Numbers Can Barely Measure Soaring National Debt by Malcolm Berko on Creators.com

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Numbers Can Barely Measure Soaring National Debt

Dear Mr. Berko: How large will the deficit be for 2009? I hear all sorts of numbers but they keep changing. I know it will be a record deficit but with unemployment rising and businesses earning less does Congress have any new ideas on how to pay it off. Some people believe (former VP Cheney for one) that deficits can grow the economy and don't have to be paid off. Is this true? Our taxable income this year will be about $43,000, which places us in the lower middle-income bracket. Do you think our taxes will increase next year along with the taxes on the wealthy people making $235,000? The investment club I belong to would appreciate your comments on this subject. We would also like your "buy," "hold" or "sell" opinion on Campbell Soup. We have 53 shares at $32 and have about $1,300 to invest. — BR: Kankakee, Ill.

Dear B.R.: In August 2008, the administration of President George W. Bush announced that the deficit for fiscal year 2009 would be $407 billion. At that time, Vice President Dick Cheney was already on record as having said: "Deficits don't matter." Well, deficits don't matter if you have the money and influence Cheney has.

Just two months later in October 2008, the Bush administration predicted the 2009 deficit would rise to $610 billion. In January 2009, the Congressional Budget Office told us the deficit for fiscal 2009 (ending September '09) would grow to $1.1 trillion.

In May, the Office of Management and Budget increased the projected 2009 deficit to $1.8 trillion and next month the OMB may raise that number to $2.3 trillion. These numbers do not include the trillion dollar-plus stimulus packages in tax credits, new spending and bailout money for banks, automobile and insurance companies.

Recently, the CBO announced government spending could total 30 percent of gross domestic product, and this is before President Barack Obama's new health care entitlements. These numbers are scary because federal outlays could exceed $4.3 trillion this year, which is the most unimaginable thing I can imagine. With that kind of money we could buy Canada.

Whether or not you believe new spending will stimulate the economy, there is one bald-faced truth: This money must come from somewhere; it must either be borrowed or taxed from the private sector.

All this spending forebodes a humongous tax increase, which frightens the bejabbers out of me.

So Congress, looking for new sources of tax revenue, could have knocked me over with a fender when I heard they are considering a tax on soda pop to pay for health care programs. Congress might even consider sin taxes on escort services, condoms, Viagra, Levitra and Cialis.

The State of California reckons its marijuana crop is an $18 billion industry and a 20 percent tax would bring almost $4 billion annually. Some members of Congress believe a national pot tax would bring in $30 to $50 billion in taxes. Others expect Congress to consider an embalming tax, a mayonnaise tax, a postage stamp tax, a coffee tax and a tax on rubber bands just to name a few. And next year, according to a member of Congress, it's reasonable to expect an increase in the federal income tax rate to 42 percent.

This multi-trillion dollar deficit guarantees higher taxes, not just for the rich (the top 20 percent in 2007 paid 88 percent of all federal income taxes) but much higher taxes for all of middle-class America. This, of course, presages higher interest rates as well as a return to high single-digit or low double-digit inflation. And of the trillions in slush given to the banks, brokerage firms, insurance companies, auto companies the consensus is that little of this largess will be repaid. The consensus also indicates that the United States might never have a surplus again. So put that in your bong and smoke it.

I like Campbell Soup Co. (CPB-$28.30), whose soups have fed me through a half-dozen devastating hurricanes in Florida. I would use that $1,300 to purchase 47 shares, increasing your position to 200 shares. Campbell Soup Co. trades just 2 points above its 52-week trading range and management forecasts annual sales growth of 3 percent to 4 percent and earnings growth of 5 percent to 7 percent. In 2009, CPB will earn $3 a share. The stock trades at a low nine times earnings and the $1 dividend yields 3.8 percent. I think CPB should trade at 11 times earnings, which potentially puts the stock price a $33 a share.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.