ARBOR WEALTH: Plains Indians, Huey Long and the fiscal slope

Published: Wednesday, November 21, 2012 at 10:34 AM.

It is a very precarious procedure to cut spending and downsize government programs while in the throes of an economic downturn. To verify how difficult it is, consider recent events in Greece, Italy, Spain, France and the rest of the countries, especially in Southern Europe, that are part of the EU.

Greece’s austerity cutbacks, with which they must comply or fail to qualify for bailout funds, included such severe measures as reducing pension payouts to those already retired by 17 percent, raising the retirement age from 65 to 67 and enacting significant government and civil service employee layoffs. As Huey Long used to say about priming the government pump, “This won’t make the mare go.” 

Some 100,000 protestors, led by union officials, took to the streets in Athens to protest Parliament’s cutbacks. Similar protests were seen throughout Europe. 

Can our leaders forge a plan that will simultaneously address spending and taxes without wiping out the first baby steps of growth our economy has experienced in several years? Well, we may be naïve, but we trust that they can. And that they will. There’s too much riding on the outcome for failure to be an option.

The Times article suggests this likely scenario: “Many budget experts and economists are hoping for a two-part deal. The first part would extend many of the tax cuts and repeal the automatic spending cuts to avert the changes scheduled after Jan. 1. But it would be contingent on the second part: a framework for reducing projected long-term deficits by overhauling both the tax code — to raise revenues —and entitlement programs, chiefly Medicare and Medicaid, whose rising costs in an aging population are unsustainable. These overhauls would preoccupy Mr. Obama and Congress through 2013 and perhaps 2014.”

And that’s the better case scenario. It’s easy to see why, then, we anticipate an extended low-returns environment, believe in dividend payers, and subscribe to a defensive investing philosophy. 

The fiscal cliff is a confusing issue.  The Cheyenne also used to say, “It is true that there is a thing here that I do not understand.” Why should they be different?

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