Protectionism is the worst strategy any nation can aspire to
in this day and age because of globalization. As nation-states
continue to join the UN, NATO, ASEAN, the IMF, and the WTO,
we are likely to see a more strong economic interconnectedness like
never before. Exports and Imports are now the life’s blood of almost
every nation on the globe. Hinder this vital relationship between and
among nations and watch their quality of life dwindle. Moreover,
countries borrow from other countries, to prevent, oftentimes the
debtor from being forced to raise taxes. But when credit defaults and
recessions occur simultaneously, what else can government leaders
do to raise revenue?
This brief commentary is to help those Americans short on political
science and wit, but are devout voters, what to expect in the coming
year-end. But all this depends on whether the democrats keeps control
of both the US House and the Senate. Barring any other barriers to this,
and Mr. Obama's uncertain popularity in the polls, which may drive his
chances for reelection in 2012 into an impossibility, I conjecture by
2011, the democrats will have to raise taxes to meet the growing budget
Wall Street at the moment is confident, according to its continued
upward trend currently, the Obama Administration is moving in the
right direction politically. But the voter must know most of the
trading in the market is due to the big movers and shakers. That is,
mutual funds, banks, insurance companies, bond fund companies and
large corporations. These are the guys who have the loot to do the
gambling. They gamble, (trade) with millions and millions of dollars
of other people's money and some of what is their own. However, when
the market takes a turn, whether positive, upward, or negative,
downward, you can bet the big-boys are behind it all.
Then too, the fact that stimulus bail-out dollars is probably
fully saturated throughout the market is more than likely the reason
for the upswing in investment by these large institutions. But just
like with every good-turn in life there is an equal and opposite
bad-turn just around the corner, no one's expectations should rule-out
a tax hike in the near future. Especially the taxpayer. But why would
Obama want to raise taxes when the economy is still down? Wonder
This is the reason for this brief commentary, and the answer is
because of what we owe to China, Japan, United Kingdom, Oil Exporters,
Brazil, Hong Kong (China), Caribbean Banking Centers, Taiwan, and Russia.
Although these major countries are the main group of creditors, there are
at least ten more that make up the entire list of creditors who has their
hand in the US government’s pockets.
As far as mid-term and long-term foreign debt, the US is indebted
to bondholders in the amount of some $2 trillion. And when you factor
in what we owe in Treasury Bills that amounts to $502.8 billion. Such
borrowing needs to be understood, in order to apprehend, why taxes will
ultimately have to be invoked. One big reason is the cost of the debt.
The fact that interest on the bonds alone semiannually, is money flowing
out of the country rather than invested in programs to get the country
back on its feet. A more troubling problem with the current foreign debt
is the fact that China's economy is slowing considerably. This could mean
they will probably have to do one of three things or all three, (1) cut
back on loaning money to the US to help finance US domestic operations,
(2) sell their government bonds in the open market to raise needed cash to
finance their own domestic operations, and (3) call for immediate payment
of all US securities held by the Chinese government. Or they could do all
three or at least two of the three.
But they are not the only people we owe. If such uncertainty in the
US economy were to weaken the confidence of the Chinese government in
the US ability to grow and manage its fiscal budget, it could have a
backlash, directly coming from all our other creditors, those mentioned
above and the one's not mentioned, to the sum of some three to four
trillion dollars. The uncertainty in the difference in the two above
figures is because of interest, (over $450 billion and does not incorporate
other public debt) owed by the US government to its creditors.
This eventually could drive up interest rates and cause the Obama
administration to ask the Congress to increase taxes. A risky
proposition all the way ‘round, and for democrats by and large.
Now I know this is all supposition on my part and not fact. But think
about our financial positioning at this moment. The economy is struggling.
China's economic growth has slowed. The US savings rate, i.e. M2 money
supply is still in the red. US States in America still have depressed
economies. Some state officials, i.e. state governors, are even requesting
another stimulus. Fiscal budgetary goals, are in limbo. If you didn't
know it during Congress's last session in March 2010, conservative
republicans in a floor debate in the Senate refused to vote yea on
extending unemployment benefits and Cobra funding, which would have
allowed the unemployed, through no fault of their own, to continue
collecting unemployment benefits for another 30 days, and to continue
receiving health care services throughout the month of April at least,
because they [leaders in the Senate] claimed there was no way to
pay for it.
This is certainly a sign we are headed for a tax hike. And this begs
the question, “Will it be a progressive tax hike that will effect all
Americans or progressive only for the middle and lower-class, while the
upper-class continue as is?” More than likely it will be a progressive tax
effecting everybody. The opportunity cost of such a negative move by the
federal government will mean less to consume, even less to save than we
already have, and far less to live on. With the steady climb in gasoline
prices, to line the pockets of OPEC once more at the pumps, the end
of the recession appears to have no end.
This is what we have to look forward to if things get any worse overseas.
That is, if China decides it can't cover our losses anymore. It is sure to
drag in other countries we owe and they too, feeling the panic and loss of
confidence in the US dollar, will hurry to dump their bonds on world markets.
This could have a downward spiraling effect on other stock exchanges,
worldwide, and I think you see where I am headed.
To taxes I say, "President Obama, there may be no other way out of the
pickle, other than to increase taxes, if all else fails in the coming months.
But know that if you do and it spurs another recession, you may have to dip
into the remainder of TARP, or begin cutting appropriations to fund the war
in the Middle East, or call the troops home ahead of time. Your biggest hurdle
to get over if you decide to implement such an economic strategy, is the fact
that, underemployment, part-timers, and those that have given up looking for
a job, the latter at least 10 million, and those who are illegal, another 5
to 10 million, who have nothing to contribute, the former aforementioned will
soon join those already living in homeless shelters, due to renewed or further
layoffs, because of the inimical effects tax hikes will have on investments
and production." If the President and his economic advisors understands this
model, yet goes ahead with a tax hike, his actions and the Congress's may
spawn another global economic crisis.
To raise taxes is certain to hinder the economic recovery, even if it means
getting the federal government’s fiscal house in order. Worse still, it may
once more adversely affect consumer confidence.
I do agree however with the President about the space program.
The US should not underreach its objectives. We have already been to
the Moon. Why go back for more moon rocks? Scientist now know it is
inhabitable. And even if Mars proves the same we may learn something
more far-reaching there than we would if we were to return to the
Also, Tea Party protestors, protesting the Obama administration’s
policies in health care and other political matters should take a look
in the mirror, what they will discover I think is they were instrumental
in his getting elected. Now when the puppet cuts its own strings and
consequently goes its own way and makes its own decisions, the
doll-maker cries foul and demands its head.
For those of you who are reading my commentaries on the good
and not the Good, I will post part three Friday evening. Thanks for
Biography - Wesley McCants
Disabled Vietnam Veteran
In addition to writing commentaries, poetry and novels, I am one half of the macbrothers, Inc. We are songwriters and not artists or performers. We write music for others to perform or record. I do not do tours since I am not an artist. Like I said, we write & record our own songs and release them for purchase online. However, we are interested in nonprofessional or professional artists seeking songs. If you are an artist interested in songs for your album please email me. I will send you the demo and lyrics (and any changes to the lyrics), or you can listen online to our songs readily.