I Felt Like Tiger Woods’ PA This Week

I want to start today’s discussion with a few comments I received from last week’s newsletter, “Putting a Band-aid on a Bullet Hole”.

For those of you that have been reading my articles for any length of time, you should be aware by now that I am an ‘equal opportunity political hater’.  I am happy to rant on the stupidity of Mit Romney’s socialized healthcare plan, GW Bush’s destruction of privacy, or Barry O’s massive growth of the public sector.

Apparently last week’s newsletter struck a chord with folks.  I received the largest amount of hate mail ever.  When going through my email box, I felt like Tiger Woods’ personal assistant after he was busted for playing on the wrong green(s).

Below are a few of the responses I received (viewer discretion advised):

  • I don’t care for snarky, smart a$$ed, know-it-all email assessments of others by a$$holes intent on separating me from my assets.  Take me off your f*****g email list.
  • You are a naïve simpleton
  • It’s all BS including you with the scare tactics. Remove me from your list.
  • I’ve read your garbage email… If you don’t like what’s happening to our country.. Get The Hell Out!!!
  • Rubbish!
  • Do not contact me again ever!  F*****g dirty rotten c**t!

In addition, I received a record number of people unsubscribing from my email list.  To those that unsubscribed or took the time to send me hate mail I say, “Thanks you”.

I know I am doing something right when the vitriol runs so deep.

A few other emails (I deleted most of them) stated that I should not be so disrespectful to the President of the United States.  My response is that respect is earned, not granted through a position of power.  No one is owed my respect (or yours) without first earning it.

This week the leader of the free world has unveiled his plan to cut the national debt by $3T over the next 10 years.  A big part of that plan involves increasing the taxes on those that earn over $1M per year.

If he would just learn by the example set by a few of the states, he would realize that increasing tax rates on the wealthy only decreases tax revenue.  Just ask MD, NY, IL and OR.

Or just ask Vladimir Putin about how tax revenue soared in 2001 when the high progressive tax system was replaced with a low flat tax of 13%.  Russia’s GDP grew by 5% the next year and tax revenue increased over 25%.

It seems Keynes has been resurrected and now sits on Obama’s advisory board.  His economic policy is firmly planted in the short term and focused on the government’s ability to solve its people’s problems.

Keynes once famously stated, “In the long run we are all dead.”  While he was certainly correct, the fallacy of this thinking is that the long run does matter eventually.

In the past 50 years the US has only seen an annual budget surplus 5 times.  That means we have been pyramiding debt for 45 years.  Imagine how your finances would look if you spent more than you made in 9 out of every 10 years.

Bloomberg recently reported on an audit of the US Justice department spending habits for conferences held between 2008 and 2009.  In 2008 the bill rang up to $47.8M.  In 2009 it ballooned over 53% to $73.3M.  During these conferences they were buying muffins for $16 apiece and beef Wellington appetizers at a cost of $7.32 per serving.

At the conference of the Office on Violence Against Women, one of the breaks consisted of Cracker Jacks, popcorn and candy bars.  The cost was $32 per person.

Keep in mind our government was burning through cash buying $16 muffins and $32 candy during the deepest recession since the Great Depression.

Another interesting story that arose this week was the bankruptcy of Solyndra.  Solyndra is a solar panel manufacturer based in CA.  Two years ago Obama granted the company low cost government guaranteed loans in the amount of $535M.

The idea was to create 1,000 new jobs and move the country towards energy independence.  If my math is correct, these jobs came at a cost of $267,500 ($535M / 1000 jobs / 2 years).

Solar energy companies are only in business because governments are subsidizing their existence.  If there were no subsidies available, there wouldn’t be one single solar panel in the world.  It is just not economically viable.

Ironically one of the Obamessiah’s biggest supporters, billionaire George Kaiser, owns 35% of Solyndra.  Coincidence?  You be the judge.

All I know is that most entrepreneurs spend considerably less than $267,500 to create new jobs.  When government involves itself in business, it has the nasty habit of misallocating capital.  Do keep in mind that taxpayers are actually the ones who are paying this bill although Obama was the one who made the decision.  Did you vote for that?

We all know that economies move in cycles.  The problem with governments is how they chose to deal with these cycles.  Of course in my view they should just stay out of the way, but that is not a realistic solution.

The second best option would be to adopt a counter cyclical economic policy.  Basically what this means is that in good times when the economy is booming and tax revenues are high, governments should save for a rainy day.

This way when the economy reaches its low points, this cash can be used to stimulate with infrastructure projects and incentives for businesses.

The opposite of the counter cyclical economic policy would be to adopt a pro cyclical policy.  This means when the economy is booming, the government spends every last penny (and then some) to ride the wave.

Of course when the economy turns down, the government’s coffers are much lower due to lower tax revenues.  This only exacerbates the highs and the lows of the economic cycles making them much higher and then much lower.

The biggest problem with idiotic politicians is they tend to be pro cyclical when the economy is good (spending every last penny and then some), and counter cyclical when the economy is bad (spending in an effort to stimulate).

Guess what folks?  You cannot have your cake and eat it too.  At some point you have to either pay back your debts, or default.  And neither solution is good.

Earlier today I was having a spirited debate with a friend of mine – let’s call him Mike.  Mike is a successful small business owner who is firmly planted in the middle income class.  He is a great guy and a very hard worker.

Today he wanted to make the point that he agrees with Obama’s idea to increase the tax burden on those earning over $1m per year.  My argument is that this tax is utterly useless as the very high earners employ armies of accountants and lawyers to minimize their tax burden.

The legislation does nothing but complicates an overly complex tax code and gives the administration an excuse to hire more IRS agents and buy more guns.

Right now Americans already spend over 7B hours per year doing their taxes.  Quick math tells me we have spend an average of nearly 24 hours for every man, woman and child doing tax returns.

For an average person who makes $50,000 per year and works a 40 hour workweek, this means your cost of compliance amounts to $600.  But keep in mind, the cost is 24 hours for every man woman and child.  So if you prepare the tax returns for your family of 4, your cost is now $2400.

I am well aware many of you will say that you don’t really spend this much time completing tax returns.  I also know there are many of you that say this is a very low estimate.  But on average, IRS compliance now costs each American about $600 per year.

I told Mike earlier today that the US economy has now reached a point of no return.  He chastised me a bit for leaving the country, but I told him I didn’t want to be on the ship when it hits an iceberg.

For me, internationalizing my life was the right thing to do.  Minimizing my risks through proper asset protection planning, diversifying assets outside of the country and creating a veil of privacy are all things anyone should consider.

What are you doing to protect yourself and position for prosperity in the future?
Call today to schedule your free 30 minute asset protection consultation.  Until next week, live extraordinary.

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