Entitlement Reform Is Inevitable

of ideas going on in the nation. The debate? Are we going to be a nation with a robust social-welfare network like Western Europe, or are we going to be a nation that relies less on government and more on individual initiative and personal responsibility?

Whatever your preference, it’s a foregone conclusion. The numbers simply don’t add up and can’t be made to. European nations benefit from a multitrillion-dollar U.S. defense umbrella, and fabulous American innovations – thanks to Apple, Google, Twitter, Intel and hundreds more U.S. companies – while imposing stifling taxes on their citizens, yet still run deficits almost as large as ours on a GDP basis.

Leaving aside Obamacare, we couldn’t meet our future liabilities for Social Security, Medicare, Medicaid and the Part D prescription drug benefit even if we taxed the net income of every individual and corporation in the nation at a 100% rate.

Reform Is Inevitable

Ergo, the system will be reformed. Raising taxes alone would be like shoveling sand against the tide.

The bipartisan Simpson-Bowles Commission – whose sensible recommendations President Obama promptly ignored – gave us a general blueprint.

Specifically, the commission proposed cutting $5 trillion from the deficit by eliminating loopholes and simplifying the tax code, cutting discretionary spending, eliminating waste and fraud, and reforming entitlements.

It’s mathematically easy… but not politically easy. Every line of the tax code benefits some special interest. Although American longevity has never been greater, no one wants to wait longer to begin receiving Social Security or Medicare benefits. And so on.

Yes, the men and women in Congress are buffoons who value incumbency more than oxygen, but faced with the choice of reforming the system or letting it collapse, they’ll fix it. But not until time, circumstances and voters force them.

Along those lines… please make sure you’re registered.

Good investing,

by Alexander Green, Chief Investment Strategist

Investment U provides cutting-edge research and strategic financial recommendations for all levels of investors through its morning publication Investment U Daily and its related publications.

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