Washington: You are Go for Sequestration

Sequestration. It's all over the news. Essentially the definition is, "If Congress cannot agree on ways to cut back the total (or does not pass a new, higher Budget Resolution), then an 'automatic' form of spending cutback takes place. This automatic spending cut is what is called sequestration."

In reality it's yet another example of what an economic mess we're in and government's total and absolute inability to do anything about it.

If both the Executive and Legislative Branches can't act like grownups it all kicks in March 1. 

A lot of folks are saying "The Sky is Falling!" Get real. If this whole thing was such a big deal the President wouldn't have gone golfing with Tiger and Congress wouldn't have gone home to shake hands and raise money for their next campaigns. This is all about politics. The folks with the "Bully Pulpit" are bullies themselves. And they're picking on us.

So let the spending cuts fall where they may. While I strongly disagree the sky will fall, if indeed it does maybe it's exactly the "Wake-up" call government needs to get serious about dealing with a $67.7 Trillion deficit.

A couple of guys who came up with a solution to this mess, and were promptly ignored by the very government who asked them to do it in the first place, are Al Simpson and Erskine Bowles.

Here's a basic outline of their original ideas:

• Replace the current tax bracket system of 10/15/25/28/33/35/39.6 with three brackets: 12%, 22%, and a maximum of 28%.
• Permanently repeal the AMT, the PEP phase-out of personal exemptions, and the PEASE limitation on overall itemized deductions.
• Eliminate all tax deductions; require taxpayers to take the standard deduction.
• Keep the earned income and child tax credits.
• Replace the mortgage interest deduction with a 12% non-refundable tax credit. Creditable mortgage balance would be capped at $500,000 (maximum credit $60,000); no credit for second residence.
• Replace the charitable contribution deduction with a 12% non-refundable tax credit, subject to a 2% of adjusted gross income floor.
• Treat state and local bond interest as taxable.
• Tax all capital gains and dividends at ordinary rates

In other words, if we're really serious about all this we'll need to do more than raise Warren Buffet's taxes.

 Never the type to give up Simpson and Bowles now recommend at the very least, trying this:

"Reform the Tax Code in a Progressive and Pro-Growth Manner. The current tax code is complicated, confusing, costly, anti-growth, anti-competitive, unfair, and riddled with well over $1 trillion of tax expenditures – which really are just spending by another name. Tax reform must reduce the size and number of tax expenditures to reduce the budget deficit and lower marginal tax rates for individuals and corporations. At the same time, tax reforms must maintain or improve the progressivity in the tax code and promote economic growth. Tax reform will make the tax code more efficient, effective, and globally competitive.:

The tax code is 70-thousand pages long, just one of the reasons Facebook is getting a $428 Million tax refund this year. How do you "Like" that?

Such foolishness, so avoidable, so very, very sad for all of us.

So maybe it's just as well Sequestration happens. As the Beatles sang, "Let it be."

Brian Olson
Owner/Consultant
Conversation Starters Public Relations
"We start the conversation about you"

STUFF POTUS left out of SOTU

"He shall from time to time give to the Congress information of the state of the union, and recommend to their consideration such measures as he shall judge necessary ..."-Article II, Sect. 3 of the United States Constitution.

Essentially what this means, and with help from Kenny Rogers, the President drops in to tell us what condition our condition is in.

In reality it's become an evening of pomp and circumstance with little in the way of substance. Afterwards a representative of the "Loyal Opposition" gives their take on things followed by hours of punditry by Washington Insiders who explain to us folks on Main Street USA what was really said. That crowd long ago forgot we can think for ourselves.

An evening of Hoo-Hah. Ho-Hum.

So with help from some pretty smart folks including a recent presentation by Greg Anton, a nationally recognized CPA, here are the parts the President left out, at least about the deficit. Mr. Anton has even been invited to the White House for his input on our growing financial mess. He said they were polite but didn't pay much attention.

A bit of a preamble is in order. I'll be using the word "Trillion" a lot here as in dollars. So just how much is a Trillion?

• One Trillion Dollars is $1,000,000,000,000.
• A trillion dollar bills stacked on top of each other would reach 68,000 miles. That's a third of a way to the moon. Ask Gene Cernan, he's been there.
• A trillion seconds is 32,000 (thirty-two thousand) years. That's a long time.

OK, hopefully this helps you understand just how big a number a trillion really is.

When President Obama took office, the National Deficit, at least according to the way the government tracks such things was 11.5 trillion dollars. Now it's about 16.5 trillion dollars. The Republicans make a big deal about this. But a fellow by the name of George Bush helped get us to the 11.5 trillion figure and despite all the blather about Bill Clinton and his "Budget Surplus" he chipped in too. This scam has been going on for decades.

So here we sit with a National Deficit of $16,700,000,000,000. Or so the government tell us. Actually they're fibbing a bit. OK, they're fibbing a lot.

Folks like Greg Anton who understand things like balance and loss sheets put the actual deficit at over SIXTY-SEVEN TRILLION DOLLARS! (All caps for emphasis and assuming you've grasped the earlier bullet points by this time)

You see, the government doesn't do its books like we have to here on Main Street. They get to leave out all sorts of short and long term liabilities and stuff. Like, Social Security and Medicare. Well, they are listed, but as footnotes and in no way reflected as liabilities. So a lot of money is "off the books." If we filed our taxes that way, we'd end up in jail.

Here's where we're really at: (Bullet point alert!!)

• The net worth of all the households here in the United States, houses, cars, lawnmowers and assorted knick knacks etc is around $65 Trillion. 
•  Our real debt, including real obligations as a nation is the aforementioned $67.7 Trillion.

If the United States was a mortgage, we'd be underwater. We owe more than the country is worth. So we are underwater. The amount we owe continues to grow, despite what you heard last night and what you've been hearing for years and years and years. It's growing so fast in fact, that countries like China are having a harder and harder time buying up our debt. There's simply too much of it.

I'll be blunt. Our government, both the Executive and Legislative Branches have been misleading us. An irony because they were elected to ...lead us instead. Democrats and Republicans alike.

If you'd really like to dig into all this, check out a non-partisan group of caring Americans at www.FixTheDebt.org. 

I urge you to spend some time and do your own research. You might also want to read the findings and solutions of the National Commission on Fiscal Responsibility and Debt Reform. It's about 65 pages long and as they say, a "Real page-turner." Senator Alan K. Simpson (R-Wyoming) and Erskine Bowles (Former Clinton Chief-of-Staff) chaired the bi-partisan group at the request of President Obama. They did their job, presented the report to the President who then stuck it in a drawer after the photo-op.

The report does offer solutions. But there is little if any sugar to help the medicine go down. It's going to take more than Warren Buffett paying more taxes. With around 50% of the population not paying any Federal Income Tax, most will have to start paying something.

Social Security is secure, although retirement ages will have to be raised in the coming years. There will also have to be means testing. Sorry Warren, no Social Security for you or your secretary. As for Medicare and Medicaid, we have simply over-promised far too long. There just is no way to meet coming demands. Defense will have to be cut. Before you get all lathered up over that, we spend more on defense than any country in the world. According to folks like Al Simpson and Erskine Bowles we spend more on defense than the next 15 nations below us combined. And most of them are allies! Also look for stuff like the tax deduction on mortgage interest to be phased out. As a bit of a sidebar, Canada has never had that deduction or anything like Fannie Mae, Freddie Mac or Snoop Snoop Poopy Dog. Yet they have a higher percentage of home ownership than we do.

To be absolutely clear, we have no choice in the matter. Well, unless we want to end up like Greece with 25% unemployment and rioting in the streets. Sadly, it might take something that drastic to really get our attention.

So, all stuff left out last night.

We can get out of this mess if we act now. As in immediately if not sooner. We have a role in all this. If like me, you belong to an organization like the South Metro Denver Chamber of Commerce, you get to meet our elected representatives to Washington. Ask them, politely, to stop lying and start fixing and if they don't you'll work hard to make sure they lose their jobs.

You can also write, phone, e-mail these folks or best of all, show up to their Town Hall Meetings. Be polite, but firm. Tell them to stop lying and to start doing. Don't, I repeat don't count on many of the media to ask the questions. They're too, uh, obtuse to ask. One journalist I do recommend you read is Al Lewis of Dow Jones Newswires. He's done the math.

We're under water. Let's not let this nation drown. Like the Titanic, we're running out of lifeboats.

Brian Olson
Owner/Consultant
Conversation Starters Public Relations
"We start the conversation about you"

How do you watch TV? Is it even ...on TV?

I'm hooked on a news series on NETFLIX. Called House of Cards it's the story of a "Ruthless and cunning, Congressman Francis Underwood." Think of it as The West Wing, minus the idealism.

Kevin Spacey, arguably one of the best in the business stars. He's also Executive Producer. Robin Wright and the rest of a terrific cast make for great entertainment. NETFLIX obviously believes in it because they've invested $100 Million in the series.

What makes the viewing experience different:

• It's on a streaming video channel which you can watch on your iPad or TV through various devices. You do have to subscribe to NETFLIX to view the series.
• All 13 episodes of the first season are available for viewing at your convenience. Watch when, where and on what you want. I used to watch Entourage the same way. Why subscribe to en entire premum channel when you just want to watch one series?

As someone who is old enough to remember being the first house on our street with a TV, and just one channel that signed on at 4pm, this sort of thing always amazes me. Technology empowers us, including how we watch TV. I watch House of Cards on an iPad mini with Bose headphones. So am I even watching TV? Long answer: No, I'm consuming video content on a mobile device. Short answer: I'm being entertained on my own terms.

There is no difference between watching a program on a 60 inch big screen or an iPad mini because it's not the size of the screen, it's how close you are to the screen.  So kicking back with my iPad a foot or so away from my eyes and the awesome sound from those Bose headphones is as good as any home theater experience.

Of course while I'm watching the show, I'm not watching traditional TV, nor the ads that still run on the bulk of TV whether it be off-air or via satellite or cable. The way we watch programming is changing with the rapid evolution of the technology we use to consume it.

It's empowering and an important step forward for us.

We as consumers are achieving a long-time goal, "A la Carte" programming. Just watching and paying for what we want to watch. Like at our house, if you subscribe to a satellite or cable television service, you buy program "bundles." You buy a package of channels, maybe watch 10 of them but are stuck paying for another hundred channels you never watch. It makes sense as consumers to pay for just what we consume, right? Up to now, those who control content distribution have prevented us from doing that.

To be fair to satellite and cable companies, they're victims to some extent of major programmers who say "If you want to carry this channel from us, you have to also carry these other channels. Take it or leave it." We as subscribers ultimately end up picking up the tab. A growing added cost for us are the so-called regional sports channels. Many cable systems have no choice but to provide them  at extra cost to us, even though we could care less about the teams or sports covered. It's about to change and here's why:

• We can get an amazing amount of digital channels, many in HD using a simple off-air antenna.
• Companies like NETFLIX are providing a huge and growing number of programs like House of Cards via the Internet.
• Technology like Apple TV is yet another video content pipeline. Ditto for YouTube, already producing several series, they've just announced a new country music channel.
• Many networks themselves are providing their shows on-demand. Watch how, when and where you like.
• We're willing to give up a little, to gain a lot AND save a lot. Heck, I'm willing to give up ESPN if they don't stop creating financial and fan-killing monstrosities like the Longhorn Network.

Consumers have a funny way of getting what they want, and these days are more than willing to shop around for what meets most their needs and save the most money. Outlets like NETFLIX get that.

When I told my wife about YouTube's plans, she said it's time to cancel our DISH Network service, or at least cut way back on it. I don't think she was kidding.

Brian Olson
Owner/Consultant
Conversation Starters Public Relations
"We start the conversation about you"