This past week it was announced that the both the US Congress and President are toying with the idea of eliminating any “loopholes” to Social Security and eliminating the Mortgage Tax deduction.
In terms of Social Security in the United States, millions rely on it as in fact most persons in the US don’t have a retirement plan and can’t think of one. The rules concerning Social Security are confusing and borderline ridiculous. People who worked their whole lives are forced to make choices and they don’t even know if the choice they make is the best one as the rules are constantly changing. So what do they do?
They have to hire a Social Security expert to give them sound advice on what they should do. All we keep hearing is “don’t collect early take Social Security at full retirement age which is 66”. If you take it at age 62 you’ll get a 25% reduction in benefits as opposed to waiting until age 66. However what all the pundits don’t ever say is each year you’ll also get an increase in benefits based on CPI (Consumer Price Index); it used to be COLA(Cost of Living Adjustment) based on real inflation but that has been scaled back to CPI. CPI doesn’t take into consideration real inflation as it doesn’t include gasoline price hikes. It includes food, so if the price of bread and milk go up you’ll get an increase. Another thing they don’t want you to know is that statiscally there is a segment of the population that will pass away between 65-68 and they want to minimize their liability.
Another aspect that came out this week was the idea of minimizing or potentially eliminating the Mortgage Tax Deduction. Millions of Americans have purchased a home with the intent of home ownership in terms of a mortgage tax deduction meaning that the interest collected on a mortgage is a tax deduction. This helps to increase demand for homes as there’s an incentive to do so. The whole argument is ridiculous as nothing has helped to propel the US economy more than home ownership. Think about it. You buy a home and what will you do? Paint it; get rid of old carpet, purchase new washer, dryer, dish washer, refrigerator, etc. This increases GDP, puts people to work and has justified Home Depot and Lowes existence. Yet Congress and President Obama are actually having a dialogue about reducing or eliminating this valuable deduction. Nothing has contributed more to the wealth of the Middle Class than home ownership. If Congress and this President claim to be proponents of the Middle Class, they have a funny way of showing it.
All of this is based upon a finite mentality. What is a finite mentality? It’s based on the notion that there’s only so much wealth, capital, good jobs in the world. Therefore if we’re in a situation where we can’t grow the economy any further then we’ll have to cut back. Cut back on spending, cut back on incentives, cut back on everything. This is the same thing we heard in the 1970’s during the Jimmy Carter years. Want proof? Two weeks ago it was announced that Obama wants employers to pay overtime to salaried workers. Why? The mentality goes like this: “well I can’t increase jobs, so I’ll create an “incentive” for employers to hire more workers.” In other words hire more workers or I’ll penalize you and force you to pay overtime to salaried workers and if you can’t do that then hire more part timers because I can’t create more jobs. I tried to create more jobs with my Jobs Bill a few years ago but everyone shot me down.
This is a lack, finite mentality. It says that we only have so much and no more. It is not what the American people want or are used to. We aren’t used to the notion of limitation. We believe anything is possible and that is no such reality as limitation. If we didn’t think that way we never would have put a man on the moon in 1969. And we wonder why 25 year old college graduates are living at home or as Janet Yellen said “shacking up with their parents”. And everyone wonders why the Federal Reserve won’t raise interest rates? How can they when know all too well that doing that will cut consumer spending and slow down a very tepid recovery? The US Government needs to get a handle on this. In a few short years we’ve gone from being a nation where anything was possible with infinite, unlimited opportunity to a nation of lack. That’s what happens with a finite mentality….Get the 5 most predictable currency pairs