The Debt Ceiling
There's no doubt that the Federal government's deficit spending is a problem. Deficit spending is expected to run at approximately 10% this year. And efforts by Congress to force budget cuts by refusing to raise the government's debt ceiling may prove effective in cutting some spending.
It could also cause a big sell-off in Treasury prices if the word "default" starts getting thrown around.
The simple fact is, we owe China a lot of money. Nearly $1 trillion. And if Congress decides to let the government shut down like it did during the Clinton administration, we could potentially miss interest payments to China and other countries.
I'm sure it's easy to say "screw China." And new Congress leaders are fulfilling their election promises. Let's hope this budget standoff gets resolved before we get to the point where default is on the table.
Some concrete plans to cut spending would probably be a good idea. I'd start with the military effort in Afghanistan. Then, I'd offer a major tax cut for American companies to bring their foreign cash home. Finally, I'd cap pay raises for Federal employees, including Congress.
In fact, how about Congress take a real leadership role and vote themselves a pay cut to help make ends meet? That's leading by example.
Where would you start? What specific spending would you cut? Let me hear your ideas for cutting spending and bringing the deficit in line. Bonus points if your idea raises revenue or growth. Send your ideas to: dailyprofit@wyattresearch.com
*****GDP growth for the fourth quarter missed estimates by .2%. Clearly, it would be great to see the economy grow fast enough to actually add jobs. But the market will like growth that's just strong enough to keep interest rates where they are.
Please note that oil prices are bouncing higher today. That tells us that today's GDP number supports the notion that growth is on track.
*****China's biggest computer maker is Lenovo, purchased from IBM (NYSE:IBM) a few years ago. Lenovo is planning to take on Apple and its iPhone and iPad with offering of its own. But get this: Lenovo is going with the names LePhone and LePad.
I get the connection. But really, those are just bad names.
This is a great example of why the US remains the center of innovation in the world.
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