completely resistant to losing the label on their ear."

    ----------------------------------------

    While I admit to being on the fiscal restraint side of the fence, I would have no real problem with paying my "fair share". However, I also think it vital that those who partake of a majority of government services---the so-called "safety net"--contribute in some way. We have far too many voters with net zero liability (no skin in the game). Perhaps those who depend on the public dole could contribute by doing community service, as was the norm when these programs were first instituted?

    In any event, before I agree to give even more of what I earn over to government to use as it sees fit, I am going to insist that it demonstrate an ability to manage what it already receives wisely and efficiently. Else, it'd be nothing more than "good money after bad".

  • Report this Comment On August 10, 2011, at 3:28 PM, wolfman225 wrote:

    Rabbitt0,

    Not a bad idea. Those of us who cannot afford a full page spread in a national publication (VERY pricey), could still submit Letters to the Editor. It may even prove that such letters have greater impact on local discussions.

  • Report this Comment On August 10, 2011, at 4:55 PM, tnk4800 wrote:

    wolfman225

    now that would be "Foolish"!!

    and that's what I'm going to do.

    Letters to the editor makes perfect sense!!

    How bout email to Bloomberg, cnbc, and fox?

    Choke feed their servers!! One of theweb site graders should be able to note % up and down of unique visitors and make a reasonable coorelation.

  • Report this Comment On August 10, 2011, at 8:32 PM, stan8331 wrote:

    I think the root of our political and economic problems is that the major players have figured out how to outsmart the rules of the game, and the folks in charge of setting and enforcing those rules have been completely overwhelmed. There's no valid reason a small percentage of the population on either extreme of the political spectrum should have the ability to elect their preferred candidates and force the enactment of their desired public policies. Basically, the extreme ideologues have learned how to game the system to their mutual advantage and the rules that should create a fair political contest have failed to keep pace.

    Unfortunately this is a self-reinforcing phenomenon, since those who get elected in the current system have strong incentives to protect it from meaningful reform. I agree with an earlier poster who made an analogy to a corporate scenario where, due to inadequate and rigged rules and a flawed incentive system, corporate officers choose to act in opposition to the interests and expressed desires of their shareholders. As America's shareholders, we citizens do have the ability to take back control from those who refuse to work in our best interest, but (as in the corporate world) it will certainly not be easy.

    The financial problems we face are difficult, but they are far from insoluble. We already have not one but TWO bipartisan blueprints at our disposal, from the Debt Commission and the Senate Gang of Six. The only reason for politicians on either side to reject these bipartisan agreements out of hand is a brazen attitude of placing ideology and political party above the good of the country.

    Even without needed reforms to our electoral system, we do have the power to vote these people out of office if enough of us who are not on either extreme become engaged in the process. Any politician whose idea of progress for America is a refusal to compromise and enforcement of their extreme ideology on a public that does not share it needs to be given the bum's rush.

  • Report this Comment On August 10, 2011, at 10:48 PM, wolfman225 wrote:

    ^"The financial problems we face are difficult, but they are far from insoluble. We already have not one but TWO bipartisan blueprints at our disposal, from the Debt Commission and the Senate Gang of Six"

    -------------------

    Don't forget the Paul Ryan budget. S&P is on record as saying that the Ryan plan would have prevented the downgrade. I believe it had some Democrat support in the House. There's also Cut,Cap&Balance. That also had Democrat support. Unfortunately, we'll never know how well it could have worked, as the Senate refused to even bring it to the floor for debate, much less an up/down vote, prefering to table it and prevent any chance of it's advancing.

  • Report this Comment On August 10, 2011, at 11:30 PM, somethingnew wrote:

    Well said Dave.

  • Report this Comment On August 11, 2011, at 12:57 AM, ET69 wrote:

    Funny , I don't fit any of those labels. Its also odd that as much as I would like to believe what David is saying--- I don't. Its not about having a kumbaya moment and lets all just hug each other and "do the right thing". One mans

    "right thing" is another mans, " nightmare".

    No, economics is much too serious --- and political. I don't really care if America's rating goes up or down...according to a bunch of bankers who are driven by the God of Profits , as symbolized by the $.

    I am a human first, an American second.I live on earth and America is just one part of it. Finally as for our economic "free market" capitalist system ...it is anything, but "free". Its historical purpose has now out lived its usefulness and it has now become the biggest road block to our survival as a species. Just look at the anarchy it is causing...millions of people who could be building a better world just sitting around doing....nothing...because some capitalist banker in New York or London or Tokyo says it is not "profitable".

    So what to do? Well, daydreaming like David, and hoping all men of good heart will put aside their petty financial concerns is about as likely as hitting the lotto jack pot he alludes too.

    As for me, I am going back to the future and I am going to read....... Marx's Das Capital again.

  • Report this Comment On August 11, 2011, at 10:34 AM, Domingoknife wrote:

    Fantastic, thought-provoking discussion! I'll add a few thoughts, most of which have been alluded to or touched upon already.

    1. Simplify the tax code. A flat tax or the Fair Tax is far superior to the mountainous, mangled mess of what we have now. In this way, we have no more tax lawyers/accountants who are able to manipulate the system to meet their client's needs. As a bonus, the simplified tax code is wonderfully transparent!

    2. On a related note, I think (generally speaking) _everyone_ should have some "skin in the game." Everyone should pay some federal taxes. Not because I want to be mean to poor people, but it actually makes us pay attention to how our money is spent. It seems to me just as ridiculous to say around half of our taxpayers pay no federal taxes as it does the rich/large corporations manipulating the tax code to essentially do the same.

    3. I have to have a good grasp on my family's financial situation. If there is fraud, waste, or abuse ("Who spent $100 on iTunes?!"), I can (and do) find out the problem quickly. The same certainly cannot be said for our federal government. Where are the shovel-ready jobs? What's up with federal funding of stuff like this?

    http://www.usnews.com/news/blogs/washington-whispers/2011/03...

    Our structural setup of government seems to be backwards. One reason people are so frustrated & apathetic with Washington is that it is so far away from them, both literally & figuratively. Our government is top-heavy. Generally speaking, shouldn't the majority of the decisions that affect our daily lives be made locally? Shouldn't the natural flow of government be local (town/county)---->state---->federal? If that were the case, the local leaders who affect our lives the most would have to answer to us at the store, in church, at a high school football game. I'm all for a strong federal government. I like having the mightiest military ever. I like fair, impartial enforcement of the laws of the land. But it should stick to its Constitutionally mandated powers (remember the 10th Amendment?).

    Great article, great discussion. Thank you to all.

    DK

  • Report this Comment On August 11, 2011, at 11:16 AM, insight999 wrote:

    All government begins with "self government." Let us hold ourselves and our elected representatives accountable for the 'self inflicted wound" and change our ways, beginning with campaign finance reform.

  • Report this Comment On August 11, 2011, at 1:26 PM, TopAustrianFool wrote:

    @ TMFBent

    "The ability to "print" more money mitigates much of the risk of insolvency, though it can bring other ills."

    It doesn't mitigate the goverment stealing from your savings account, which is essentially what it does when it prints money.

    So you say the the deficit is part of low taxes. Well, what is high enough? Is govt spending of 40% of GDP enouogh?

    You are showing partisanship when you repeat democratic talking points. Just in case you don't know realize it.

  • Report this Comment On August 11, 2011, at 1:39 PM, wrenchbender57 wrote:

    @ET69: True, pure Capitalism is a failure, as is pure Communism. But nobody lives in either of these fictitious systems. Our Capitalist system is riddled with Socialism (Social Security, Unemployment compensation, Medicare, etc..). Communist systems screw up the market so bad it is pitiful. No government ever completely controls an economy. To try, as the Communists did is to court disaster. This is the big reason that China has accepted so many Capitalist reforms in their so-called Communist system and continues to do so. Our system is still the best in the world. But, we all need to work hard to keep it that way. Seems to me that the Coffee Party has many right ideas. They seem to be working for compromise and civility in politics compared to the Tea Party folks. If we want to keep some of the entitlements we all want the tax base must be larger. The solutions are likely found in decreasing entitlements to some extent while raising taxes to pay for the parts we all want to keep. Also, reducing military spending while we stop policing the world and ask more from our allies. This is a great country and representative, republican ( not the party), modified capitalism is still the best working system in the world. But, we all need to work hard to fix our current problems and elect those that will help our middle class to grow and prosper. It seems to me that the Republicans (the party) are working for big business, the upper class and the corporations. But they work hard to hide that by pretending they are working for individual rights and the free market. And many seem to believe their sales pitch.

  • Report this Comment On August 11, 2011, at 4:29 PM, garyflet wrote:

    There are two problems with David's statement about balancing the budget every year. One problem is that it's not good financial policy. The other problem is that it raises unrealistic expectations that will never be met. Show me a large developed nation that has balanced its budget on a regular basis. It doesn't happen, and it doesn't happen for solid reasons. It's simple to compare national financial policy with a household but the analogy is deceptive. mjmac89 wrote one note about this above and left a link which is the kind of thing people generally don't read because it is too long and complex. The LA Times has a relatively easy to read article on the subject today: http://www.latimes.com/business/la-fi-0811-debt-20110811,0,6...

    The title and subtitle are: "US debt: A four letter word or necessary evil. Half of Americans want the government to stop borrowing, but economists say the nation needs to go deeper in debt to get the economy back on track."

  • Report this Comment On August 11, 2011, at 4:48 PM, wolfman225 wrote:

    ^This is absurd. The LA Times is well known for promoting progressive policies. I would take what they "report" with a rather large grain of salt. If "....economists say the nation needs to go deeper into debt to get the nation back on track." was accurate, we would surely have seen evidence of that after nearly 3 years of Obamanomics.

    In contrast, Clinton was able to see that his progressive ideas were: 1) not working and 2) not wanted by a majority of Americans and he was able to moderate his policies and bargain (in good faith) with the new Republican majority in congress to come up with true compromises (ie., Welfare Reform, which he finally signed after vetoing twice, led to more Americans getting jobs and actually doing better financially than they were while on public assistance, in spite of the shrill warnings by progressives/liberal Democrats that Repubicans wanted to "starve children and throw families out on the street".)

    I fear that our current President and administration are unable/unwilling to turn from the path they have committed to.

    The classic definition of insanity is to keep doing the same thing over and over and expecting a different outcome. By that measure, this country's leaders are certifiable.

  • Report this Comment On August 11, 2011, at 5:50 PM, garyflet wrote:

    @wolfman225

    "If '....economists say the nation needs to go deeper into debt to get the nation back on track.' was accurate, we would surely have seen evidence of that after nearly 3 years of Obamanomics."

    The trouble with using terms like "evidence" is that we cannot test with different starting conditions like a scientist in a lab. Thus we don't know whether the economy would be better or worse or basically the same if we had a president with different policies. My own opinion is that the president doesn't have nearly as much control over the economic status of the nation as he claims as a candidate. I think the financial crisis of 2007-8 could have occurred under any president, liberal or conservative. But year after year, many believe the politicians and their promises, that it really makes a big difference who we get for president, as far as the economic welfare of the country. Economic policy doesn't change that much from president to president. Under Reagan, a hero to conservatives, the debt celing was raised many times and the national debt rose from 26% GDP in 1980 to 41% GDP in 1988.

    Conservatives will point out the financial problems under Obama, blame him, in an attempt to get a Republican elected, just as Obama blamed Bush to get himself elected. Despite all the hot air about how disastrous our national debt is, we will continue borrowing a great deal no matter what party the president or the majority of Congress happens to belong to.

    You complained that the LA Times is liberal, but that doesn't mean they are necessarily wrong all the time, or in this case are misrepresenting the general consensus of economists. If you have evidence that they are, I'd be interested.

  • Report this Comment On August 11, 2011, at 7:03 PM, FoolSolo wrote:

    Lots has been said already. Judging from the brinksmanship on this thread, I suspect we're in for more of the same when it comes time to open up the budget and deficit discussions again.

    Honestly, I don't believe the politicians have the will or the motivation to do what is right. Fraud is rampant throughout Washington and the municipalities across the nation, corporate sponsors fund their candidates on the basis that they get what they want, and the elected officials put their careers ahead of their country. Government will never spend less unless spending less becomes the measurement of success, and we can force transparency into the system so those who cheat are prosecuted. The system is broken, and likely beyond repair. My fear is it will take a bloody revolution before any of it ever changes.

    Hope is not a strategy, so I won't close by saying I hope it gets better. Instead, I'll keep my options open, and if comes down to it I will put my money where I think I can safely keep it away from the greedy politicians bent on taking it away from me. Unfortunately, there are few options to escape this madness, most countries around the world seem to be drinking from the same liquor cabinet.

  • Report this Comment On August 11, 2011, at 7:51 PM, wolfman225 wrote:

    @garyflet--

    "I think the financial crisis of 2007-8 could have occurred under any president, liberal or conservative."

    Agreed. The base reasons for the crisis are debatable (and always will be). The trigger seems to have been the housing bubble, which was fueled by both the Clinton and Bush administrations.

    "....year after year, many believe the politicians and their promises..."

    Again, this is also true. Far too many vote according to which party/candidate promises the greatest reward.

    "Under Reagan, a hero to conservatives, the debt celing was raised many times and the national debt rose from 26% GDP in 1980 to 41% GDP in 1988."

    There are some conditions Reagan and Obama have in common: they both inherited an economy either in trouble, or on the brink and a restive populace. It is also true that debt/GDP grew dramatically under both. It has grown to a larger percentage under Obama, in much less time. However, under Reagan's policies there were signs of economic improvement by this point in his first term and the economy overall was in an uptrend. He managed to do this with a largely uncooperative Democrat-led congress, starting out with high unemployment and double-digit interest rates. For his first two years, Obama and the Democrats had a hammer lock on the WH and Congress. During that time, they did little/nothing to address looming economic problems, spending their time pursuing social agendas.

    While I am not on either side of the ideological fence--I most certainly am not an apologist for Bush--the comparisons are impossible not to make. W certainly did his part to contribute to our current mess (he was/is not a conservative).

    "Despite all the hot air about how disastrous our national debt is, we will continue borrowing a great deal no matter what party the president or the majority of Congress happens to belong to."

    Again, we don't necessarily disagree. However, I will say that without the Tea Party stirring things up, we wouldn't even be having this national conversation. It is vital that we do so. In spite of all the talk by "economists" that we, as sole issuers of the USD, can always pay our debts via the printing press, this presupposes a willingness on the part of our creditors to accept devalued USD. If they refuse (or stop buying our Treasuries), we are already in way too deep to get out without a great deal of turmoil.

    The theme of this post originally concerned the need for the US and it's people to begin living within our collective means. Projections already point to a debt that the CBO has said is unsustainable, where intrest payments alone could soon reach $1T per year. It's imperative that we have this national discussion now, while we still have a chance to turn away from dissaster.

  • Report this Comment On August 12, 2011, at 3:21 AM, muddlinthrough wrote:

    @garyflet,

    <"The trouble with using terms like "evidence" is that we cannot test with different starting conditions like a scientist in a lab. Thus we don't know whether the economy would be better or worse or basically the same if we had a president with different policies. My own opinion is that the president doesn't have nearly as much control over the economic status of the nation as he claims as a candidate.">

    This is the usual stance I have with my more fiscally liberal (ahem, cough, hairball, Keynesian) friends who keep going, 'give him time.'

    Penn of 'Penn and Teller' had a *great* article about the economy and an analogy to a car skidding: the first thing you learn when driving if you want to keep driving is to take your foot off of the pedal. And Obama, since elected, has done nothing much in a leadership role for pushing for fiscal discipline.

    http://www.cnn.com/2009/POLITICS/04/01/jillette.skid/index.h...

    Obama argued during the election that 'bending the growth curve down on healthcare' could somehow help the economy...and somehow it became an inalienable right to have limitless...well...somewhat limited...well, you basically get nothing but we'll set up these exchanges by 2014, and employers who provide will have to pay a penalty if they don't continue to subsidize. But only if they're bigger than 50 employees-large, or are US chartered or...or...wait.

    So, we got a pig-in-a-poke, 30 million people now THINK they get healthcare access for more-or-less-free, ('oh, the government will pay for it'), but it eventually becomes a 'oh, the government will backstop it when the few major US employers still providing the perk...well, sort of like Congress, their top 4% will always get those, because they know where the perks are to be gotten and the bodies buried...but the rank-and-file will continue to pay more as the execs 'cut costs' by offshoring more). Like Congress, those folks get a contract that guarantees after a 2-5 year tenure they'll get a golden parachute, lifetime country-club dues paid, and keep the benefits. The 800 people they laid off got COBRA funded for 2-6 months...but, 'hey, they made the company money.' Enter our Pres, who wanted the Olympics for Chicago (hey, they gave me the pre-emptive Nobel Peace Prize...this'll be a snap), has a wife who thinks $800 'sneakers' are fashion and wants us to go eat healthier by skipping comfort foods in stressful, time-limited-just-keep-running-because-your-competition-works-for-one-eighth-your-salary, and grow our own organic foods.

    Which, if we have a job that doesn't allow us that much time, we can hire a foreign national (undocumented) to plant, water, and pick it.

    But, that was how he decided to 'lead' in an economic crisis. I'm sure he's a nice guy. I'm sure he means very well. But, like an Amish blacksmith looking at a BMW with a blown transmission, what good can he possibly do? Well, he's a schmuck in a chair...go easy on him; all he can do is veto. Uhm...sure. So, the previous guy could do $4-6T of war spending and no one could stop him. This one can't stop himself from handing out healthcare and corporate welfare to any and all of his campaign contributors, either...uhm...pattern, maybe?

    And now 'the world is laughing at us because we have paralysis about how to pay our debts?'

    Uhm...no. The world isn't buying our debt-sales because the big money managers are wising up to the idea that 'unsustainable' has happened.

    Our favorite pullybulbit (a nonsensical word I just made up for a mouthpiece that can't be proven wrong with logic, data, or any of the usual techniques because they make up their own), Mr. Paul Krugman of the NYT likes to argue that we're still mired because of the very reason you list in the first half: if only we'd spend a $50T stimulus, we'd have gotten $150T in return, if you carry out a 'reductio ad absurdum on his fundamental arguments.

    He has a doctorate and a claim of 'you can't do repeatability in economies.'

    Sure you can. History is replete with examples of countries that 'inflate' out of a crisis--saying 'it's never been done this way before' sounds suspiciously like 'we've never had a tulip bulb drop in price, across the country, all at the same time.'

    When you're borrowing from yourself to pay yourself to ward off your mom, it's one thing. When its a loan shark with a baseball bat and two big friends, you better go crawling to Mom. In America's case as a whole, the guy with the baseball bat is China. Mom...I don't have a good analogy for. I used to think it was 'the Fed' but since they proven to be part of the same group that's writing IOUs into the petty cash waiting for Mom to put some more back in...I'm pretty sure the only 'final' solution will be a complete currency crash...those happen in all histories, to the Spanish, Dutch, English, Romans, whenever empire no longer controls sufficient resources to make fiat money worth something.

    In Europe, 'Mom' is Germany...we used to be 'them,' but, no more. The singular sane idea *is* better economic transparency, on all levels. It's available, but it's also aethitical to the current administration: they might have to report how they got $5-$20 donations to total up to $600M...and they might also be taken to task to re-distribute said wealth to the 30 million or so who are now going to want a piece of the pie for that donation.

    The bigger players will never let the kiddies on the slide. That's why I find TMFBent's 'hey, I'll pony up' such an empty offer.

    There *are* debt reduction funds available; Financing the Debt

    Why does the debt sometimes decrease?

    The Public Debt Outstanding decreases when there are more redemptions of Treasury securities than there are issues.

    How do you make a contribution to reduce the debt?

    There are two ways for you to make a contribution to reduce the debt:

    •You can make a contribution online either by credit card, checking or savings account at Pay.gov

    •You can write a check payable to the Bureau of the Public Debt, and in the memo section, notate that it's a Gift to reduce the Debt Held by the Public. Mail your check to:

    Attn Dept G

    Bureau of the Public Debt

    P. O. Box 2188

    Parkersburg, WV 26106-2188

    http://www.treasurydirect.gov/govt/resources/faq/faq_publicd...

    Let me know when you've kicked in your $30K share; I'll follow suite. Hey, one person's crazy idea, two people's movement. But...you first. I'll have to fund my share after I quit being a home owner and sell.

  • Report this Comment On August 12, 2011, at 4:00 AM, muddlinthrough wrote:

    @garyflet,

    I'm reading your 'easy to read but hard to digest article,' and I'll admit to the bias and chip on my shoulder, as I remember 'the Reagan Hell Years' more fondly than I think the average reader of the LATimes.

    That admission in place, "To put it another way, consider that a typical mortgage is four to five times a borrower's annual income; add to that student loans and credit card debt and a family's debt load can easily match or surpass the U.S. government's current ratio of about six times more debt than revenue."

    No...the guideline is/was 2x/3x; the total income/debt family ratio is nowhere near that bad, except perhaps in LA. Where, as we know, everyone is a millionaire, has a poodle, a chihuahua, their own chaffeur and agent on speed-dial.

    To put this in perspective, in 1991 I was starting my first job in an economically depressed area. A friend bought a house at 2X his annual salary...and he told of how the seller brought a $15K check to the bank prior to the house closing to be 'out from under' the loan. Another friend bought at 3X his annual salary, and everyone thought he was wacky...asked him how he was doing it, and he said 'because I've got no debt and I don't spend crazily.' Other than losing the house in a divorce 3 years later...it was a great move.

    Citing the LA TImes, which uses such a specious argument of 'it's okay, everybody does it, even maybe you personally' with numbers that match the argument but not reality--are you sure you're not an elected official somewhere on his 4th term? :)

    More interesting charts about actual debt/income levels...which even without our $400K/person-of-US-Citizenship federal obligation tacked on, are pretty scary.

    http://www.closemountain.com/papers/macro_0708b.pdf

  • Report this Comment On August 12, 2011, at 7:18 AM, TopAustrianFool wrote:

    @garyflet,

    "My own opinion is that the president doesn't have nearly as much control over the economic status of the nation as he claims as a candidate. "

    Not true. The president can restrict the Fed by espousing a limit on deficits and borrowing to cover it. He can fight to reduce the amount of debt limit increased which restricts the amount the Fed inflates. So it is not just Obama, it is all presidents. None of them know the 1st thing about economics and subscribe to Keynesian nonsense because it suit government power and spending.

  • Report this Comment On August 12, 2011, at 7:22 AM, TopAustrianFool wrote:

    Tom G.,

    I believe your brother's main point was to spend less than one makes. Your "balance approach" of increasing taxes means makes more to spend more. I don't think its the same.

  • Report this Comment On August 12, 2011, at 9:03 AM, wolfman225 wrote:

    @muddlinthrough--

    +1 Great post.

  • Report this Comment On August 12, 2011, at 12:49 PM, baekeland108 wrote:

    Thank you for the reminder, David. What was once such a great nation is heading for the ash can quicker than you can say Fool. How do we find these political money managers to vote for? I compare the current situation to the environment: How many of us are or would be willing to sacrifice a comfort in our lives to preserve a species, say perhaps the seals -- not many. Now, how many would be willing (or are currently doing) a balanced budget in their households when everyday we are innundated with more and more bigger, better, best. I have a freind who has a 40 some inch flat screen at the moment. He is going out to buy a 50 some inch flat screen television with LED. He currently lost his job and his apartment with his girlfriend and has had to move in with his girlfriend's mother. He recieves from unemployment $720.00 every two weeks. I tried reasoning with him but like the majority of Americans I speak with the television comes before anything and he has no intentions of trying to save a dime. Is it a wonder that we as a nation are where we are?

    Thank you David for your reminder but if this generation are not taught that saving is better than spending we will end up in the ash can of history.

  • Report this Comment On August 12, 2011, at 1:32 PM, PhoolishPhox wrote:

    I think mtheadedfool was the first in this discussion to capture the essence of the spending issue. The reactionaries in todays political milieu would have you believe that our nation is like the Cleaver family household. The Beaver (who doesn't really work for a living, and doesn't even look like us) has been getting waaay too big of an allowance.

    Metaphorically, The Beave is the burger flipper, grape picker, floor sweeper, minimum wage earner, indentured servant cash cow that our capitalist economy depends on for its trickle up economic prosperity.

    Why would we want to kill our cash cow? We inject poultry and pigs with antibiotics to the point that infectious bacteria have become so emboldened that they run for Congress. Yet we balk at the idea of investing in basic preventive health care and education for our cash cow indentured servants. All so that the small minority of very powerful people can keep getting more very powerful?

    I strongly believe democracy is unsustainable in such a lopsided economic environment.

    If you are a capitalist, think like a capitalist and take care of your cash cow.

    Thanks David

    ...and Dream On!

  • Report this Comment On August 12, 2011, at 4:59 PM, bckarp wrote:

    Many thanks David for your on the mark and timely message that serves as a lead for many others to step forward and commence the arduous undertaking of regaining a positive path forward for our great country.

    All the Best,

    Brad

  • Report this Comment On August 12, 2011, at 5:43 PM, fredgei wrote:

    "I'll throw in one more structural improvement that *they* will never vote for: term limits."

    My state (Michigan) adopted term limits two decades ago. Today, the lobbyists and "special interests" have more influence over the laws that are drafted than before term limits were adopted. It is not clear to me how this would be any different at the Federal level than the State.

  • Report this Comment On August 15, 2011, at 7:21 PM, erixbid1 wrote:

    WE do have megaphones - as was pointed out earlier-- votes. But we also have money, email, telephones, facebook, twitter and mouths. I made a point of calling the president, my senators, congressmen, speaker of the house, budget committee members, as well as emailing all of them about my opinions on the latest fistfight in Washington. You can get these # from AARP websites and others. I actually got real people who sounded surprised to get the calls so maybe they went through. At least I tried. I contribute to orgs that support what I think is important & I am on a very fixed income--so it matters if any change is made to me.

    I'm not a big "player" but I have a big mouth - and that can sometimes help. At least I remain hopeful, someone will hear me - if not - once again I tried and did not just sit and yell at the TV. It's numbers-- the more who yell, the same message-- then they hear it. Particularly if you back it up with votes and donations to the right places.

    Thanks for the support Tom and Dave - it's scary to be financially dependent on others taking their rides on the government and the stock market. Your newsletters and this website has been an oasis of calm, intelligent thought and advice.

    my $0.02

    Lisa

  • Report this Comment On August 16, 2011, at 2:50 PM, TMFBent wrote:

    @topaustrianfool

    "It doesn't mitigate the goverment stealing from your savings account, which is essentially what it does when it prints money. "

    No, that's what the government does if it creates rampant inflation.

    There's a big difference, and the unwillingness of the "stop printing money!!!" crowd to look at the reality of inflation (dangerously low except in certain commodities which are in short supply due to other effects) is part of the reason this debate isn't a real debate.

    The problem with many of the comments in this thread, and in the media in general, is that no one is willing to let the facts interfere with his opinion.

  • Report this Comment On September 01, 2011, at 7:21 PM, TopAustrianFool wrote:

    @TMFBent

    "the reality of inflation (dangerously low except in certain commodities which are in short supply due to other effects..."

    Are you saying that inflation is dangerously low? Where do you get this non-sense?

    How can inflation be dangerously low? Low prices means low demand for whatever garbage you are trying to sell. That's right. If no one wants it, then maybe you should take the message that low prices give you and shift what you are doing.

    When the Fed inflates and keeps interest rates low artificially, it distorts the information afforded by prices. It tells industry, albeit falsely, that people are saving, and that said industry should invest in capital equipment to supply the future demand, once people start spending what they saved. With this false info, industry hires, buys capital equipment, and builds inventories for a future demand that will never materializes. After a period of growth, when there is no demand, the bubble will burst. And deflation tell the economy that its time to stop building that crap. If the Fed curbs deflation, he is only feeding the bubble that will burst later even worst.

    See the problem here is that you are missing how the Free Market works and then want to make an educated opinion on how govt should manage deficits, and spending to get us out of something that will resolve itself if the govt and the Fed do nothing. Well, the only thing govt can do is cut spending and the Fed can cut printing. It will fix itself, just like it did in 1821, 1837, 1909, 1921. Pick your depression and you will see how doing nothing is the solution.

  • Report this Comment On February 20, 2012, at 12:52 PM, bronzeguy wrote:

    Good sentiments all, however, let's be real and realize it IS up to government to regulate the financial industry. Most of the candidates seem to have forgotten the recent deregulation history which was a big factor resulting in the credit bust and the recession. if we can't control greed we can certainly control its instruments.

    And btw. I agree totally with the sentiments concerning lotteries. What you pay for a ticket is indeed a tax on stupidity.

    very best to all this year.

    jw

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