We are all being sold a bag of goods!
Unless one has been living under a rock, you are aware there is broad consensus that if nothing changes in Washington, the US government will be broke several years from now. The looming debt crisis is one of the reasons why Tea Party candidates won so many seats in the last election. In the past 2 weeks, we have heard about cuts in spending of $38 billion in order to avert a shutdown, Paul Ryan’s plan to cut spending $6.1 trillion and Obama’s plan to cut $4 trillion. Let’s be clear, there are truly no cuts in spending in any of these plans. The US Government will be spending more ten years from now than they are today. Only in Washington can spending more be considered a cut. They do all this through baseline budgeting.
If you and your family were doing a budget and discovered that you were overspending, you would make an actual cut to what you spend. I know we did that in 2009 as we tightened our belts and spent less money going out as a family. THOR also made cuts as a company by reducing its expenses. That is how the real world cuts spending, they actually cut spending.
Washington uses baseline budgeting. Using baseline budgeting, the Congressional Budget Office (“CBO”) makes the assumption that current services continue without change and builds in automatic spending increases. For example, if a current program costs $100 billion and its assumed annual growth rate is 10%, the CBO would set aside $110 billion ($100 billion plus 10% increase) in next year’s budget for that program. If Congress changes the CBO’s assumed growth rate to 5%, Congress would take the position that it made a cut of $5 billion when in reality it increased spending by $5 billion. As one of the most entertaining Congressman, James Traficant, would say “Beam me up!” In our opinion, baseline budgeting should be a thing of the past. Politicians should budget every year how much more they are going to spend and share that number with the American people. They are not making cuts under the current system.
As always, feel free to contact us if you have questions or concerns.
Your THOR Team
Special Note: Many clients have come to us recently to help evaluate and/or liquidate coin collections. Jim is a collector and although he is not an expert on all coins, he is available to assist in these matters. Now may be an opportune time to sell common date silver coins as silver has reached decade highs and the silver value of these coins is significantly above their numismatic value.