I get my American Express bill every month like clockwork. Yet, when I pull it out of the cold, hard stainless steel mailbox and see it for the first time, I feel nauseous. This nauseous feeling is amazing to me that as rationale man knowing I have an American Express card since 2002, and knowing I am going to get a bill every month. I tear into the thick puffy envelope with reluctant anticipation. What is the f*^king total ? I scream to myself in my head, as I search for the total on the first page. OMG! How can this be? It cannot be this much! What in the world has Mark (my partner of 10 years) bought now? It all goes through my mind, in a Ricky Ricardo accent at full volume, just like he would yell, “Lucy you have some esplaining to do ”. But the reality is that since 2002, it is always more than I remembered, anticipated, and conceived. I check the numbers over, and then think to myself, “Really Mark, a Zara charge of $32.84 and $12.59 at Five Guys? Really ?
I immediately calm down as perspective kicks in. Yes, the bill is more than I expected, as it is every single month. Yes the bill is significant but Mark’s charges were a whopping 4.4% of the total bill. Sadly, I cannot blame him for driving us like Thelma and Louise over our financial cliff. I get off the elevator, walk into the apartment and all is well again. I know the time will come within the next 28 days to pay the Piper aka American Express. As a nation we have less than 75 days to make up our minds how we are going to pay the Piper aka the American Debt.
Dear Readers, this election more than any other election in history will dwell on our collective debt. This $15 Trillion (by the way a Trillion is 1,000 Billion) American Express bill is our collective debt and is 100% of our annual Gross Domestic Product, GDP (our country’s W2). Although we know we had two wars, the Bush tax cuts, ethanol subsidies, a $750 Billion Stimulus Package, farm subsidies, Medicare, education, welfare, and $750 Billion TARP to bail out the banks, , the bill has arrived and the total makes everyone nauseous. We all know what programs we hold near and dear to our heart and some programs we find despicable and wasteful, but the time has come to elect intelligent mature representatives, senators and yes a president to help us come up with a strategy to pay-off the almost $15 Trillion of debt (our collective American Express Bill). Here is our best strategy;
- CUT SPENDING. Put all spending are on the table. Yes even the sacred cow of “defense”. To think there is no waste in the defense budget is to think Sex in the City 2 was an Academy Award contender. All Federal expenditures including Defense should revert to the same number adjusted for inflation as the 2000 budget (before 9/11)
- RAISE REVENUES. All revenue increases on the table, Bye Bye Bush Tax Cuts (they were meant to be temporary and the time has come). The Congressional Budget Office (think of it as our H&R Block) says allowing the Bush Tax Cuts to expire will bring in $850 Billion (over a 10 year period). As of 2011 the total tax collected was about $2.3 Trillion. However our Federal Budget spent the $2.3Trillion collected and an extra $1.3 Trillion. We spent 56% more than we took in! To think that we can cut our way out of this is like thinking Governor Sarah Palin is qualified to teach 8th grade.
- SET FUTURE SPENDING LIMITS. Limit the Federal Budget to a maximum of 25% of our nation’s GDP (our W2). In case of War, we get a War Tax! A War Tax is like a special assessment on a condo, but then again wars do happen. Our GDP is $15 Trillion, our Federal Budget should be no more than 25% of $15 Trillion so it should be a maximum of $3.75Trillion, but that is more than our tax revenue so we either cut expenditures or raise taxes.
- PASS THE LINE ITEM VETO LEGISLATION. Thereby allowing the President to remove any one item out of the Budget without issuing a veto on the whole budget. This allows the President to veto expenditures that he feels are not in the national interest.
- PASS A BALANCED BUDGET AMENDMENT. Henceforth the Federal Government may never ever spend more than it takes in. This would be like cutting up the credit cards and only using a debit card.
As you read in a previous column the top 5% (those making $155,000 or more) pay 58.7% of all the tax revenue collected. If you double the taxes on the top 5% you would collect all the money necessary to run “todays federal government”, but not an extra penny to pay down our collective American Express bill aka the National Debt, after interest and inflation. If you doubled the taxes on the top 25% (those making $66,000 or more) you could run “todays federal government”, for a year and by my rough calculations we could pay almost 75% of the debt off (not including interest) but even with that increase you still cannot retire the entire debt. This proves that increasing revenue alone does not solve the problem.
Now for the sobering realities of life, who of us could actually make due with a doubling of our actual tax bill. Look at your paystub, what would happen to your “net-take home pay” if your Federal Withholding were doubled? There goes a vacation, Friday night outings, tickets to plays and movies, charitable contributions, and HELLO Ramen Noodles. It is as futile to double taxes as it is to gut defense, green energy, education, etc. What I hope is not lost is that the strategy has to be holistic and balanced. Hence the solution is the election of mature intelligent congressmen, senators and a president. Our Federal Government is like our date to the senior prom, nobody gets everything they hoped for.The opinions and recommendations expressed herein are those of Mr. Garrido and do not necessarily reflect those of the firm and are subject to change without notice. This information is not to be construed as an offer to sell or the solicitation of an offer to buy any securities. The information contained herein has been derived from sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be a complete analysis of the security, company or industry involved.