Seymour Zises, President and co-founder of Family Management, writes bi-monthly opinions on issues and observations of relevance to clients and investors.
Wherever you look, the money just keeps flowing. Optimists believe that a combination of growth and austerity can get us out of this mess. Pessimists… well, they are pessimistic! Someone once told me that a pessimist will say, “Oh boy, things cannot get worse,” whereas an optimist will say, “Oh boy, things can get worse!”
So the “fiscal cliff” came and went, and now we are looking at the political confrontation concerning raising the debt ceiling—O.K., that is now delayed for three months. What was actually accomplished at the beginning of the year was a small step in reducing the deficit.
According to the Investment Company Institute, assets in retirement plans have reached a level of $18.5 trillion. The prospective tax on these funds is a huge receivable held by the U.S. Government. As baby boomers retire, the tax revenues from this pool of money will help with the nation’s deficit.
Who will get hurt if America falls off the fiscal cliff? We’re going to find out if the Bush-era tax cuts expire and nothing is done to replace approximately $1.2 trillion that comes out of the economy. The rich will pay more taxes (yawn if you’d like), the poor will continue to get subsidies (resent it if you’d like), and the guy in the middle… well, he will take it on the chin as always.
European Central Bank President Mario Draghi announced that the bank would do anything to keep the Euro alive and well. How about specifics, please? We have heard so much discussion from Washington and Brussels about how they intend to save the economies of the U.S. and Europe. In the meantime, the rest of the world is watching them waste precious time.
