The Economy

THE ECONOMY

I’m not saying I have a boring life or anything, but I spent 3 hours on Sunday watching the bank hearings from this past week on c-span. No, I did not miss the Daytona 500. To begin, some of the questions posed to the bank leaders were pathetic. Like how much did you make in salary and bonuses for 2008? Only to be followed up by what did you make in 2007? The best question I heard came from a congressman from N.C. He asked all the leaders, “What can the government do to fix or speed up the recovery from this recession?” It was the only question that did not reek of class envy.

I wish I were on the panel because I would have jumped all over the answer. First, you can lower the corporate tax rate to 15%. Second, you can eliminate the capital gains tax rate for three years. Third, you can triple the investment tax credit, sir. Fourth you can instruct the SEC to quit reviewing FAS 157 and suspend it immediately. FAS 157 is the infamous “mark to make believe” accounting rule. Fifth, create a substantial tax credit for hiring new employees for the next two years.

We are in our current economic situation because of one word. DEBT. And just between you and me, creating more debt, whether it’s at the corporate level, the individual level or at the government level is NOT going to fix the situation. Spending more that you earn is a recipe for disaster, again at any level. Loaning money to people who can never pay it back is also ludicrous. I will admit there are situations that call for the PRUDENT use of debt, notice the key word there, but we as a nation passed prudent about 30 years ago.

As a Nation and as individuals we can and we must get back to living within our means. We must quit spending more than we earn. It’s ok to tell our kids no we cannot afford something. We must get out of debt as soon as humanly possible. Cash is King. The single greatest wealth-building secret is to pay your self first. Put 5 or 10% (whatever you can afford) in savings or in an IRA, 401K account and leave it there. Learn to live on 90% of your earnings. For some, all you would have to eliminate is Starbucks from your life. Trust me, the two trillion dollars our government has spent in the last two weeks is only going to make matters worse. Be prepared. God Bless, Art