Deficit spending when controlled to remain under 3% of the GDP is an extremely effective economic tool. It is easy to get distracted by the media and their polarized views. Almost nothing is black or white, good or bad (even lions and tigers and bears.) It may help to think of the deficit in relation to your own family debt.
A family needs debt at certain points of time for a mortgage, business or education loans – it is the management of the debt that is important. Properly managed debt can work to your advantage, but managed improperly it is disastrous. The US is at a critical juncture in respect to our economic numbers including unemployment, GDP, housing, wages, consumer demand, you name it. When an economy is struggling it’s necessary to increase demand, not just provide additional bail outs of banks and corporations that benefit those few. Just to recap:
1.) Money spent on infrastructure creates demand for goods and services which then increases jobs.
2.) Jobs provide income to people to purchase those goods and services at a greater rate whether it is for homes, cars, vacations, durable goods, consumer discretion, etc.
3.) Jobs create more tax dollars that go back into the government coffers.
4.) Corporations create higher taxes because the actual demand is increased and they have increased revenue and earnings.
5.) Higher taxes help lower the deficit, when managed properly. (A combination of corporate and individual taxes account for approx. 85% of all revenue to the government, other collections make up the additional 15%.)
This is a non-partisan statement based entirely on economics and finance. However, as we all know, basic economics and finance are politically unviable for either party in Washington DC today; we should know we live here.
DISCLOSURE: Opinions and estimates offered constitute the judgment of MCS and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
This article was written by Metropolitan Capital Strategies CEO Sharon Snow and Chief Investment Officer David Schombert.