Economy & Budget

It’s not a good time to be a Baby Boomer. The generation is on the cusp of becoming the largest population of retirees in U.S. history and there has never been a worse time to plan for retirement.   
 
The goal for any retiring Boomer is straightforward: design a portfolio that generates enough income to sustain a certain lifestyle, post-retirement. This has traditionally meant finding securities that offer capital preservation and income—basically, bonds. In the current environment, however, the conventional balance between risk and return has been disrupted.
 
With yields at historical lows that are barely keeping pace with inflation, the risk-return tradeoff could not put retirees in a worse position.  If an investor buys a 10-year U.S. Treasury note, today, the payoff would be 1.72% before tax. Accounting for inflation (expected at 2.3%), the investor actually loses purchasing power the longer the bond is held.

I’ve skimmed some informed discussions at economics blogs about how JPMorgan Chase (JPMC) lost $2 billion and counting on their “synthetic credit portfolio.” But educated guesses are still guesses, the next big problem in the financial system will be entirely different, and to be honest, it all gives me a headache.

My imperfect understanding puts me in good company.

“Paul Volcker by his own admission has said he doesn’t understand capital markets,” Jamie Dimon told Fox Business News earlier this year. “He has proven that to me.” Dimon reportedly was asked at a dinner for investors about Volcker’s criticisms and the arguments by Richard W. Fisher, president of the Federal Reserve Bank of Dallas, that “too big to fail” banks should be broken up. Dimon said he had only two words for Volcker and Fisher: “infantile” and “non-factual.”

As a state legislator, it has never been more frustrating to watch Washington, DC than it is right now. At a time when record numbers of Americans are struggling with hunger and we desperately need economic stimulus, Washington seems to be pursuing the political equivalent of a crash starvation diet. Nowhere is this more evident than in the treatment food stamps are receiving in Congress.

Common sense tells us this is not the time to cut the Supplemental Nutritional Assistance Program (SNAP), known to most Americans as food stamps. The proposed cuts are job-killers, and working families have rarely needed this program more than right now.

This week, the non-partisan Congressional Budget Office (CBO) stated “if the fiscal policies currently in place are continued in the coming years, the revenues collected by the federal government will fall far short of federal spending, putting the budget on an unsustainable path.” This is unacceptable.  With trillion dollar deficits and a skyrocketing debt, now is the time to put people before politics and progress before partisanship. That is why I was proud to co-sponsor the only bipartisan budget that has been voted on in the House of Representatives in decades.

The date:  April 29, 2009. The time:  05:31 p.m. On that day, at that hour, the United States Congress did something it has failed to do ever since – pass a budget.
 
While countless families and businesses across America have had to make the tough choices to spend within their means, Congress has operated over a thousand days without passing a fiscal blueprint to restore financial sanity to Washington. This blatant neglect of a fundamental duty has led to runaway spending, trillion-dollar deficits, and has contributed to the worst jobs climate since the Great Depression.
 
Make no mistake, passing a budget is not a choice. The 1974 Congressional Budget Act obligates both chambers to adopt a budget resolution every year by April 15. The House has done its part, passing resolutions the past two years that cut trillions in wasteful spending. Unfortunately, Senate Leader Harry Reid and others in his chamber continue to sit on the sidelines – 1,120 days and counting.

Challenging budgets and global conflict have become prevalent themes in our national dialogue. Americans expect their government to fulfill its fundamental responsibility of ensuring the nation's security while rightfully demanding a high return on their hard-earned tax dollars. This expectation is critical to the debate over the future of our Armed Forces, and is the reason the National Guard stands at the forefront of that debate as an indispensible, efficient, combat-tested solution both globally and locally.

With anti-regulatory fervor gripping Washington, it’s difficult to imagine both parties working together to enact successful public safeguards that protect Americans. But it wasn’t that long ago that strong, bipartisan majorities in both the House and Senate took action to defend consumers against predatory practices in the credit card industry. Three years ago today, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) into law. Evidence of its effectiveness and success at saving American families money continues to roll in.
 
Demos’ 2012 national survey of low- and middle-income American households who carried credit card debt for three months or more is an in-depth look at how the recession and its aftermath affected the financiallives of American households – including how the passage of major new consumer credit card protections is helping households pay down balances faster and avoid fees.

Average Americans and our European cousins are most likely confused by the intense discussions at government, business and media levels about regulations, ethics and especially governance. After 50 years as consultant, author and, more recently, professor of corporate governance, I too, am sometimes confused. Confusion creates uncertainty.

That uncertainty is one of the principal causes of our current economic malaise as to where the regulatory process mandated by the 2010 Dodd Frank legislation will take us.

The Buffett Rule, a measure to raise income tax rates on individuals and capital gains of top-earning Americans, recently received its first close up in the U.S. Senate and failed. Nevertheless, President Obama, Senate leaders and others have pledged to continue to raise the Buffett Rule again and again this campaign season in the name of tax “fairness.”
 
Many arguments against the Buffett Rule have been made, but perhaps a very compelling is the unintended consequences this war on savings and investment could have on our economic recovery, particularly in states whose budget receipts are dependent on collection of capital gains taxes.

Republicans were quick to cozy up with Catholic bishops in opposition to the Obama Administration's requirement that contraception be covered at no cost under health insurance plans. These days the GOP has its own prickly Catholic problem.

Catholic bishops have sized up the GOP budget proposal – praised by presumptive Republican nominee Mitt Romney  – and found it morally bankrupt. In a series of stinging letters to the House of Representatives, the U.S. Conference of Catholic Bishops condemned the budget for slashing anti-hunger programs and asking the most vulnerable to bear a disproportionate burden while the richest Americans are given more tax breaks. Rep. Paul Ryan (R-Wis.), a conservative wunderkind and architect of the budget, has claimed these proposals are inspired by the values of his Catholic faith. Bishops and other Catholic leaders are not letting him get away with that fiction.