David Walker on the necessity of concessions on all sides

David M. Walker, former U.S. comptroller general, who headed the Government Accountability Office from 1998-2008, now CEO of the Comeback America Initiative, is one of the few who understands the numbers at hand.
See: The fight for a grand bargain.

“Ideologues and special interests on the left and right are marshaling forces to crush all efforts to achieve a reasoned fiscal compromise. We are about to discover if our elected representatives are leaders or minions.

Each party has its sacred cow, untouchable in previous negotiations. For the Republicans, it is their insistence on no tax increases; for the Democrats it is a refusal to consider cuts to social insurance programs.

Both positions are irresponsible — because we cannot address our structural deficits and mounting debt burdens without additional tax revenues and reform of existing social insurance programs. After all, total federal liabilities, unfunded promises for Medicare and Social Security, and other commitments are more than $71 trillion and growing by about $100 billion a week.”

It is also critical to understand that there are some 10,000 people turning 65 in America each day now. In many ways the budget fight at hand is not between the left and the right, but between the old and the young. Boomers on both sides want their tax savings and all of their social benefits too. Meanwhile this is a generation who have eaten their cake for years now, indulging their wants while setting aside very little for the future. Their expectations are simply crushing the financial viability of the nation. Now milked dry, it is time to feed the cow.

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US Bonds not buying the “fixie” dust

This chart captures the disconnect between the S&P 500’s “hopium fix” the past few days and US bond markets that see no grounds for economic optimism thus far.


Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

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My suggestion for US budget reform

Let the fiscal cliff happen in 2013 to reduce the present 1 trillion of deficit spending by approximately 670 billion.  Continue working on reforming the tax code in 2013 in order to remove other deductions and loop holes which the country presently cannot afford.

At the same time hyper focus business and government policy on increasing energy-efficiency and developing domestic energy of all kinds in order to stop the capital drain of some $400 billion each year that America is spending on foreign oil (2011 numbers shown here).

This will be a solid investment that will create valuable American jobs and finally set the country on a new financial paradigm.  It will also plug a meaningful hole in the bottom of the cash flow bucket and finally turn the nation on a sustainable path to fiscal recovery.   By present policies, energy self-sufficiency for America is estimated to be attainable within 10 years.  Focus seriously on this today, and more rapid progress starts now.  Then we would have something to truly be bullish about.

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