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Thursday, December 01, 2005

A Little Economic Perspective

As even the NY Times concedes, the US economy is growing:
The economy grew at a 4.3 percent annual rate from July through September, the Commerce Department reported yesterday, the fastest since the first quarter of last year and evidence of resilience in the face of hurricanes and record energy costs.
According to the Commerce Department, the gross domestic product rose to $11.2 trillion when annualized and adjusted for inflation. Without adjustment, the economy grew at a 7.4 percent annual pace, to $12.6 trillion, for the quarter.
And 4th quarter growth is projected to be strong. But don't get too happy. Not only is real inflation high, but the 2006 budget (pdf) calls for estimated federal spending of 2.6 trillion:
Total outlays for 2005 are now estimated to be $2,472 billion, down $7 billion from the February estimate. Small increases due to policy changes are more than offset from reductions due to estimating changes. For 2006, the estimate for total outlays has increased by $46 billion relative to February to $2,613 billion.
When you consider local and state governmental outlays, it's clear that the US economy is overburdened by government spending. This is why people don't feel the prosperity. Until we can curb state, local and federal outlay growth to less than GDP growth, people will continue to experience a crappy economy.

To be spending this much now - ten years before the real demographic crunch hits - is insane.

The 2006 budget page is here. Your New Year's resolution should be to wade through it. This means everything to you and your family.

My New Years Resolution:

Keep voting for big spending Republicans, because they're just slightly better than Democrat socialists.

Sad huh? Man Im depressed. Wish Gerald Ford were President.
We could stop spending today- and it would take years to slow the ship down.

That said, eliminate debt and remember, cash is king.

Then, buy RE.
Cabe - are you trying to make me shoot myself? I think the key is to put the pressure on the politicos. The problem is that our Congressmen won't wade through this! Which means we have to do it.

SC&A, it's true that we've built up a lot of debt inertia. Still, when you find yourself in a hole, the first thing to do is stop digging.

The rest of your advice is good, but right now RE is a bit risky overall. There are good areas and bad areas, but I think cash will flow back into the stock market for the next two years.
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