By Edward Leone Jr. DMD MBA CFP RFC
Contact Information: leonee@vzw.blackberry.net
I came across a most disturbing bit of news in the October 7th issue of Forbes Magazine in an article written by Steve Forbes. It appears that Polish law caps national debt at 55% of GDP. Given the status of the European economy, Poland has experienced economic slow down and excess national debt as a result of political strategies to grow the economy by government stimulus funded with borrowed money. In order to comply with Polish law regarding national debt limits, the government has announced a recall of government bonds held in private pension savings plans and has nullified the value of these bonds. Rather than trying to get the populace to elevate the debt limit, this strategy gets government debt bellow the legal limit at the expense of citizens’ retirement savings. There was an attempted confiscation of bank account savings in Cyprus earlier this year. Is this a trend that may spread to the U.S. some day? After all, our President tried to institute a limit on retirement savings by capping tax deferred retirement accounts at $3 million. What could be coming our way next?
It is important to note that according to Robert Delucia CFA of Prudential, U.S. GDP falls short of forecasts bellow the 2.2% average experienced over the past 4 years. It is expected that over the next 2 or 3 years that GDP will rise to 3.5-4% as this slow economic recovery progresses. Much of this will be influenced by monetary and fiscal policy along with the progress in a global recovery.
Another challenge to us regarding tax code adjustments is a potential for the elimination of the deduction for charitable contributions. What will this mean to those organizations which count on such donations?
To create further concern in your mind, let me share with you the status of the U.S. consumer whose spending represents 70% of economic activity. According to Bloomberg Business Week, median household income has declined from $55,280 in 2008 to $52,133 in 2013. This is a decline of 5.7% while according to the Bureau of Labor Statistics, consumer inflation is up 7% over that period. It is imperative that steps are taken to accelerate economic growth and improve the availability of quality employment opportunities!
I woke up this morning and learned on the TV news that our government was involved in a partial shut down of non-essential services. My day was no different that so many others. The rhetoric I heard through the media was quite disturbing in that it appears that this is all about politics and no about we the citizens. If non-essential services really exist, I need to know why. I also need to have a definition of a non-essential government service and a list of such functions in order to judge the validity of such action. I believe that the reporting on this issue is very faulty. Most of us do not have a clue what is really going on. Our representatives in Washington DC don’t seem to have a grip on the key issues either. What is going to happen and how will this impact our economic progress?
For The Record:
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Suggested Reading: “Learn to Earn” by Peter Lynch
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