How to Protect Yourself from Our “Keystone Kop” Congress!

 

I don’t know about you. But when I watch these Congressmen on TV argue back and forth about the budget, I’m reminded of those old Keystone Kops episodes. The 1910s-era silent films featured a rotating bunch of incompetent, uncoordinated officials chasing their tails and otherwise bumbling about … while the bandits made off with the loot!

Here in the present day, both Democrats and Republicans have been haggling for months on federal budget cuts — while getting essentially nowhere! They’ve had to pass not one … not two … but SIX continuing resolutions to keep the government operating so far this fiscal year — a year that began more than six months ago!

The key point of contention?

Just how much federal fat to cut.

Tea Partiers who helped get several conservative members elected to Congress last year want cuts on the order of $100 billion. Other Republicans are content with $61 billion. But some Democrats want no more than $10 billion, while others are only willing to consider a figure around $33 billion.

Regardless of how the negotiations play out, however, several things are abundantly clear to me …

First, the “leaders” we’ve elected aren’t leading. They’re bungling.

Second, even the figures being discussed by the most aggressive budget cutters are too timid!

And third, a future debt crisis is virtually guaranteed as a result! Let me tell you why …

It Doesn’t Matter Whose Cuts We’re Talking
about … They’re All just Spit in the Wind!

The White House recently projected cumulative budget deficits of $7.2 trillion over the next decade. But the Congressional Budget Office (CBO) said those figures didn’t hold water. It says the deficit tally will be even higher — $9.5 trillion.

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Folks, that’s an average of nearly $1 trillion EVERY SINGLE YEAR through at least 2021! It took more than two centuries to rack up TOTAL deficits that large, and now we’re going to be doing it every single year for as far as the eye can see!

Let’s say for the sake of argument that mainstream Republicans get every last penny of the $61 billion in cuts they want. Even if by some miracle that happened, it would amount to just 3.7 percent of the $1.65 trillion deficit the Obama administration is predicting for fiscal 2011. Meanwhile, our nation’s debt load rose by $61 billion in the first 22 days of March alone. That proves beyond a shadow of a doubt that we’re just spitting into the wind.

If Congress really wanted to make a difference, it would make major, long-term changes to the biggest budget-busting programs out there — Medicare, Medicaid and Social Security. They account for roughly 44 percent of federal spending right now. And those percentages are only going to rise as America ages.

Congress refuses to make meaningful spending cuts to costly entitlement programs.

Yet despite years of talk, successive administrations and Congress have failed to make meaningful progress on reforms.

Our official government debt load is hovering around $14.2 trillion. But in a recent and widely-read commentary, PIMCO guru Bill Gross noted that our unfunded Social Security liabilities total $7.9 trillion, while our unfunded Medicare liabilities total $22.8 trillion. Throw in Medicaid and you get another $35.3 trillion. That’s roughly $80 trillion in official debt and future liabilities.

Yet our “leaders” are haggling over a couple tens of billions of dollars in cuts as if they’ll turn the tide. Unbelievable!

Think I’m just blowing smoke about the magnitude of this looming debt crisis? Think again! No less an authority than the International Monetary Fund (IMF) agrees with me!

In a just-released report titled An Analysis of US Fiscal and Generational Imbalances: Who Will Pay and How? the IMF concluded we would have to “immediately and permanently” slash all transfer payments and jack up taxes by a whopping 35 percent to eliminate our current and long-term deficits!

Its stark warning?

“The United States is facing an untenable fiscal situation due to the combination of high fiscal deficits, and aging population, and rapid growth in government-provided healthcare benefits.”

How to Protect Your Portfolio
from Washington’s Bumbling

Bottom line: Regardless of how and whether the 2011 budget debate settles out, our fiscal outlook will get worse and worse each and every year thereafter. The only way to get us off this path to peril is for Washington policymakers to take these threats seriously, and tackle them head on. But that just isn’t happening, not by a long shot.

If there’s a bright side to all this, it’s that you don’t have to sit idly by and take the abuse from Washington. You can insulate your portfolio in a number of ways.

Martin Weiss goes into much more detail on how in the extremely timely online presentation “American Apocalypse.” If you haven’t already viewed it, I urge you to do so right away.

Other actions to consider?

Buy foreign bonds and stocks to profit from the dollar plunge that’s resulting from lousy policymaking in D.C. Avoid long-term U.S. Treasuries like the plague. And invest in the shares of companies whose balance sheets are in much better shape than our own government’s, while dodging the multitude of dogs out there!

Until next time,

Mike

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