President Obama puts Fiscal Cliff Offer on the Table – What are you willing to give up?

President Obama puts Fiscal Cliff Offer on the Table – What are you willing to give up?

  • Posted on: 9 December 2015
  • By: admin

President Obama puts Fiscal Cliff Offer on the Table – What are you willing to give up?

President Obama put his first formalized Fiscal Cliff offer on the table, calling for $1.6 trillion in tax increase, $50 billion of infrastructure spend, removal of the debt ceiling, and extension of emergency unemployment benefits. You can read the CNBC article at http://www.cnbc.com/id/50016612

Why You Should Care

Yesterday’s blog asked the question “what are you willing to give up to fix the deficit?” and it focused on the mortgage interest deduction, which costs roughly $100 billion per year. Today I want to focus on unemployment benefits since the President wants to extend those benefits for another year. Currently, unemployed people can get benefits for up to 99 weeks, basically 2 years, for a cost of $94 billion in fiscal year 2012. Over the last five years, we have paid out $520 billion in total unemployment benefits according to the Congressional Budget Office. 

The U.S. economy has been sluggish, job growth has been slow, but we need to accept the fact that high leverage and debt drove unemployment to the low rate of 4.5% in 2007 and that most of these jobs aren’t coming back. At what point are we going to say enough when it comes to unemployment benefits? Two years is simply too long. What if we were to cut that in half? We could save $47 billion next year. Add that to the $100 billion from the mortgage interest deduction and we are now at roughly $150 billion in savings for 2013. What are you willing to give up to balance the budget?

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The Mortgage Interest Deduction – Fact and Fiction

The Mortgage Interest Deduction – Fact and Fiction

  • Posted on: 9 December 2015
  • By: admin

The Mortgage Interest Deduction – Fact and Fiction

Given the fiscal cliff debate and the fact that the mortgage interest deduction costs the Federal Government roughly $100 billion a year, I thought it would be a great idea to re-visit this New York Times article from 2006 which chronicles the birth of the mortgage interest deduction and debunks some of the myths as it relates to homeownership rates http://www.nytimes.com/2006/03/05/magazine/305deduction.1.html?_r=2&oref=slogin&pagewanted=all&

Why You Should Care

The mortgage interest deduction is simply a microcosm of what we face in the fiscal cliff debate and the route we are going to take to get our finances in order. For every person who is in favor of eliminating this deduction, another will cry foul and claim that eliminating this most important of deductions will destroy the housing market and hurt middle class families. It’s not about the mortgage interest deduction specifically; it’s about our inability to look at our fiscal situation in a rational manner, putting aside our personal sacred cows, to allow a large scale debt and deficit reduction plan to materialize. What are you willing to give up?

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Politicians Using Cartoon Mascots to Sell Public on Fiscal Changes – Are we Doomed?

Politicians Using Cartoon Mascots to Sell Public on Fiscal Changes – Are we Doomed?

  • Posted on: 9 December 2015
  • By: admin

Politicians Using Cartoon Mascots to Sell Public on Fiscal Changes – Are we Doomed?

In another confirmation that politicians and citizens just doesn’t get the severity of our fiscal problems, Illinois Governor Pat Quinn has created a mascot named Squeezy the Pension Python and begun a large scale social media campaign to try to educate the public on the failing finances of the state of Illinois http://chicago.cbslocal.com/2012/11/19/quinn-using-social-media-to-explain-pension-debt-crisis/

Why You Should Care

In the immortal words of Frank Costanza from Seinfeld, “SERENITY NOW!” Are we really this gullible, ignorant, disconnected, and immature that we need a mascot to be able to connect with the debate over the debts and deficits our towns, cities, states, and federal government face? I hope not, but I’m losing that hope daily as the focus on taxing the wealthy so they “pay their fair share” continues to drown out the true deficit monster, entitlements. 

The state of Illinois’ budget deficit now stands at $43.8 billion, they have an unfunded pension liability of $96 billion, and they have to make $5 billion in pension deposits every year. The system can’t take it. California faces the same issues and recently passed a retroactive tax on wealthy residents but did nothing with their pension obligations. It would be funny if it weren’t so sad.

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Another Stay of Execution for Greece – What’s the Definition of Insanity?

Another Stay of Execution for Greece – What’s the Definition of Insanity?

  • Posted on: 9 December 2015
  • By: admin

Another Stay of Execution for Greece – What’s the Definition of Insanity?

After a lack of consensus from Euro zone finance ministers and the IMF, the parties finally reached an agreement that allows bailout funds to flow to Greece so the struggling country can continue to operate. You can read the Bloomberg story at http://www.reuters.com/article/2012/11/27/us-eurogroup-greece-idUSBRE8AP05820121127

Why You Should Care

This is not a simple agreement to keep funds flowing to Greece; this is a large-scale write down of Greek debts held by the ECB. Greece will be given a 10-year deferral on interest payments and maturities on Greek debt will be extended by 15 years. The goal is to bring Greece’s debt/GDP ratio down to 124% by 2020. What’s the definition of insanity? Doing the same thing over and over again but expecting a different result!

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Holiday Sales Jump 13% during Thanksgiving Weekend

Holiday Sales Jump 13% during Thanksgiving Weekend

  • Posted on: 9 December 2015
  • By: admin

Holiday Sales Jump 13% during Thanksgiving Weekend

Regardless of what is going on in the world, one thing remains constant--that is the American consumer is going to spend money. This Thanksgiving weekend supports that constant. You can read the Bloomberg recap at http://www.bloomberg.com/news/2012-11-25/shoppers-lift-thanksgiving-weekend-spending-13-to-59-1-billion.html

Why You Should Care

The U.S. economy is driven by consumer spending, and as we stare at the Fiscal Cliff and rising taxes coming at the end of 2012, the U.S. consumer doesn’t appear to want to blink. Although actual Black Friday sales declined year-over-year, retailers are pulling deals into Thanksgiving Thursday and when looked at as a 4-day total, holiday sales rose 13% over the 4-day weekend last year, a strong figure. The resiliency of the U.S. consumer continues to amaze me, but it just may keep this economy chugging along.

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Housing Starts Rise Again in October – Now at 4-Year High

Housing Starts Rise Again in October – Now at 4-Year High

  • Posted on: 9 December 2015
  • By: admin

Housing Starts Rise Again in October – Now at 4-Year High

After increasing 15.1% in September, U.S. housing starts grew another 3.6% in October, posting a 4-year high of 894,000. You can read a recap at http://www.sfgate.com/business/bloomberg/article/Housing-Starts-in-U-S-Unexpectedly-Rise-to-4053127.php

Why You Should Care

While we are still well below the over 2 million starts/month we experienced during the 2003-2006 period, housing starts have now rebounded well off of their 2008 lows of roughly 500,000 and are showing a steady ramp up. The fact is we built too many homes during the housing bubble, but housing starts have been so depressed for so long, that we now don’t have the inventory to meet the household creation rate in the U.S. which stands at roughly 1 million/year.

 

 

This improvement in homebuilding will help to support GDP growth rather than drag it down as we’ve seen over the last 3+ years. It does provide some cushion for us as we deal with the issues of the fiscal cliff and the potential for GDP retarding tax increases and spending cuts.

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If You Have Life insurance, Better Check Your Policy Assumptions!

If You Have Life insurance, Better Check Your Policy Assumptions!

  • Posted on: 9 December 2015
  • By: admin

If you are an owner of a Universal Life Insurance policy purchased prior to the big decline in interest rates in 2008, we call your attention to an article from the weekend Wall Street Journal about potential roadblocks with this product. The issue with universal life is with policies that have flexible premiums where the cash value build up is anticipated to pay for future costs of the policy. You may wish to have your insurance agent rerun some scenarios for you which are based on today’s low interest rates. The link to the full article is attached.

 

http://online.wsj.com/article/SB10001424127887324595904578121484233279270.html

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Don’t Want to Cut Defense Spending? Think again…

Don’t Want to Cut Defense Spending? Think again…

  • Posted on: 9 December 2015
  • By: admin

Don’t Want to Cut Defense Spending?  Think again…

Defense spending could be slashed by $68 billion over 10 years if the military stopped spending millions on running grocery stores, operating its own schools and even developing a roll-up version of beef jerky, insists one of the Senate's leading fiscal conservatives. In a new report, Republican Sen. Tom Coburn dubs the Pentagon the "Department of Everything."

http://www.ksl.com/?nid=128&sid=22977747&title=gop-senator-outlines-68-billion-in-defense-cuts

Why You Should Care

No government department is immune from ridiculous and wasteful spending, so it should come as no surprise that the Pentagon too has plenty of areas to make cuts. What continues to shock us is the gall with which these agencies spend. The Pentagon spent $100K on a Star Trek workshop, $1.5 million to develop beef jerky and $1.48 million to upgrade the kitchen and computer room at a junior high–Come on. Where is the outrage? Where is the accountability? In a time when deficit reduction is vital, it seems fairly easy to begin by cutting these programs that don’t deserve government funding. Can’t the two sides agree on that?

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Single-Family Rental Demand Is Outstripping Supply

Single-Family Rental Demand Is Outstripping Supply

  • Posted on: 9 December 2015
  • By: admin

Single-Family Rental Demand Is Outstripping Supply

Demand for single-family rental housing is outstripping the available supply of homes, and some housing markets that have been hit hardest by the foreclosure crisis have seen rental demand jump by more than 25% in the past year, according to a report to be released Tuesday by real-estate firm CoreLogic. It shouldn’t be surprising that single family rental demand has picked up in recent years: There are many families who have lost their homes to foreclosure or that can’t qualify for mortgages given tighter underwriting standards.
 

http://blogs.wsj.com/developments/2012/11/13/report-single-family-rental-demand-is-outstripping-supply/
 

Why You Should Care

The rental market’s impressive performance is one aspect of an improving housing market. Partially driven by financing challenges, down payment requirements, and a shift in mindset, the strength in the rental market is indicative of the real demand for housing and good for the long-term. Demographics, household formation, and improving confidence should continue to drive improvements in the various housing sectors.

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U.S. to Overtake Saudi Arabia for Oil Production by 2017

U.S. to Overtake Saudi Arabia for Oil Production by 2017

  • Posted on: 9 December 2015
  • By: admin

U.S. to Overtake Saudi Arabia for Oil Production by 2017

According to the International Energy Agency (IEA), the U.S. is on course to become the largest producer of oil by 2017 due to the growth of shale oil production. You can read the Reuters article at http://www.reuters.com/article/2012/11/12/us-iea-oil-report-idUSBRE8AB0IQ20121112

Why You Should Care

We have been discussing U.S. energy independence for the last 50+ years, with every new President making claims that they will move the U.S. off of foreign oil by some date that is constantly being pushed back. But, with the increased oil and gas production from the booming shale plays, we may finally get there.

One of the more interesting plans in this most recent Presidential election was Mitt Romney’s plan for North American energy independence. It had the potential to reduce our reliance on OPEC oil, create over 1 million jobs in the U.S., and also reduce our military spending on the defense of the Persian Gulf. As a nation, we send roughly $150 billion a year to OPEC countries (we spent $460 billion on all foreign oil in 2011). Those dollars could help U.S. GDP growth dramatically if they remained within our borders. Hopefully, with President Obama winning re-election, this plan doesn’t simply get pushed to the side and we can capitalize on new technologies and new oil and gas production.

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