This phrase is generally believed to have originated in the US in the early part of the 20th century. It is a manifestation of the dilemma of being in the position where one is faced with two equally unwelcome options.
One of today’s pressing problems is the increasing gap between the cost of government services and the willingness of the public to accept tax increases. The print and broadcast media have been reporting on many specific examples, which seem to be a bigger problem for blue jurisdictions. It is not the purpose of this blog to offer possible solutions, but rather, to alert investors to the risks. Either solutions will be found or the ever-increasing pressure on public financing may lead to bankruptcies, such as what occurred in Detroit several years ago (2013) or, potentially, uncontrollable inflation.
Investors should note that the problem is not limited to cities and states but is also a problem at the federal level. The big difference in assessing potential solutions is the Federal Government’s ability to borrow.
Investors should also be aware of the increasing effort, particularly at the city and state level, to increase and/or establish new revenue sources from those deemed to have too much income or wealth.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
