My friend Bill Clinton is facing an economic Dunkirk. There is no better analog. He will be bombarded on all sides by a crushing national debt, falling output, rising unemployment and social unrest. He’s going to try to do something.
I can tell you what he will try to do.
At the rate the $4 trillion debt is expanding, the interest payments alone will consume 100% of income tax payments in just 3-4 years. The government’s whole operating budget, besides interest, will have to be borrowed.
Obviously, Clinton can’t let that happen. So what will he do? Will he stand tall or blink? Here’s the worst-case scenario:
Clinton will raise taxes far above the 39.6% level (actually, 44%) he’s already signed into law. (How do I know this? Keep reading.) Clinton will also be forced to slash Social Security, Medicare, Medicaid, and farm subsidies. He’ll fire legions of government employees. There will be few sacred cows left because there won’t be enough money to pay for the hay.
That’s the worst-case scenario. For the best case, reread the last paragraph.
But wait, you say, why wouldn’t Clinton simply inflate his way out of the economic wreckage he inherited? That’s what governments usually do when faced with economic problems. A lot of newsletter writers are predicting that Clinton will crank open the money spigots in hopes of inflating away his problems.
But the thing you have to understand about most financial advisors is that, like most generals, they are always fighting the last war. The fact is, the inflation option is no longer available to Clinton.
Bond Traders Now Veto Presidents
Bond traders aren’t elected, and they answer to nobody. But they possess knowledge about market prices around the world. In the new Information Era, they can move trillions of dollars at the speed of light. And that makes them very powerful.
At the first inkling that Bill Clinton is trying to reflate the economy by pumping funny money into it, thousands of bond traders will dump hundreds of billions of dollars in U.S. bonds. Interest rates will shoot up like an Apollo booster: slowly at first, then with unbelievably power and speed.
The government debt is almost all short term and has to be refinanced every year or two. With 20% interest rates—and remember, we had them in 1980—the interest on the national debt would be five times what it is now. It would be greater than all the rest of the budget combined. It would take one dollar out of every five earned by every man, woman and child in the United States just to pay the interest on the debt. And there wouldn’t be a penny of tax money left for anything else, from Social Security to the military to the Weather Service.
It would take an Argentina-scale inflation to get out of this. The government wouldn’t be able to borrow again for a generation. The value of money would be totally destroyed, and with it most of the middle class.
Every major government that ever tried the inflation option ended up falling from power, usually in bloody revolutions. Clinton knows this. It’s not going to happen.
So what will Clinton do to bail himself out of a seemingly impossible situation?
The Plan to Take $138,000 of Your Money
Yes, $138,000. And that’s just one installment, as I’ll explain in a moment. Do you know how to protect yourself?
What Mr. Clinton wants to do in office and what he’ll be forced to do are two very different things.
Clinton tells us he’ll make government work by “tapping the kind of idealism that really hasn’t been tapped since the early days of the Kennedy administration.” Right. The 90’s are not the 60’s and Clinton does not live in Camelot.
Then Clinton tells us he’s “solved” the debt problem by raising $200 billion in new revenue from “the rich.” That still leaves the Treasury flat broke in three of four years.
So, after all the shouting, the question is still there: What will Clinton do when he finds the interest payments on the debt swallowing up the whole federal pie?
The Oxford Connection
Last year, before Bill Clinton was even elected, I knew it was urgent to get an answer to that question, so I could advise our readers on how to act. To get this valuable information, I turned to Strategic Investment’s intelligence network.
Bill Clinton may talk like a good ole boy, but he’s an alumnus of Georgetown and Oxford, where he met a man named ROBERT Reich. The two had a profound impact on each other. It was no surprise that Clinton tapped Reich, a Harvard prof., to help him make sense of the economy.
As I mentioned earlier, I attended Oxford. So did Lord Rees-Mogg. Two members of our intelligence network attended Georgetown, a training camp for Washington insiders. It you want to know what’s cooking in Bill Clinton’s head, you’d better tap into this old boy network, not the good ole boys in Arkansas.
The Oxford Connection holds the clue to what Bill Clinton will do about the economic crisis. And it’s truly frightening.
I’ve concluded that Clinton will raise taxes even more. This is a sure bet. When cornered, raising taxes will be the easiest thing for Clinton to do.
You see, Robert Reich is a firm believer in economic planning. He has little respect for the private economy or for entrepreneurs—he thinks “teams” do everything now. And he plans for government to be the captain of the team. What’s more, he wants to turn back the clock to the days of big industrial corporations and powerful unions.
Reich has already taken steps to make it easier for unions to strike. He also wants to re-unionize the private sector, where almost no one belongs to labor unions anymore.
Basically, he thinks the economy is slow because the government doesn’t do enough. He thinks the private sector is too big and has too much power.
He’s been called “the Karl Marx of the Information Age.”
It’s not a fluke that he’s in the Clinton cabinet. He has plenty of company there, including Donna Shalala and Hillary Rodham Clinton. It is already clear that Mr. Clinton is no “new Democrat.”
Clinton’s tax increase leaves him well-shy of what’s needed to pay the bills. He’ll be back asking for additional tax increases. And with the help of a Democratic Congress, he’ll get them. Bob Reich and other top advisors will be there with the academic mumbo-jumbo to justify it all.
In 1994 or the year after, Clinton will go on nationwide TC. He’ll look us right in the eyes. And he’ll tell us that his program to raise the tax brackets to 36% for people earning over $115,000 has been so successful, that he’s raising the rate to 50% and lowering the income level to $60,000!
But That’s Not All!
Besides raising tax brackets, Clinton will raise a host of other new taxes, great and small. Remember, Clinton will be slashing Social Security, Medicare and every other type of government spending. The victims of these cuts are going to be in a rage. They’re going to be baying for blood.
And Clinton will give them somebody’s blood: yours.
Ladies and gentlemen, this is not news. We’ve already seen Clinton’s strategy is to blame the rich. But the first tax increase—and the get-the-rich rhetoric that went along with it—is just a rehearsal.
When cornered, Clinton will attack the easiest tax target—estate taxes. You can count on it. Why should anyone inherit wealth, Bob Reich is going to ask. Maybe the parents earned it, but the kids didn’t. Tax it away! Fairness!
Clinton will cut the estate tax exemption from $600,000 all the way down to $200,000. That means your heirs will get taxed at the top rate for all but $200,000 of your estate.
If you’re worth $400,000...which is easy with a home and a few stocks...then your heirs will be paying $67,000 in new taxes. If you’re worth $600,000 or more, your new taxes shoot up to $138,000!
Disinherit The IRS
Is there any salvation from these outrageous new taxes?
You bet! There are specific steps you can take right now to disinherit Mr. Clinton’s IRS. But if you procrastinate a few months, you could lose big.
The newspapers will tell you that there’s not much you can do to hold onto your money. They are foolishly naive. You can rearrange your assets to avoid the new estate taxes.
And you can avoid the higher income tax brackets by redeploying your assets into selected capital gain investments. The assets I have in mind will go up in value year after year—but you won’t pay a penny in taxes on them unless you sell them.
Trillions of dollars can easily be salted away out of the government’s reach...”buried” in capital gain assets for decades, if need be. When Ronald Reagan lowered capital gains taxes, he found that tax collections went up, as the rich cashed in their capital gains! Billions of dollars of hidden wealth came out of the woodwork.
Now it’s time to bury that wealth again. This buried capital gain treasure will see you through the coming bad years. It will also be the foundation for our country to rebuild after Clinton is gone in 1997.
But if you want to make capital gains, you have to purchase assets that will go up in value. Choosing which assets to buy is the whole point of Strategic Investment! Not everything is going to appreciate. In fact, most assets are going to go down in value. Our whole reason for publishing Strategic Investment is to tell you what’s going up—and what to avoid!
Every month, Strategic Investment will be your pilot, navigating you through the treacherous seas of soaring taxes and plunging stocks, bonds and real estate.
In a special report called The $138,000 Estate Tax Surprise, we outline the specific, 100% legal tax and investment moves you can make right now to keep more of your wealth in the family. I want to send you this special report—free—when you agree to try Strategic Investment for one year.
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