Author: mike

Unlike most politicians who live in denial, Schwartzenegger is willing to admit that California is on the same path as Greece.  Unless we change, we know we’re in trouble.

There are two potential answers to California’s budget problems:  cut spending or increase revenues.

The problem is that we can’t increase revenues.  With unemployment in California is at 13% right now, we simply don’t have the workers to tax.  But even if we did,  we already have the highest sales tax of any state in America.  We also have the highest personal income tax rate of any state for middle-class people (9.55% of everything over $50K!).

If you break down the state budget, it comes down to two choices:
      a) cut education
      b) cut welfare type programs

Unfortunately, we have to finally decide on one or the other.  We can no longer afford both.  Which do you want?  Cut education further than we’ve already cut it, or cut entitlements?  Schwarzenegger knows what he is doing.  If you don’t approve of his current plans, you can’t blame him for cutting education.

As the IMF prepares to hand $150B to Greece, you’ve got to wonder what they are thinking.  Greece has demonstrated that it is a financial mess.  When you lend someone money, you’ve got to see a path where they can pay you back, right?

First there is the issue of spending.  Greece has been spending crazy amounts of money for decades.  While the IMF hopes to require spending cuts, what confidence can any investor have that Greece will implement them?  Sadly, the Greeks have been caught lying about their finances in the past.  How do you lend money to a country where the leaders are fraudulent?

Second, there is the issue of revenue.  The IMF wants Greece to raise taxes on its people.  That seems like a good idea, except that Greece has had policies of not enforcing their own tax code for years.  Why would any investor believe that Greece will suddenly change, and that its people will finally start paying their bills?

So for you would be lenders out there, Greece has huge risk both in terms of cutting its spending and also in terms of increasing its revenues.  In my view, lending money with any expectation of payback is simply wishful thinking.  It’s not going to happen.

Finally, who are the lenders then?  Well, as usual, it all comes back to the United States.  While the US isn’t getting the full  $150B for this one, the US contribution as being part of the IMF will be a staggering $39B.  That’s right, while the Greeks are selfishly protesting tax increases in the streets and not even paying their own taxes, America is going to take another $39B loan to help them out.  Nice.  For the record, that means every working American gets a bill for ~$278.

You can guess what I think:  let them fail.

The problem with the Obama administration rewards failure and punishes success.

• When the financial industry failed:
  Obama was there to bail them out.
• When GM failed:
  Obama was there to bail them out.
• When homeowners over-extended and failed to pay mortgages: Obama was there to bail them out.
• When Americans failed to find jobs:
  Obama bailed them out with extended unemployment.

But what happens to the Americans that managed to succeed and make money rather than lose it?  Obama chastises this group as the greedy, evil rich people.  And to punish these people for being successful, Obama increases their medicare taxes, increases their income taxes, increases their capital gains taxes, limits their itemized deductions, and even hopes to implement a windfall tax if you’re just too damn successful.   That’s 3.8% + 3-4% + 5% + reductions in itemized deductions.  So in addition to the over 50% that you already pay in taxes, Obama wants to take another 12.8%!

And don’t forget – the state of California plans to increase taxes too…

Let’s put incentives in for being a benefit to the system rather than benefits for being a drain on the system.