Everything Rosy Now In Washington? Don't Bet On It!

With the debt ceiling raised for the next couple of years everyone who is voting for this legislation is saying it's not a perfect deal but the best one they could come up with at this point.  I agree that it is important to keep government running, but in the end at what cost?  Lost in all of this is the true national debt that the U.S. has which should scare the bejeezuz out of anyone.  Are you ready for this?  Figures brought out yesterday show that the U.S. has amounted an un-funded debt liability to the tune of $61 trillion dollars.  Yes, you read that right, $61 trillion dollars in un-funded liabilities like medicaid, medicare, pensions, ongoing contracts and more.  I am very nervous about our Canadian unfunded liabilities sitting at $200 billion.  To put it in perspective, we have 1/10th the population of the States, if we had the same amount of people our unfunded liabilities would be $2 trillion, which is $59 trillion short of what they sit at today.  WOW!


The problem is that everyone in Washington just wants to sweep this under the rug and forget about it.  Let our children and our children's children pay for it, as long as we live good today and keep the votes coming my way.  When is the insanity going to stop?  There has to be some common sense left in Washington?  Maybe not?  I watch the likes of Nancy Pelosi go on about how this new deal is going to hurt her constituents who have become used to government handouts.  It is the likes of Nancy Pelosi who have gotten things so bad in the U.S. ad at some point it will collapse under the weight of the debt.  Until they get serious about confronting their real debt I will not invest in the country and would not recommend anyone else to either.


The Tea Party has had a strong voice in this latest round of negotiations but even most of them don't truly know how bad the situation really is.

Tax reform to be next battle in U.S. fiscal war

 

US$1.5T must go

 

BY CHRISTINE DOBBY, FINANCIAL POST AUGUST 2, 2011 9:28 AM

 

 

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Round One in the U.S. debt debate ended up being all about spending cuts. Look for Round Two to be all about taxes.

Photograph by: Getty Images, Getty Images

Round One in the U.S. debt debate ended up being all about spending cuts. Look for Round Two to be all about taxes.

If the deal to raise the U.S. borrowing limit and cut US$917-billion in spending is finally passed, the focus will switch to overhauling the tax system. The new debate may be even more acrimonious than the first go-round but could give the U.S. economy the desperate growth boost it needs.

As part of the deal, a 12member congressional committee of Republicans and Democrats from each chamber will be responsible for finding a further US$1.5-trillion in budget savings by Nov. 23 and could look to politically risky decisions not yet touched - including tax reform.

"Tax reform is the silver lining to all of this. It's really critical for the United States to change its current structure," said Andrew Busch, global currency and public policy strategist with BMO Capital Markets in Chicago.

"I thought tax reform wasn't going to happen until 2012, but I think the groundwork is going to get laid at that meeting," he said, adding that he expects the issue to be central to the next presidential campaign.

Much of the political focus has been on tax hikes for the richest Americans, with Republicans staunchly against new taxes as part of the solution to the debt crisis.

House Speaker John Boehner, the top U.S. Republican, sought to reassure conservatives that the deal is "all spending cuts."

Meanwhile, the White House has indicated if the new committee does not move ahead with tax reform, President Barack Obama will allow tax cuts put forward by former President George W. Bush to expire in 2013.

But Mr. Busch hopes the committee will focus on corporate taxes, arguing the current system makes it difficult for the country to compete globally and is holding back job growth.

If the U.S. moved to a flatter, simpler code - he suggests a corporate tax rate of 25% and eliminating costly tax breaks and exemptions - it would stimulate the economy, he said.

"First, it's a lower tax rate so you simplify the tax code and therefore you reduce the cost of doing business in the United States because they don't have to spend so much on accountants and tax attorneys.

"Second, for small businesses, you really reduce their costs... and they're the ones who are the job creators in the United States. You want to make them as viable as possible."

Mr. Busch also argued the United States should move from its extra-territorial tax system - that taxes domestic companies on overseas activity - to a territorial one.

"Companies keep a tremendous amount of money overseas," he said, noting that some of that will be spent on the cost of doing business abroad but in some cases multi-national companies simply keep money overseas to avoid taxation.

"This is all about reducing friction and reducing incentives for companies to keep their money overseas and that's really critical," he said.

He noted that the structure of the debt ceiling plan committee may not lend itself to agreement on these two issues, but suggested the pressure to make changes to the tax code to spur economic growth will only increase.

Either way, Mr. Busch predicted: "Whoever grabs a hold of this issue will likely make it to the White House in 2012."

cdobby@nationalpost.com

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