Anyone watching the little soap opera that’s going on in Washington? They’re calling it the fiscal cliff, and I’m having a hard time keeping quiet about it.
I don’t care where you are in life. Who your political affiliation is with… it does not matter. In my opinion you are being systematically screwed by your government. The fiscal cliff is a carefully orchestrated side show to keep you distracted from what is really going on.
I am going to show you in very simple terms why you are being screwed; why you are in jeopardy. You need to wake up if you have not already awakened to what is going on, so you can take appropriate action to safeguard yourself and your family.
This is not going to be exact, but it is going to be directionally correct.
The fiscal cliff, speaking in general terms, means that if the government does not take other action by January 1st , then the so-called Bush tax cuts (which are now over eight years old) will expire. This is going to increase the tax rate in 2013 and—if it does not stop the economy, slow it down and cause a recession—could bring in an additional $100 billion. In addition, there would be mandatory cuts in spending somewhere around $600 billion.
If that goes into effect, it will definitely throw the economy into recession, and yet, there are many people who think we’re already in a recession. If that is the case, then it will just throw us into a deeper recession. It is not a good thing.
Instead of that, you have the president who, in my opinion, is not leading; you have the House with their proposals; you have the Senate absolutely quiet, doing nothing; and the clock is ticking toward the so-called fiscal cliff.
Now, let’s suppose that the president gets what he wants. He wants to increase the marginal tax rate on “the rich.” “The rich” refers to anyone who makes over $250,000 a year which is mostly small-business owners who provide most of the employment in the country. This does not make sense to me.
Let’s say, though, “What do I know? Maybe he’s right. Let’s increase the taxes on the rich and collect the $100 billion.” Well, the president does not want to cut the $600 billion. He does not want to cut at all. In fact, his proposal right now asks for more spending, not less spending.
However, let’s say the republicans get what they want. They want to cut spending on 2013 because they know the size of government is out of control and getting worse by the day, but they do not want to cut it $600 billion. Let’s say they want to cut it $200 billion.
Let’s say they are both successful and we end up averting the fiscal cliff. We reduce the annual deficit for 2013 by $300 billion. Everyone will declare victory and all is well.
Well, all is not well. This is why you are being screwed. A lot of you already know that we have a $16 trillion national debt. Most of that debt is shorter term to midterm. Interest rates on that debt are about 1.5%. You know the fed is manipulating rates and keeping them low ostensibly to stimulate the economy. I think it is because the government cannot afford higher rates.
At 1.5%, they are paying $240 billion a year just in interest. Can you imagine what happens if those rates ever go to 5% which is more typical in the past 20 years? In interest alone, they are going to be paying $800 billion a year.
Did you know that the annual total tax collection from individuals this past year was about $1.1 trillion? Can you imagine if interest rates go to 5% and the interest paid by the government is $800 billion? That is going to practically consume the entire tax revenue from individuals.
This is just getting back to the normal level of interest rates.
I’m running out of time right now, so I’m going to have to stop here for a bit. But I’ll be back soon with the 2nd 1/2 of my “rant” and I promise that it won’t be just the doom and gloom… although there’s plenty of that to go around. I’ll actually touch on a few ways that this might all be a good thing … if you do the right things.
At the end of the day, that’s the point I’m trying to make. We’re in trouble here folks. Deep trouble. But it’s survivable if you start taking your financial future into your own hands.
Till then, take a look at my video below where I tell you the WHOLE story.