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The Necessary Pain of the Fiscal Cliff

The U.S. now runs annual deficits of more than $1 trillion as a matter of course. That is irresponsible and unsustainable, and we can't bridge that gap simply by soaking the rich. Instead of parroting the rhetoric of blame, let's admit that we're all a part of the problem -- and that, therefore, we must all be part of the solution.

That means higher taxes not just for the wealthy, but for all. Everyone needs to have some "skin in the game." Instead of divisiveness, we need to promote a "we're all in this together" attitude. It's the right thing to do. Keep rates higher across the board until we get our financial house in order.

Regarding spending cuts, the fiscal cliff creates an opportunity to deal with areas of spending that have grown wildly out of control. For example, I believe the U.S. should have a strong military, but what does that mean in 2012 and beyond?

In illustration, the U.S. currently has more than 53,000 troops stationed in Germany. Is that really necessary? Is it possible we could get by with, say, 30,000? In a world of increasingly mechanized, asymmetrical warfare, does having troops stationed in more than 150 countries help you to feel safe at night?

There are many other areas that can and should be cut, and this is but one example. My point is, we're no longer living in the 20th century. We have more than 1.4 million personnel on active duty, enough to create the seventh-most-populous city in the U.S. Once upon a time, a massive army was a sign of military strength, but the types of conflicts we are likely to experience in the 21st century have changed the focus to small, highly specialized teams.

I have a great deal of respect for our troops, and it's not my intention to single out the military -- there are many additional areas where we can save money. For example, the U.S. Postal Service lost nearly $16 billion last year. When you find yourself standing in a long line at the post office this holiday season, consider that nearly every task performed there could be automated.

To those who will say that these ideas will result in lost jobs, consider this: We can't afford the luxury of living in the past. We've spent ourselves into a tremendous hole, and we have to stop pretending that we can get away with it indefinitely. The truth is the truth, regardless of whether we have the courage to face it.
Ed Ponsi is the managing director of Barchetta Capital Management, an NFA-registered commodity trading advisory, and is also the president of FXEducator. An experienced professional trader, Ponsi has advised a variety of hedge funds and institutional traders. Ponsi has appeared on CNBC more than 50 times and has been profiled in magazines such as "Technical Analysis of Stocks and Commodities" and "The Traders Journal." He is the author of Selling America Short: The New World Order vs. the American Middle Class, released in Novermber 2011; Forex Patterns and Probabilities, a top-selling book on currency trading that has been translated for release in China; and The Ed Ponsi Forex Playbook, which was endorsed by Steve Hanke, professor of applied economics at The Johns Hopkins University.

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