By Charles Goyette (Money and Markets | Original Link)
There is little doubt that the massive fiscal cliff we are now approaching threatens to cripple the U.S. economy and stock market and to drive gold and silver prices into the stratosphere.
It is, quite simply, the single greatest challenge the American Dream has ever faced. And it now threatens to destroy that dream for generations.
Make no mistake: This crisis is the natural, inevitable consequence of the obscene orgy of reckless spending our leaders have engaged in for decades.
This great fiscal cliff was constructed entirely by Washington. It was created in Congress and in the White House … by both major political parties … and with the undying support of the Federal Reserve.
Congress and the White House have been able to fight wars … grant massive subsidies to businesses in return for huge campaign contributions … and create massive give-away programs and other vote-buying schemes — all without having to raise politically unpopular taxes …
Simply because they knew the Fed would pick up the slack and print all the money needed to monetize the outrageous amounts of debt they were incurring.
Also thanks to the Fed, our leaders were able to force the American people — good folks who have largely been responsible with their own money — to bail out investment bankers and other billionaires who drove the economy into the ditch.
How Will You Pay YOUR $2.8 Million Debt?
Not only is this crisis real … not only has it been engineered by our leaders … it is far larger and far more terrifying than any politician, pundit or media outlet has even begun to report.
Last week, for instance, even as the Democratic National Convention convened, America’s official national debt soared past the $16 trillion mark.
I say “official” debt because even this enormous number represents only a tiny fraction of our nation’s actual indebtedness.
According to Laurence Kotlikoff, a senior economist with Reagan’s council of Economic Advisors, Washington’s total debts and obligations are now $222 trillion; more than $2.8 million for every family of four in the nation.
And that means the price you pay for Washington’s financial blundering is about to explode.
Taxes as Far as the Eye Can See …
The plain truth is that every dollar our leaders spend — whether on current expenses or to service its gargantuan debt — has to come from somewhere.
Some of those dollars are collected through direct taxation on companies, wage-earners and investors.
More are borrowed by the U.S. Treasury.
And still more are printed — created out of thin air — by the Federal Reserve.
But in truth, these are all forms of taxation. They’re all burdens on a productive economy:
Taxes on your income confiscates your money before you see it.
Taxes on the companies that produce and sell the products you buy are passed on to you in the price of those products.
When the U.S. Treasury borrows money, it raises the price you have to pay when you purchase a new car or home.
And when the Fed kicks the money-printing presses into overdrive, it imposes yet another tax on you — perhaps the most insidious of all.
A Tax By Any Other Name …
It doesn’t matter what you call it — deficit accommodation, liquidity operations, debt monetization or quantitative easing — at bottom, it’s a tax.
Because when the state prints money to spend on wars, vote-buying schemes or any other government program, it means that every other dollar in existence — every dollar YOU earn, save and invest — loses value.
When the Fed prints money, it is, in effect, taxing every dollar you have and every dollar you will ever have — all under the guise of economic “stimulus.”
Worse, this “stimulus” has little if any real positive impact on the economy. For example, consider the latest round of bailouts for billionaire bankers that the European Central Bank announced last week.
Despite what some in the media claim, this new bailout — a veritable “soup kitchen” for failed banks — is NOT the solution to Europe’s woes.
It is simply more of the same ineffective economic tinkering that the European Central Bank has engaged in for the past four years:
A futile act of desperation that can only prolong the agony, impoverish the European people and dig a deeper grave for the EU.
Because in the end, the bill for these rich-man’s bailouts is ultimately presented to the people. In Europe as in the U.S., a tax by any other name is still a tax.
Whether collected by the IRS, engineered by the U.S. Treasury, or imposed by the Fed, all of these taxes are burdens on YOU; on your ability to provide for your family … to save … and to invest for a more secure future.
If You’re Waiting for Either Political Party
to Save Us from This Looming Crisis,
You’re Likely to Be Woefully Disappointed
I may be treading on dangerous ground here — with the elections only a few weeks away, political fever is high — but the simple truth is that BOTH parties engineered this crisis. And there is little reason to believe that either party has the political will to save us from it.
We have allowed politicians on both sides of the aisle to tinker with the types of taxation, instead of focusing on the total amount of taxation. We have empowered them to use tax laws to manage our affairs, to decide things for us that we should be deciding for ourselves. In short, to socially engineer our lives.
We allow them to use tax laws to provide favors to supporters, to burden their opponents, to enrich their cronies. And all this taxation effectively takes money out of our pockets and puts it into others’ pockets.
It’s a transfer of wealth, not an increase in wealth. It’s a zero sum game.
Now, the Obama administration has explicitly called for an increase in taxes on the wealthy. That plan is more about politics than economics, but unfortunately, it’s bad politics AND bad economics.
If Obama succeeds in raising taxes on the top two percent of taxpayers, it would generate enough income to run the government for about eight days.
And while it would do virtually nothing to reduce the deficit, it would likely do enormous damage to the economy.
Namely, it would confiscate enormous amounts of money from small business owners — the very people who are most needed to help end America’s unemployment nightmare.
Meanwhile, Romney proposes cutting tax rates, and says he would offset those cuts by closing tax loopholes. But he doesn’t say which loopholes he’ll close. Would he eliminate the mortgage interest deduction? The write-off for charitable deductions?
In other words, Romney wants to cut income taxes for some, while imposing other forms of taxes. The result would be a continued increase in the amount of government spending.
Even Paul Ryan’s budget, which has been hailed as a model of fiscal restraint, raises spending as well. And as we know, rising spending means rising taxes in one form or another.
How to Save the American Dream
So the question is: How do we avoid falling off the fiscal cliff?
How do we AVOID a future in which the American Dream has been utterly obliterated …
In which our children do not have an opportunity for a better life …
In which our futures are not secure …
In which paying our medical bills is an all-consuming challenge …
And in which employment and retirement are uncertain?
How do we increase prosperity in the United States of America?
The answer is not letting taxes increase on January 1, 2013.
Nor is it the spending cuts mandated by the Budget Control Act. While they ARE large enough to cripple the dependent U.S. economy and addicted stock market in 2013 and beyond, they do not even begin to solve the larger problem.
The way for our nation to become wealthier and more prosperous, and avoid tumbling off the fiscal cliff and into the abyss, is not the transfer of wealth.
It must be an INCREASE in wealth, which can only be accomplished by eliminating the enormous drag of Washington on the economy.
The only thing that is proven to create wealth is production. Without production, there can be no prosperity.
But production has been burdened with taxes — not just the types of taxes that would increase further if we fall off the fiscal cliff, but also taxes in the form of government spending.
Make no mistake: Government spending and taxes will continue to increase under President Obama, and they will also increase under President Romney.
It is only by dramatically reducing the negative impact of the government spending, regulation and taxes on the economy and by promoting production that we can become prosperous again, and restore the American Dream.
Yours for wealth and liberty,