Policy choices made in the next several months will affect the economy for years to come. In the same way, the replacement refs may have altered playoffs and superbowl outcomes.
Washington polarizations will likely produce lower to negative growth should the “fiscal cliff” come to pass, thus putting pressure on social programs/entitlements and increasing competition for private sector business funding. How you ask?
Chicken before the egg or the other way around? Minimal GDP growth leads to minimal revenues which leads to deficits that need to be funded by selling government debt. Here in lies the rub. The private sector is trying to raise capital for business creation and expansion but their competing with the government...Who will win? Uncle Sam, always. This example may be over simplified but you get the point.
Should the “cliff” come to pass, approximately 2 million people will hit the bricks. These will be in part America's best and brightest: engineers, scientists, mathematicians, machinists, manufacturing of the world’s largest defense contractors and sub-contractors all keeping America safe. Medical research Dr's and PhD’s will also take a huge hit among other industries.
Let’s not forget the tax increase and the new “Obamacare tax”. The result: a huge spike in unemployment, 2 million families thrown into chaos, lost tax revenue to the fed, state and local governments. Yet, entitlements are free from any adjustments? What’s up with that? When do “We” get “The Real Ref’s”?
History has shown faster economic growth has been accompanied by higher domestic investment. The end result is higher productivity, higher living standards and of course higher revenue for the US government and states. Between the early 60’s and the present, the spread between net business fixed investment and mandatory entitlement spending has never been wider, I.E., entitlement spending increasing and business investment shrinking. Unless the trends are turned around the US may be faced with a stagnate economy and low interest rates beyond 2015.
With GDP currently at 1.3% the real question then, is “how can I make my investable capital work most efficiently?” Answer: Income oriented investments.