Thursday, October 18, 2012

Romney's Plan vs. Obama's Plan

People have been complaining that the President Obama of the presidential debates doesn't seem to "have a plan."  We all know that Governor Romney has a five point plan: energy, job training, expanded trade (but penalize Chinese cheating), cut deficit, reduce taxes on middle class.  We know that because he keeps telling us.  But what about Obama's plan?

Come on guys, of course Obama has a plan.  It is to ask the rich to "pay a little more" and to expand training and teachers.  That's what he keeps telling us.  He's still gaga over green energy, but he seems to have experienced a "come to Jesus" moment on fossil fuel, at least for now.

Really, there is not much to choose between the two, excepting on taxes.  Obama wants the rich to pay a little more; Romney says he wants to keep the top 5 percent paying 60 percent of the total (is that income tax only or income tax plus payroll taxes?).

It's what they are not saying that matters.  What they are not saying up front at the debates is that it's doubtful that Obama would reduce spending from the current level at 22 to 24 percent of GDP.  Romney's plan is to cut federal spending back to 20 percent of GDP.  That means, according to some, that he'll cut everything to the bone except Social Security, Medicare, and Defense.  Makes sense to me.

As a Republican partisan I'd like to think that Romney will achieve his spending goal.  But as a betting man I'd guess that the federal government will get out of its jam through a combination of inflation, debt default, financial repression, and open confiscation.  Why?  Because that's what governments do.

The bottom line, if you are an individual American, is that in the next few years it's going to be really difficult to hang onto your money, either in real wages or investment income or in real capital appreciation.  Because while you are trying to live your life and keep a little aside for a rainy day the government is going to be trying to fill in a gigantic hole in its finances.  One way another, the government front-end loader is going to take a chunk out of your little pile and dump it into the hole.

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