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Al Jacobs invites you to take a look at his most recent book, Roadway to Prosperity, which embodies the heart of his nearly half-century in the investment business.  You'll find a wealth of information there.




Straight Talk from Al Jacobs



Which political party have you chosen? I’ve concluded it doesn’t matter. After years of observation and participation I’ve decided the fundamental difference between the two major political parties is their approach to resolving problems. In general, Democrats throw money at them while Republicans pass resolutions against them. A well-reasoned approach to an important issue is seldom offered and rarely embraced by the political community.

While on the subject of matters of no consequence, an example of this is the balanced budget, long a touchstone for political responsibility. Originally a centerpiece of Republican doctrine, the concept is now embraced by all segments of the political community. A few comments on the subject of budgets will put things in perspective.

In the world of reality, a budget is a plan where future income and expenses are estimated. A balanced budget is one where estimated income equals estimated expenses. The critical word is estimated. With that as our objective it’s easy to balance or unbalance any budget. If, for example, a national budget is drawn up showing a $100 billion shortfall for fiscal year 2019-20, the budget committee quickly increases its estimate of corporate income tax collections by a like amount. Voilà! The budget is now in balance. This is standard practice, although rarely admitted by the participants

There are more nefarious reasons to juggle a budget. The following true story may put the process in clearer focus. After inauguration of John F. Kennedy as president in 1961, his newly appointed defense secretary, Robert McNamara, ordered a 10 percent across-the-board budget reduction in the 1961-62 fiscal year for each military command in the nation. Within days, the Navy Department interpreted this order, with instructions to each facility. As Public Works Officer of a naval facility in the Washington, D.C. area, I recall the meeting of department heads as we received our orders. Each departmental budget required a slash of the most vital items possible, demonstrating a 10 percent cut would decimate our operation. Though my department would easily have run on 40 percent less with no ill effect, I submitted as instructed and, for whatever reasons, our facility eventually received 4 percent more in funds than the prior year. The entire budgeting process seemed an exercise in nonsense, although I never understood why. Welcome to the world of politics; it doesn’t matter with which party you affiliate.




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