For the past 9 months I've been telling myself that I should do a financial analysis of my decision to leave the active duty Army to enter a full-time MBA program. This afternoon I finally sat down and finished it. The number was fairly astonishing. Leaving the Army for a career in the private sector is worth a minimum of several million dollars over the rest of my life. While I won't share the specifics or the excel model, it was a good exercise to at least do.
For those who are interested, I basically assumed that I would enjoy a fairly typical military career. Promotions would happen on schedule and I would retire after 25 years of service. After retiring I would begin a second career before retiring completely at age 60.
To estimate the civilian option I used my current job offer and some widely published statistics on post-MBA pay (see here). The chart presented is probably not a good representation of actual salaries, as MBA graduates tend to become quickly segregated into income brackets which vary considerably. The sample size and methodology that Bloomberg Businessweek used is dubious at best, but represents a good starting point.
I did this exercise for a couple reasons:
1. Many people see to make education choices with little analytical thought. While I'll perhaps write more on this later, I fundamentally believe that too many young people attend college/university and receive no financial benefit.
2. When I was resigning from the Army, my supervisors asserted (falsely) that it was a mistake financially. I believed then that this was a fallacious argument supported by some extremely naive assumptions around the value of a military pension. Unfortunately it's difficult to understand what your opportunity cost is when you haven't received a civilian job offer.
All that being said, money isn't everything. I know a great many peers who are still serving on active duty who would not leave their profession for any amount of money. There's certainly something to be said for being part of a profession with a noble calling.
Friday, March 25, 2011
Thursday, March 10, 2011
Black-Scholes - Will they have to give back their Nobel Prize someday?
I've been delinquent in writing posts, mostly because I'm lazy. As a 2nd year MBA with a job offer in hand, my life is not that much different from an unemployed beach bum, much to my wife's chagrin.
Fischer Black, Myron Scholes, and Robert Merton are economists who developed a formula, now known as Black-Scholes, to value European style options. A European style option gives you the right to buy or sell (known as exercising) a financial instrument at a fixed point in the future for a fixed price. Normally you must pay an upfront fee for this right, and Black-Scholes is what is used to calculate that fee. To keep this at a level which is understandable to the lay person, Black-Scholes uses the past prices of the asset, amount of time for which the option is available, and current borrowing rates to establish the price of the option. Black-Scholes makes a number of assumptions about each of these variables and a few others, and has been widely adopted by the finance community as the preferred method for valuing options. Scholes and Merton won a Nobel Prize for their work in 1997, Black was unfortunately dead and therefore ineligible for the honor.
Both Scholes and Merton were part of an infamous hedge fund called Long-Term Capital Management, or LTCM. For those of you who are curious about a disaster that nearly became a prominent part of American history, you should read this book that details the story. I find it riveting, though you may find it a good way to fall asleep after a busy or stressful day. On a side note, many of the characters in the book came back to haunt us in this most recent financial crisis. The short story of LTCM is that they used many of the concepts that Black-Scholes developed, primarily the role of historical pricing in estimating future prices. LTCM failed miserably in 1998 when the Russian and East Asian financial crises occurred.
When I first heard about Black-Scholes as undergraduate economics major at West Point I considered it to be a intellectual gimmick. The difficulty is that Nobel Prize winners are likely to ask for your better idea when you point out that theirs is rubbish. Modern finance has spun this idea of using historical assets prices (or more accurately, volatility in those asset prices) to predict future prices into a frightening swirl of bullshit. While it may or may not be accurate in the very short term, in any period longer than a few weeks or months the validity of the model becomes questionable. A company's future profits are dependent on a myriad of factors, not least of which are the overall economy, individual market served, and company's operations. None of these factors are stagnant, rather they constantly evolve such that it is extraordinarily unlikely that the same set of variables which existed in the spring of 2011 may ever again exist. If these variables are not static, it becomes very difficult (I would say impossible) to use them in predicting future prices or volatility.
The recent financial crisis has put a bulls-eye on the back of adherents to this theory. It also raised very serious concerns about modern portfolio theory and the efficient market hypothesis which are the fundamental reasons that most Americans use something called index funds to invest for retirement. I don't believe that markets are efficient in the short or medium term or that index funds represent the best way to invest for retirement. That, however, does not translate to recommending that disinterested investors abandon their index funds. For most individuals, identifying market pricing failures is a task too difficult or boring to engage in and an index fund is the best option.
I've written this long-winded explanation as a lead-in to some interesting comments made by Warren Buffet. In his most recent letter to shareholders he made the following statement, "Both Charlie and I believe that Black-Scholes produces wildly inappropriate values when applied to long-dated options...More tangibly, we put our money where our mouth was by entering into our equity put contracts. By doing so, we implicitly asserted that the Black-Scholes calculations used by our counterparties or their customers were faulty." (paragraph 6, page 20, here).
I find the second part of the statement particularly amusing. Scholes and Merton received about $1 million and the undying love of their fellow academia's for their formula. Buffet is betting billions of dollars that they are full of it, and he's winning.
I've decided over the past year that my future investments will include a number of LEAPS. They are certainly risky, in most instances you must invest $1000s in each option and run the risk of the investment becoming worthless. You must be willing to lose on the vast majority of these bets, but one winner can make your year. I also love the risk, it's not unlike doubling down at the blackjack table if your two card total is 11. It doesn't matter what
Fischer Black, Myron Scholes, and Robert Merton are economists who developed a formula, now known as Black-Scholes, to value European style options. A European style option gives you the right to buy or sell (known as exercising) a financial instrument at a fixed point in the future for a fixed price. Normally you must pay an upfront fee for this right, and Black-Scholes is what is used to calculate that fee. To keep this at a level which is understandable to the lay person, Black-Scholes uses the past prices of the asset, amount of time for which the option is available, and current borrowing rates to establish the price of the option. Black-Scholes makes a number of assumptions about each of these variables and a few others, and has been widely adopted by the finance community as the preferred method for valuing options. Scholes and Merton won a Nobel Prize for their work in 1997, Black was unfortunately dead and therefore ineligible for the honor.
Both Scholes and Merton were part of an infamous hedge fund called Long-Term Capital Management, or LTCM. For those of you who are curious about a disaster that nearly became a prominent part of American history, you should read this book that details the story. I find it riveting, though you may find it a good way to fall asleep after a busy or stressful day. On a side note, many of the characters in the book came back to haunt us in this most recent financial crisis. The short story of LTCM is that they used many of the concepts that Black-Scholes developed, primarily the role of historical pricing in estimating future prices. LTCM failed miserably in 1998 when the Russian and East Asian financial crises occurred.
When I first heard about Black-Scholes as undergraduate economics major at West Point I considered it to be a intellectual gimmick. The difficulty is that Nobel Prize winners are likely to ask for your better idea when you point out that theirs is rubbish. Modern finance has spun this idea of using historical assets prices (or more accurately, volatility in those asset prices) to predict future prices into a frightening swirl of bullshit. While it may or may not be accurate in the very short term, in any period longer than a few weeks or months the validity of the model becomes questionable. A company's future profits are dependent on a myriad of factors, not least of which are the overall economy, individual market served, and company's operations. None of these factors are stagnant, rather they constantly evolve such that it is extraordinarily unlikely that the same set of variables which existed in the spring of 2011 may ever again exist. If these variables are not static, it becomes very difficult (I would say impossible) to use them in predicting future prices or volatility.
The recent financial crisis has put a bulls-eye on the back of adherents to this theory. It also raised very serious concerns about modern portfolio theory and the efficient market hypothesis which are the fundamental reasons that most Americans use something called index funds to invest for retirement. I don't believe that markets are efficient in the short or medium term or that index funds represent the best way to invest for retirement. That, however, does not translate to recommending that disinterested investors abandon their index funds. For most individuals, identifying market pricing failures is a task too difficult or boring to engage in and an index fund is the best option.
I've written this long-winded explanation as a lead-in to some interesting comments made by Warren Buffet. In his most recent letter to shareholders he made the following statement, "Both Charlie and I believe that Black-Scholes produces wildly inappropriate values when applied to long-dated options...More tangibly, we put our money where our mouth was by entering into our equity put contracts. By doing so, we implicitly asserted that the Black-Scholes calculations used by our counterparties or their customers were faulty." (paragraph 6, page 20, here).
I find the second part of the statement particularly amusing. Scholes and Merton received about $1 million and the undying love of their fellow academia's for their formula. Buffet is betting billions of dollars that they are full of it, and he's winning.
I've decided over the past year that my future investments will include a number of LEAPS. They are certainly risky, in most instances you must invest $1000s in each option and run the risk of the investment becoming worthless. You must be willing to lose on the vast majority of these bets, but one winner can make your year. I also love the risk, it's not unlike doubling down at the blackjack table if your two card total is 11. It doesn't matter what
Monday, January 24, 2011
Another Lesson In Contrarian Investing
Let me start this post by saying that I have shown myself to be, at least temporarily, very wrong on the subject of pricing in the municipal bond market. Having made a series of investments in mid-November, I am eating my words on the my original belief that I could make a quick profit. It now turns out it will take a little longer.
My original thesis was that the default risk for municipalities does not support the current prices. In December, a well known financial analyst named Meredith Whitney appeared on CBS's 60 minutes. The piece was entitled a State Budgets: The Day of Reckoning. In it she hypothesizes that hundreds of billions worth of municipal bonds will default in the near future. More knowledgeable investors who specialize in the bond market have stated that she is wildly overestimating the potential problem. Bill Gross, the legendary self-made billionaire bond investor, has been a buyer in the market as well as a critic of Whitney's analysis. The short explanation goes like this: municipalities (broadly defined as governments and gov. agencies other than states and federal gov) are facing lowered revenues (less property taxes, fees, etc) and increased costs (primarily benefits for employees), and many will have to restructure their existing debt because they can't make the payments.
In short, I agree that municipal debt issuers are in a rough place, however, it isn't that bad. Revenues can be adjusted upward as most issuers are normally monopolies (anyone ever call around to fire departments to get better pricing during a car accident/house fire?) and the defined benefits scheme which is now plaguing governments everywhere is going through a generational shift. I fundamentally believe a general obligation bond with a good credit rating (AAA/AA) is not priced correctly right now.
The difficult part remains investing while avoiding the avalanche of selling. Most investors don't do their own research and tend to be late to the party (selling or buying), so the question is how much longer they continue to push prices down. I'll keep my investment and lower the cost basis, but this will certainly take a while to work out. I really wish that I had the ability to buy individual bonds, I would be able to cherry pick. A few more million yet to go.
My original thesis was that the default risk for municipalities does not support the current prices. In December, a well known financial analyst named Meredith Whitney appeared on CBS's 60 minutes. The piece was entitled a State Budgets: The Day of Reckoning. In it she hypothesizes that hundreds of billions worth of municipal bonds will default in the near future. More knowledgeable investors who specialize in the bond market have stated that she is wildly overestimating the potential problem. Bill Gross, the legendary self-made billionaire bond investor, has been a buyer in the market as well as a critic of Whitney's analysis. The short explanation goes like this: municipalities (broadly defined as governments and gov. agencies other than states and federal gov) are facing lowered revenues (less property taxes, fees, etc) and increased costs (primarily benefits for employees), and many will have to restructure their existing debt because they can't make the payments.
In short, I agree that municipal debt issuers are in a rough place, however, it isn't that bad. Revenues can be adjusted upward as most issuers are normally monopolies (anyone ever call around to fire departments to get better pricing during a car accident/house fire?) and the defined benefits scheme which is now plaguing governments everywhere is going through a generational shift. I fundamentally believe a general obligation bond with a good credit rating (AAA/AA) is not priced correctly right now.
The difficult part remains investing while avoiding the avalanche of selling. Most investors don't do their own research and tend to be late to the party (selling or buying), so the question is how much longer they continue to push prices down. I'll keep my investment and lower the cost basis, but this will certainly take a while to work out. I really wish that I had the ability to buy individual bonds, I would be able to cherry pick. A few more million yet to go.
Monday, November 29, 2010
Municipal Bond Update 1
The good news is that the municipal bond market has somewhat stabilized, but I've only made .1% on my investment to date. Fortunately the brokerage I am buying through does not charge for purchases of internal mutual funds. Bonds are difficult/expensive to buy for the average investor given the average size ($1000) and transaction costs ($10 and up at many online brokerages). If you are purchasing less than $100K in bonds, it makes much more sense to purchase shares of a mutual fund. Achieving diversification and keeping transaction costs low is incredibly difficult otherwise.
Thursday, November 18, 2010
Municipal Bond Market
This may bore most, if not all, of the few people who regularly read this blog, but an interesting event occurred earlier this week. The municipal bond market has tanked in the last 3 weeks. There are a variety of reasons such as the poor condition of municipal finances, Republicans were elected so the Build America bond program will likely end, and the prospect of future inflation. As an example, iShares Tax-Free Municipal Bond ETF, MUB, fell from $106 a share in October to $99 on Tuesday. This may not seem like a significant drop to those who don't follow the market closely, but to give some perspective, the last time the municipal bond market fell this much was October 2008 during the height of the financial crisis.
In a few previous posts I've mentioned that I don't truly believe that the market is efficient in the short term. In other words, I do not think the market price accurately reflects future cash flows at all times. The latest example is the municipal bond market. While I would not speak highly of the long term prospects for many issues, I do not think that the probability of default or debt restructuring (lowering the principal or interest associated with the bonds) increased over the weekend. Of all debt holders who should be worried, it's Treasury holders. They are accepting absurdly low returns while ignoring the certain pricing change that will occur as the bond market wises up. Much like other investments I've made such as BP, GS, GE (during the flash crash), and others, this is a good opportunity to enter the municipal bond market with the intention of selling after a more realistic price level returns in the near term. The municipal bond market is not very liquid, so a minor movement can affect the fair value of others' holdings. This is what I believed has happened in the last few days. Sanity will likely return and I should make a decent return, 2-5% for about 4-6 wks of investment.
With this investment I intend to publish an update every week with the returns I receive. With any luck, I will not be embarrassed by thought process outlined above.
In a few previous posts I've mentioned that I don't truly believe that the market is efficient in the short term. In other words, I do not think the market price accurately reflects future cash flows at all times. The latest example is the municipal bond market. While I would not speak highly of the long term prospects for many issues, I do not think that the probability of default or debt restructuring (lowering the principal or interest associated with the bonds) increased over the weekend. Of all debt holders who should be worried, it's Treasury holders. They are accepting absurdly low returns while ignoring the certain pricing change that will occur as the bond market wises up. Much like other investments I've made such as BP, GS, GE (during the flash crash), and others, this is a good opportunity to enter the municipal bond market with the intention of selling after a more realistic price level returns in the near term. The municipal bond market is not very liquid, so a minor movement can affect the fair value of others' holdings. This is what I believed has happened in the last few days. Sanity will likely return and I should make a decent return, 2-5% for about 4-6 wks of investment.
With this investment I intend to publish an update every week with the returns I receive. With any luck, I will not be embarrassed by thought process outlined above.
Wednesday, November 10, 2010
Don't ask, don't tell
I have been besieged over the course of the past 6 months with Pentagon surveys requesting me to catalog my feelings about serving with homosexual military members.
First and foremost, let me say that I support the idea that homosexual Americans should have the exact same rights and opportunities as every other American. It strikes me as peculiar that we can pride ourselves on being a land of liberty for all yet decide that there is a class of citizens who are entitled to fewer liberties than others. In my opinion, the current debate will be viewed by Americans in 50 years in the same way that we now think of woman's suffrage and civil rights.
Having grown up in a very conservative Christian community, I can understand (but not agree with) the anger that homosexuality induces in some. I cannot, however, find in the Bible where I have been authorized to impose (share, yes) my own religious beliefs on those around me.
With that said, the current policy is terrible. I have served with openly gay individuals and never did I doubt their commitment to their country or feel threatened by their sexuality. I have shared living quarters with gay people and been oblivious to their orientation. The notion that the Joint Chiefs of Staff could agree in principle with the equal rights of homosexuals yet request time to take surveys to decide a course of action strikes me as incredible. Since when did we decide that popular opinion was the American method of apportioning rights? Either homosexuals deserve the same rights as all of us, or they don't. There's no morally defensible position whereby the general says, "Sure they have rights, but my soldiers are against it, so I'll pass." I would have been completely understanding if they had dropped DADT, but requested time to put in place policies for actual implementation (does the partner get access to Tricare and military housing, how must living quarters be adjusted.....). What the military's leadership actually did was disgraceful.
First and foremost, let me say that I support the idea that homosexual Americans should have the exact same rights and opportunities as every other American. It strikes me as peculiar that we can pride ourselves on being a land of liberty for all yet decide that there is a class of citizens who are entitled to fewer liberties than others. In my opinion, the current debate will be viewed by Americans in 50 years in the same way that we now think of woman's suffrage and civil rights.
Having grown up in a very conservative Christian community, I can understand (but not agree with) the anger that homosexuality induces in some. I cannot, however, find in the Bible where I have been authorized to impose (share, yes) my own religious beliefs on those around me.
With that said, the current policy is terrible. I have served with openly gay individuals and never did I doubt their commitment to their country or feel threatened by their sexuality. I have shared living quarters with gay people and been oblivious to their orientation. The notion that the Joint Chiefs of Staff could agree in principle with the equal rights of homosexuals yet request time to take surveys to decide a course of action strikes me as incredible. Since when did we decide that popular opinion was the American method of apportioning rights? Either homosexuals deserve the same rights as all of us, or they don't. There's no morally defensible position whereby the general says, "Sure they have rights, but my soldiers are against it, so I'll pass." I would have been completely understanding if they had dropped DADT, but requested time to put in place policies for actual implementation (does the partner get access to Tricare and military housing, how must living quarters be adjusted.....). What the military's leadership actually did was disgraceful.
A legitimate plan? That's not what we hired you for!
On February 18, 2010, President Obama created a panel called the National Commission on Fiscal Responsibility. It's billed as a bi-partisan panel, but the self-imposed rules governing the appointment of members meant that the Democrats would appoint 12 of the 18 members, though at a minimum 2 of those 12 can not be "Democrats". The other 6 members were appointed by Republican leadership in the Senate and House. In the end the panel is 10 overtly Democratic members, 6 Republican politicians, and 2 CEOs.
If you're the President, you expected the panel to come back with some sort of rubber stamp of your economic policy. Unfortunately, the 18 panel members are capable of simple math and determined that spending cuts and tax increases are required to restore the American economy. This was met by stunned lawmakers, notably the Democrats who put this thing together and schedule the proposal to be delivered after the election (no politics there of course). The proposal from the co-chairs which was released today is far from earth shattering. This is not the final deliverable as that must be approved by a vote from the entire commission. I outlined some of the items below which I found to be fairly good proposals.
1) Social Security: Raise the eligibility age, index benefits to inflation not wage growth, expand the tax base to include state/local government workers, and expand the tax to higher income levels. All of these are necessary in some form or another; it is impossible to fix Social Security without either raising taxes or cutting benefits. The Social Security eligibility age was initially 65 when the program was first introduced in 1935 and life expectancy was between 60-64 at the time (see page 6 here). The eligibility age is now 67 and life expectancy has increased to just over 78. (By the way, life expectancy means how long a child born in that year is expected to live...example: a child born today is expected to live to 78). Social security was meant to keep the elderly out of destitution, so indexing to inflation provides the individual to access the goods which are required to live.
2) Fix the tax system: Use just 3 tax rates, reduce the availability of deductions (including the mortgage deduction), and tax no income under $30,000. I really like this plan. Raising the standard deduction to $30,000 codifies what is already the case, that low income individuals pay no taxes right now. Whenever a Democrat says, "They're trying to raise taxes on the poor to give tax breaks to the rich," I laugh. The poor don't pay taxes and what the Democrat should say but can't is, "They're trying to cut benefits to the poor so they lower taxes for the rich." I like reducing the number of tax deductions available, especially those related to housing. Tell me, why exactly should the interest on a mortgage of greater than $500K be tax deductible? I disagree in general with the mortgage interest tax deduction, but subsidizing the purchases of large homes doesn't seem like smart public policy. I would also suggest that the deduction should be indexed to geographical areas, but in general the principle seems correct.
3) Cut federal budgets: Freeze federal wages/benefits, reduce farm subsidies, make civil servants contribute to their retirement plan, and so on. Again most of these options seem to be reasonable. The gap between public and private sector pay has disappeared, so there's no reason for Federal employees to enjoy hirer pay and lower career risk. Farm subsidies are just plain ridiculous, subsidizing the manufacture of ethanol which requires more energy to produce that it provides simply highlights what happens when a politician tries to solve a market problem. I also like the proposal to increase the premiums for the military's health care plan, Tricare. As discussed here, this alone costs the Pentagon tens of billions each year. The premiums could be substantially raised and still be lower than the market price of a comparable plan.
There are quite of few excellent ideas in their report, most of which will never make it out the committee since the final report requires a vote by the 18 members to be approved. The trouble is that the co-chairs were right, we are in a bad place economically and fixing it requires pain in the form of cuts to federal budgets and increased taxes.
Having recently received an offer for employment, I calculated my expected yearly tax bill and was horrified to learn it will be significantly larger than my salary when I first joined the Army as a 2nd Lieutenant. The upside to this is my purchasing power now is significantly better that of an individual who was born to a lower middle class family anywhere else in the world. So why don't we just buck up and accept that the Ponzi scheme we have allowed our politicians to put in place can't continue?
P.s. Having read this post before hitting the "publish button," I appear to have assigned far more blame to Democrats than Republicans. That is certainly not my intent, indeed were you to simultaneously start two wars and cut taxes you shouldn't even be allowed to utter the words "fiscal responsibility." I will also add that I find Tea Party members to be in the same intelligence league as the beauty pageant member (What do you want? World Peace!). If you pay attention to all the candidates that the Tea Party has put forward, they all recommend cutting taxes. Asked how they'll pay for this, they reply with some inane combination of cut earmarks and reduce waste. I have news for you, earmarks are a pitifully small portion of the federal budget (less than 1% percent) and there is not exactly a Federal program which comprises of people burning $100 bills all day long. Waste in government means ineffective policies and expensive regulations, it's not exactly easy to find or fix.
If you're the President, you expected the panel to come back with some sort of rubber stamp of your economic policy. Unfortunately, the 18 panel members are capable of simple math and determined that spending cuts and tax increases are required to restore the American economy. This was met by stunned lawmakers, notably the Democrats who put this thing together and schedule the proposal to be delivered after the election (no politics there of course). The proposal from the co-chairs which was released today is far from earth shattering. This is not the final deliverable as that must be approved by a vote from the entire commission. I outlined some of the items below which I found to be fairly good proposals.
1) Social Security: Raise the eligibility age, index benefits to inflation not wage growth, expand the tax base to include state/local government workers, and expand the tax to higher income levels. All of these are necessary in some form or another; it is impossible to fix Social Security without either raising taxes or cutting benefits. The Social Security eligibility age was initially 65 when the program was first introduced in 1935 and life expectancy was between 60-64 at the time (see page 6 here). The eligibility age is now 67 and life expectancy has increased to just over 78. (By the way, life expectancy means how long a child born in that year is expected to live...example: a child born today is expected to live to 78). Social security was meant to keep the elderly out of destitution, so indexing to inflation provides the individual to access the goods which are required to live.
2) Fix the tax system: Use just 3 tax rates, reduce the availability of deductions (including the mortgage deduction), and tax no income under $30,000. I really like this plan. Raising the standard deduction to $30,000 codifies what is already the case, that low income individuals pay no taxes right now. Whenever a Democrat says, "They're trying to raise taxes on the poor to give tax breaks to the rich," I laugh. The poor don't pay taxes and what the Democrat should say but can't is, "They're trying to cut benefits to the poor so they lower taxes for the rich." I like reducing the number of tax deductions available, especially those related to housing. Tell me, why exactly should the interest on a mortgage of greater than $500K be tax deductible? I disagree in general with the mortgage interest tax deduction, but subsidizing the purchases of large homes doesn't seem like smart public policy. I would also suggest that the deduction should be indexed to geographical areas, but in general the principle seems correct.
3) Cut federal budgets: Freeze federal wages/benefits, reduce farm subsidies, make civil servants contribute to their retirement plan, and so on. Again most of these options seem to be reasonable. The gap between public and private sector pay has disappeared, so there's no reason for Federal employees to enjoy hirer pay and lower career risk. Farm subsidies are just plain ridiculous, subsidizing the manufacture of ethanol which requires more energy to produce that it provides simply highlights what happens when a politician tries to solve a market problem. I also like the proposal to increase the premiums for the military's health care plan, Tricare. As discussed here, this alone costs the Pentagon tens of billions each year. The premiums could be substantially raised and still be lower than the market price of a comparable plan.
There are quite of few excellent ideas in their report, most of which will never make it out the committee since the final report requires a vote by the 18 members to be approved. The trouble is that the co-chairs were right, we are in a bad place economically and fixing it requires pain in the form of cuts to federal budgets and increased taxes.
Having recently received an offer for employment, I calculated my expected yearly tax bill and was horrified to learn it will be significantly larger than my salary when I first joined the Army as a 2nd Lieutenant. The upside to this is my purchasing power now is significantly better that of an individual who was born to a lower middle class family anywhere else in the world. So why don't we just buck up and accept that the Ponzi scheme we have allowed our politicians to put in place can't continue?
P.s. Having read this post before hitting the "publish button," I appear to have assigned far more blame to Democrats than Republicans. That is certainly not my intent, indeed were you to simultaneously start two wars and cut taxes you shouldn't even be allowed to utter the words "fiscal responsibility." I will also add that I find Tea Party members to be in the same intelligence league as the beauty pageant member (What do you want? World Peace!). If you pay attention to all the candidates that the Tea Party has put forward, they all recommend cutting taxes. Asked how they'll pay for this, they reply with some inane combination of cut earmarks and reduce waste. I have news for you, earmarks are a pitifully small portion of the federal budget (less than 1% percent) and there is not exactly a Federal program which comprises of people burning $100 bills all day long. Waste in government means ineffective policies and expensive regulations, it's not exactly easy to find or fix.
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