Special Report: What Does the National Debt Mean To You?
"Understanding the National Debt Crisis in America and How it Impacts Retirement"
My mission is to try to get the average Joe or Sally on the street, like you and me, to get the big picture. I don't think you need to know and understand ever single financial detail to grasp the scope of the problem. So, unlike the economists, politicians and other financial experts, I will attempt to write this report in such a way that it does not you to death with numbers and charts. However, you do need a basic foundation in how the National Debt works in order to realize the problem we are all in due to excessive government spending and inept policies that must be stopped.
In this article you will learn specifically how the National Debt is and will seriously impact retirees, future retirees and most importantly your children and grand children.
Grasping the Magnitude of the Debt
This report is about the serious implications the National Debt is and will have on our lives . I am not a financial planner and the statements and opinions in this report are solely my own. I will do my best to stay on subject and not turn this into a partisan political argument of debate.
Let me begin with an overall observation. Every day we are bombarded with news stories about our National Debt. Everyone is blaming the next guy. While there is plenty of blame to go around, it is important to understand how we got here and discuss ideas for mitigating the problem. While passing the buck seems to be a favorite sport these days in Washington, I will do my best to stick to the facts and let them speak for themselves. The opinions expressed are solely my own based on over 40 years as a successful business person who speaks from a broad background of personal experience in the area of finance.
If you turn on the news, you are going to get quickly overwhelmed with the 24/7 news cycle full of discussions and debates on what is happening today in our Federal Government. We are on news overload. The facts and numbers change daily. It's sort of like watching the stock market with one major exception. The national debt is not going up and down right now.
Search the key words such as “National Debt Clock” and you will see that the numbers go up second by second, almost faster than the eye can see. I try to make things as simple to understand as possible. The national debt in light of what our government is doing is by no means a simple subject. By using lots of real world examples I will use common sense illustrations to make my points.
For example, let's take personal health to illustrate a point. That is a relatively easy subject to understand. In order to get the most out of retirement one must be healthy. We talk a lot on health related issues on our retirement blogs listed below at the bottom of the report.
The blog reader may or may not really take this information to heart right away. Don't worry if some get it then it's a start. The younger you are, the less likely you are to think about staying healthy to enjoy your retirement years. That's the point. It does not become real until they get sick, can't work any longer and their retirement years are now far less than what they had planned for or dreamed for them to be. Now they get it. Good health—enjoyable retirement. Bad health---poor retirement. You get sick and reality sets in.
My father-in-law was a successful insurance sales person. He lived on a lake and was a world class fisherman. His life-long dream was to retire and start a charter fishing company. He suffered three major heart attacks in his early 50's. He survived, but could barely walk to his dock, let alone fish. When he lost his health he lost his dreams. His doctor had told him to lose weight, reduce stress, exercise more etc. He was a strong man and thought he would live for ever so he worked hard and lived hard.
After his heart attacks, he immediately understood what the doctor was trying to tell him about his health. Unfortunately for him, he got the message too late. Health was not an issue he wanted to deal with in his life, so he went on as if everything was OK. The analogy to the National Debt is this. Millions of Americans are living each day as if the National Debt is nothing that will ever affect their life. If you will continue to read this report you will understand that if we do nothing about the National Debt, like my father-in-law and his health, there will be dire consequences that will eventually impact our lives. Note I said if we do nothing. Fixing the National Debt is a problem all of us must fight to fix.
The stakes are way too high to sit on the sidelines and let the next guy take care of it.
Let me give you another quick example. Let's say you have been working full-time making a decent salary of $75,000 a year. You have been told all your life that you need to save for your retirement. Life goes on and you never do anything about it. By the time you near retirement you begin to wake up and scramble to put some money aside or invest the time you quick work and live off of your savings, investments and social security. Fast forward to age 66-70. You retire and your first social security check arrives. Instead of making around $5,000 a month your check may be less than $2,000 a month. (That assumes that social security is even around at that time.)
You panic and go back to work or downscale your life to near poverty levels .You should have seen it coming. You were warned this day would come, but you kept living your life like work would go on forever. Now you realize I should have spend less and saved and invested more in my younger years. As they say no one escapes death or taxes.The day always comes when reality strikes when least expected. The question is are you going to listen to my warnings now and take action early or wait for the bottom to fall out?
Living in Tough Economy
Many in our current economy are learning what this feels to live through tough economic times. They loose a good job and find themselves in the unemployment line. Reality smacks them in the face. I have been in the unemployment line myself over my 40 year career and no matter how you slice it, it is not fun. I was sick and embarrassed; not to mention hurting at the time to feed my kids. So I sucked it up and got my checks. But I can tell you you do not want to go there.
The checks eventually stop coming. By then you hopefully have found work. Many times the job is not as good as the one you had before because times were more desperate. Your life has been changed by this experience. You have learned the lesson to appreciate the value of what you had and truly appreciate the job you found. Next times things get tough, you will have some money put aside and you will be better prepared having been through this experience once before. That's how most of us handle life. You can prepare for the worst and hope for the best or you can wait for life to smack you in the kisser. Either pay now or pay later.
Most of us will never truly appreciate our freedom we enjoy in America until we lose it. The out-of-control spending in Washington is racking up debt we can not pay without great pain. The longer we keep spending the worse it is going to be. If we don't stop the spending, you will most likely wake up some morning and the entire financial system has collapsed. and nearly everyone is in the unemployment line. Guess what, the government will have no money left to send you a check.
Explaining The Problem in Real Life Terms
Let's get down to explaining the problem of debt in terms you can understand and then end with some ideas and solutions for you to think about in the coming months. When the average American hears the term "National Debt" that immediately sounds like someone else's problem. In reality it sounds like the debt belongs to everyone but me.
Example: If I loaned you $100 for 30 days my guess is that you would personally feel the weight of actually owning me $100. Correct? As a person of honor you would feel responsible to pay me back on time. That $100 you owe me feels real to both of us. I want my money repaid and you need to come up with the money in 30 days to pay me back. We both get it. If you do not pay me back you will feel pressure from me to live up to your obligation. National Debt does not feel like that. It's over there some place for someone else to worry about.
When we hear and read that we, as a nation, are trillions of dollars in debt, there is not that same sense that I personally owe anyone. Recently congress passed a bill to increase the debt ceiling of the government to over 14 Trillion Dollars. Honestly, I don't think anyone can truthfully say they know or understand the magnitude of such a number.
We all loose the concept of what the National Debt numbers really mean. We may understand what it might be like to have or owe a million dollars. Personally that is meaningless to me. Most of us have never been in either position. When someone starts taking billions, we loose touch with the amount of money being talked about. When you have a conversation about the National Debt, there is no way we can get our arms around the concept of owing trillions of dollars. If you did owe it (and your mind says you don't) there would be no way to pay it back anyway, so you turn off your brain and do something real like go by groceries. Our government is in unbelievable debt and big trouble as a nation, but because it does not feel real we are numb. We can't feel owning anyone trillions of dollars.
Owing 14 trillion dollars or 1 trillion feels like all the same. At least it does to me. So when government spending increases a trillion dollars we simply can't conceive what that is really like. A billion, 500 billion, a trillion or 14 trillion is beyond our comprehension because it's surreal. It doesn't feel like there is any connection between those numbers and our day to day life.
None of us wake up in the morning in a cold sweat over the Trillions owned in the National Debt. If the truth be known, it probably is not on our mind at all unless we turn on the news. Even then we dismiss it as a government problem that someone else, other than you or me, will have to solve and pay. Back to our earlier example, the concept of staying healthy for retirement does not mean anything until you are too sick to enjoy retirement. Until congress gets the wake up call that spending our hard earned taxes is not our money but their money too they will keep on spending.
Now consider this possibility. What if the government decided that 50% of every dollar you earn will be deducted from your pay or government check to help pay off the national debt? Now the problem of out-of-control spending in Washing would come home to roost in your pay check. Suddenly that debt that you could have cared less about (You know that problem in Washington) just became your problem because the quality of you life just got drastically diminish with only half your income to sustain you lifestyle. You are not only aware of the problem, you are fighting mad or ready to jump off a bridge. (Please no body do any jumping on me quite yet, OK?)
The good news is that to my knowledge the government has no plans to impose a 50% cut in your pay or social security check. The bad news is that the national debt is larger then you can imagine, it must be paid back or our government can not sustain itself. Some one has to pay back the money. And that is where the rubber meets the road. The government may not take a direct slice of your paycheck each month, but they are going to pay this debt off with your money and you children's money and their chidren's money. Trust me!
If you and your fellow Americans don't pay off the National Debt one way or the other then the debt number will continue to grow larger and the debt will not only hurt you, it will be passed on to your children and their children to pay as well. At some point, the debt must be paid or our entire financial system will collapse. You say that is impossible. We are too big to fail.
We thought AIG, GM, Bank of America etc. were too big to fail. Without a government bail out they would have failed. Again let me remind you, I know you can't feel it yet, but the possibility is very real that a day is coming sooner then you think, unless drastic measures are taken to stop the spending in Washington to reduce the deficit (the debt we owe) this government's debt problem is getting so big and so bad everyone is going to feel the consequences.The pain will be catastrophic.
Individual states have a similar problem going on but the numbers are not nearly as big and there are some responsible states that by law are forced to balance the budget each year. I am told 48 states currently are in red ink and some states like California are going to need a federal bail out with your money to keep from going under. It's real and it's coming sooner then you think.
Left to run its course, the amount of debt we owe as a nation will grow so fast each year that as we spend too much and fail to bring in enough revenue to pay it down or worse yet use the money for something else, the debt burden will begin to impact your life. As crazy as it may sound, if congress does not stop spending and address the National Debt very soon, it could trigger the collapse the our entire financial system. God forbid it gets to that point because it would send the world into a tail spin.
The President's Dilemma
As you read this special report, our government is between a rock and a hard place and the hole they are digging is getting deeper and deeper..As I listened to TV last night one commentator put it this way. He said that we are not only digging a deeper and deeper hole, but now we are jumping in and piling the dirt on top of ourselves. I had a friend who was in a large ditch on a construction site that collapsed and crushed him. He nearly died. That is what debt is like. You are buried under a crushing weight that will choke the life out of you.
Some economists and politicians are telling our President that more spending is required to grow the economy. I hate to be the bearer of bad news, but more spending just deepens or increases the exploding deficits. In your own life have you ever figured out how to spend you way out of debt? Think about it. If it does not work on your small budget at home, how the heck will it work for the government? You respond but they have more money to spend then I do. Yes and after they spend it they will be in more debt in the end, just like you would be if you tried this at home.
The President's new budget proposal of $3.8 trillion in spending puts the US headed for deficits totaling more than $5 trillion over the next five years. The President is trying to put the blame on the last administration for the debt he inherited. He says it is worse then he expected. Well Mr. President that is why the country elected you. But rather than spend less to begin to bring down the debt you and congress are trying to spend more to fix the economy. It just won't work! That is when a large segment of people who voted for you are jumping ship.
Some would say that this is more about retaining political power in 2010 and 2012 by appearing to be helping the folks on main street while making government larger and grabbing more power so the politicians can fundamentally change America in the process. In doing so they are passing massive debt on to our children and grand children and trying to redistribute wealth. Do you feel any pain yet. Maybe. Will you feel it at some point in the future? Absolutely!
Here is why:
The president was accurate when he said that he faced huge deficits when he stepped into office in Jan of 09. Opposition lawmakers, aware of the impact that these deficits will have on our country were silent while they too were piling up more debt and red ink themselves. Hold them accountable on election day.
The Awaking of the American People
The American people are starting to wake up. They don't like all the government spending. This was not the kind of change many of them thought they were voting for last November.The "Tea Party Express" movement, which was thought to be a brush fire, is turning into a wild fire of independents and conservatives that may sweep congress our land in 2010 and the White House in 2012.
Our country simply can not sustain the debt we are piling up over the next ten years. If nothing changes, every dollar we make would have to go against paying down this debt. The party will be over. We pay now or we pay later. Pay we will and the longer we wait the bigger amount we will owe and the bigger the problem becomes. That is fact.
This should be a grave concern for retirees or any one planning to retire in the near future. No matter how much money you have saved or earned on your investments, you will not be able to insulate you and your family from the collateral damage that congress is creating with their appetite for spending
Perhaps if all the bail out money was spent on true job creation, helping people keep their homes and buy new ones we would not have wasted a year on a health care reform bill that less then 50% of the American people want in the form it was created. I do believe we needed to stabilize the financial core of our county. But now that the money is being repaid is not being used to pay down the debt. That is our money and that is not what congress agreed to when the legislation was passed. A year has passed and we spend all that time and money trying to fix health care while unemployment rose to over 10%. If you count the people who have given up that number is estimated to be closer to 17%. Plus, we keep extending unemployment benefits with your tax dollars. Perhaps there is no incentive to go find a job.
Instead of cutting spending, as we were promised, we could have used all that energy and billions of dollars that were spent on things like buying car companies, bailing out banks and investment companies and creating 2 million new high paying government jobs, is gone and the problem is not fixed. What we did not do is create jobs and that is why a year later the President is in trouble.
What we do have to show for it is more debt and a much bigger government to try to run our lives? And trust me, they will try because they think they know better then the people what is best for our own good. That small little perception is what is going to be their demise.
Regrettably, the President's short-term answer to fixing the economy is to borrow more money, and that increases deficits. As the national debt soars, it threatens economic recovery, putting pressure on interest rates to rise and slowing down job creation.
Details on New Federal Budget Proposal
Instead there is a new budget before congress. How this will finally wash out is any one's guess at the moment. Here are a few highlights that will help make my point that our government is not fixing the problem they are the problem:
The President's budget proposal for 2011 is $3.8 trillion dollars. Here a few quick highlights. He plans to put a higher tax burden on the wealth which is defined as people making $200,000 or more and families making $250,000 will pay higher tax rates on their income and more taxes on capital gains an dividends earned on investments.
Did you know that the budget still has over $200 Billion in anticipated savings from health care reform in it. Take that out and we are instantly $200 Billion more in debt.
The government can't begin to pay for this budget by taxing the average folks. Because the debt is so high and his new budget is by far the highest in the history of our country, he has to stop spending or go after the rich to re-distribute this wealth and help pay down the debt.
Paying for the Budget with More Taxes
First, let me say that $200,000 a year may be rich to you and I, but if you live in New York, Chicago or LA that is not a lot of money. That being said, I will share a little secret with you. Having owned businesses in my life I got to know many people with far greater wealth.
These were smart people who made a lot of money by learning to hang on to their money and make it grow. First let me say there are not enough rich folks out there to pay for this budget. Secondly, the rich will find as many ways as the can to avoid paying much if any of this tax. In my humble opinion, the rich are smarter than the politicians. So my bet is on the rich boys to outsmart the system.
Or, they will not work to give more to the government. That means, in my estimation, that the money the government thinks they will rake in from the rich is not going to happen. If that revenue does not come in as planned and we keep on spending like it will be there, we have compounded our problem.
Project tax revenues are too high. When the money does not come in then everyone will pay even more taxes. If the government would start today to seriously cut spending we have a prayer of stopping this train ride to disaster. As long as they think you can spend your way out of recession using our money, the final chapter will not be a pretty one.
Just as it's necessary for this administration to take it's budget and make some hard choices on further cuts, It also needs to stop relying on some overly optimistic assumptions. For example, the budget counts on saving nearly $300 billion over 10 years by increasing income-tax deductions for wealthy taxpayers. That proposal went nowhere in Congress last year.Stop kidding yourself. One way or the other the wealthy are not going to give up the piggy bank because it's probably in Switzerland, Panama or buried in the back yard by now.
Another thing to consider is that the rich create more wealth every year which means through brains and innovation they are also the employers and job creators. If we place a heavier burden on this group of Americans, the end result will be less jobs; not more. Part of the problem is class envy. There are many people that resent those that have become successful. They cheer on as the government goes after the rich and the fat cats on Wall Street. Be careful. You may be killing the golden goose and that means fewer eggs in the hen house.
There is a sick part of many people's mind set that wants the rich to get hammered. There are people that think being rich is unfair and they deserve to be hit with higher taxes than they are now paying. After all they have too much any way so lets take some from them. They can afford it. Right?
Sadly there those that hate capitalism and want to see the wealth spread evenly, that is called communism or socialism. And it is part of what we now call the new Progressive Movement is just a new name for and old game.There is nothing progressive about it. It is repressive. And it is not the spirit of life, liberty and the pursuit of happiness that made our country great.
Everyone would like to be rich and a lot richer than $200,000-$250,000 a year. I hope you are there or get there some day. But, if you are trying to cross the Arctic region by dog sled, taxing the rich into the ground is like shooting all your dogs. Who is going to pull the sled? Higher taxes will starve our sled dogs to death and they will die of natural causes.
When this all shakes out the government has not choice but to raise taxes on everyone. No matter what they call it to try and hide it, you will be taxed in 2010 and beyond under this current administration.
More Budget Details
The budget proposes a $100 billion dollar cut in the space program that would have funded taking man back to the moon. That makes sense at this time in our economy but in government terms a $100 Billion is just chump change.
There is a proposal to increase spending on education by 3.5 billion. Who can be against education? The problem is that we spend more money on education per person then most countries on earth. Every year we spend more get less bang for our buck. It's time to figure out why the money we are now spending is not working before we just keep on spending more.
Spending on two wars will stay high. The budget calls for $159 Billion in 2011 to pay for more troops. I don't want to be Mr. Doom and Gloom but we are most likely going to be in these wars for several more years and future budget requests will continue to go up. And then there's the cost of fighting two wars, a burden that shows no sign of diminishing. The financial price tag is now at about $160 billion per year, only slightly less than it was at the height of the Bush administration.
There's little indication yet that these costs can be reduced as much as the President is projecting.Our added concern should be what else can happen in the world that could cost us a lot more money that we do not have tucked away for a rainy day? What if Iran nukes someone? What happens if Israel decides to strike first. It could throw the entire world into war.
Putting the Pieces of the Puzzle Together
In a moment I will tie all this together for you so you can fully understand how everything I am talking about can and most likely will impact your retirement.
The President says he won't cut military funding while troops are in the field. But this enormous cost should be debated in the light of what is really best for our national security. A poor nation is a vulnerable nation.I believe we are far more vulnerable now and as we go deeper into debt it will make us even more venerable because we can not fight wars without any money. Add to that, our enemies see us as weaker but the actions of this administration.
There are countries out there that hate us and wish to kill as many of us as they can. They only understand one thing and that is force and violence. Perhaps its time we worried less about who gets killed and go in and win these wars quick and fast and get out. Did we not learn anything from Vietnam? That was a war we could have won in months if we went in to win. Win, get out and save money. Plus it might send a stronger message not to mess with the US.
What if some form of health care reform passes? Health care I believe makes up about 7% of our entire US economy. Congress does not have a great track record on forecasting cost. It's not what they got right but how many they get wrong. The latest is the prescription drug program which is so far over government original forecast it is outrageous.
When I was in charge of sales forecasting in corporate America, I would have been fired for going over forecast. Politicians have no consequences other than being voted out when they make such blatant mistakes. Just imagine if they get the health care reform system wrong. That alone could bankrupt the county. Since when do you experiment with 1/7th of the entire US economy?
A well managed business that must turns a profit to grow and pay it's employees would never gamble 1/7th of its entire wealth on an untested product or service. When I worked at Procter & Gamble several years ago, I was told that Head & Shoulders shampoo was is market test for eight years before it was rolled out the the public.
Congress tries to fix the entire US Health Care system in a few months with 2,000 page bills that no one read that was brokered behind close doors and rushed to the floor of the house and senate in less that 72 hours. This is not the way the American people want their money and note I said their money spent. The message is loud and clear from VA & NJ to MA...Stop the spending and back room bribes, deals and corruption.
The proposed budge does offer some belt tightening but only after this humongous budget is approved. So they raise the budget to the largest level in history and tell you and I that they actually cut the budget and froze some spending in the process. The cuts are few billion which is drop in the bucket if you can get you arms around the difference between a million, a billion and a trillion. It is possible that our national debt will some day hit a quadrillion dollars.
How big is that?
There are two systems in use for naming numbers larger than a million.
In the American system, the Latin prefix refers to the number of groups of three zeros, not including the last group of three, which represents a thousand. Thus in the USA, a billion is 1,000,000,000 (109) and a quadrillion is a mere 1,000,000,000,000,000. (1015). See how hard it is to understand those kind of numbers? But understand or not that is the direction we are headed.
Government is the Problem; Not the Solution
Part of the problem is that our President and many lifers in congress, never had to stick to a budget or meet a payroll. Some have never worked a day in the private sector. I have owned businesses and know what it is like to sweat out cash flow and some times not take a paycheck to make sure my employees got paid. More taxes and taxes after that.
Regardless of what came before him, this complicated job belongs to the new President we elected to govern and lead our country. George Bush is back in Texas. The president and Congress need to do more to hold down spending, by taking a closer look at every department. It would be nice if the president stop saying one thing and that going back on his promises. He talks a very good game. So far his policies and performance leave a lot to be desired.
The administration has pledged to freeze some domestic spending, and that's a start, but even within that spending cap, some programs are targeted for increases much greater than the rate of inflation. Education spending would grow by 7.5 percent; the Energy Department's budget would grow 6.8 percent.
There's always a risk when increasing taxes in a weak economy, even for those who can most afford it. But balancing the federal budget can't be done responsibly through spending reductions alone. Bush-era tax cuts for couples earning more than $250,000 per year would expire on Dec. 31. Right now it appears they will not be renewed. Big Mistake. If they let them expire, families will end up paying more, but it's hard to imagine how this current administration will allow those taxes to continue. It's not in their DNA.
The Feds want to increase interest rates. They will hold off as long as possible so they don't further tank the economy. However, they must pull that trigger soon. I am sure they prefer to wait until after the 2011 elections, but time may be running out.
Now they say letting a tax break expire is not a tax increase. The government must think that we are complete idiots to not get the fact that taking away a tax break is the same as adding a tax on the back of those families that had the tax break. Give me a break! Unfortunately, too many are sleeping and the tax cuts will expire and then we will wake up one day soon and the tax breaks we got last year are gone. Will it hurt--You bet.
Those are just a few examples of many of why we are in the trouble we are in. As quoted in USA Today, " Budget can't tame Deficit. The budget deficit would top 1 trillion for a third year in a a row and stay above $700 Billion a year through 2020.A bipartisan panel would be needed to make additional reductions."
The President and Congress are trying to push the worst budget decisions further down the road. That won't do. Only you, me and the American people can stop it. I hope it is done peacefully but I fear that it could get very ugly before it's all over. I hope I am wrong.
This not just a Democrat or Republican Problem.
Yes the power hungry out-of-control spending in Washington in a big part of the problem on both sides of the isle. Social Security and Medicare are drowning in red ink but wait. As the baby boomers hit retirement age there will be 30 million more people getting these entitlements. That will add billions more each year to the national debt. Where it used to take three Americans working to pay for each recipient of social security soon the ratio will hit 2:1 which means everyone with a job will have to pay in more and still the entitlement programs will not pay for themselves.
The politicians will not make the hard decisions to solve the problem because it is political suicide. The voters would crucify them at the polls to push them for and reduction in entitlements. The wimps in Washington just keep passing the problem to the next congress and the next congress. When it will stop I do not know. But one thing I know for sure, the day will come when our country can not longer carry this heavy burden any longer. If nothing is done the entire system will crash and most likely in our lifetime.
How we are Being Sold a Bill of Goods
It's interesting how this administration thinks that by changing the language we won't catch them. If you notice, a tax is now a levy. A terrorist is an isolated enemy combatant. A stimulus bill is now called a jobs bill. No matter how much you dress up the pig, it's still a pig.
The future for our children and grand children is very bleak. Thanks to the spineless politicians who just kept passing the buck along to the next congress, this huge debt will land on the backs of our kids to handle. Only they will have far fewer choices and options left to solve the problems. Ask a younger person if they ever expect to collect a social security check and he or she will probably laugh at you. They may not know how bad it is but they know its so bad they will never see a dime by the time they are ready to retire. They didn't cause it but they will pay.
We have politicians who think it is possible to spend yourself out of a recession. Think about it. Does that make any sense to you? If you added up all your bills and owed $50,000 in debt. Does spending more money make the debt problem better or are you deeper in debt at the end? Well you might win the lottery. What are the odds of that happening? You could go back to school and get a better job. Now you owe $50,000 plus interest plus the cost of school plus the lost income while you were going to school. Unless you are now a brain surgeon you will never have the means to pay the debt off on your own. So if you can't pay off $50,000 in your personal life what makes you think the government can pay off trillions in debt they are racking up?
Growing Debt is Unsustainable
Recession or not, the country can't sustain this level of spending in the face of decreasing revenues. The federal government now borrows one-third of all the money it spends.
No household could survive very long like that. On this pace, interest payments alone on the national debt alone will reach $840 billion in 2020. That sum is more than the government is projected to spend in the same year on all discretionary domestic programs not related to security. That's assuming the numbers are correct and I hate to tell you this but they never are. Politicians do not have to pass a math test to get elected. It's obvious the system is broken and I just hope its not already too late to save our nation.
Let's bring this article to a close with a few thoughts, ideas and perhaps some solutions.
No doubt about it taxes are going to go up. The government will tell you there are tax cuts coming but that is a lie and here is why. Anyone and everyone who gets taxed that has the ability to pass on will do so. Gradually the prices of everything inches up ever so slowly faster than the money you have coming in. What got you buy today will not be enough to keep you going in five more years.
People are living longer which means they have more retirement years to pay for. Most are choosing to work longer. They may make a late in life career change but most retirees will have to do something to supplement their income. With red ink as far as the eye can see, taxes will keep going up at the very worst time in an economy trying to recover. There is a very good chance these taxes will choke out the recovery before we see much benefit.
State and local governments are in big trouble. California is nearly bankrupt. So expect you state and local taxes to also go up. Every where you turn state and local governments who insist on more spending have only one place to come to get more money and that is you.
A year from now you will look back and see that everything is more expensive. The cost of doing business will be more expensive. More jobs will go over seas to avoid the union stronghold gripping our nation. More business will fail, people will have less money to buy homes, cars or food. Do you see how you can not spend your way out of a recession.
If you are on a fixed income, unless you can supplement the money coming in each month, you are headed for troubled waters ahead.
Remember what I said when we started? The National Debt that seemed so far away from your day-to-day world is coming to a town near you. And when prices of everything goes up, it does not matter what you call it, it will not be good. And, I am confident when I say that the best retirement planners in America have not factored in this punishing burden of debt and its coming affect on retirees.
You many not understand how all this works, but I think you can grasp the concept and the implications on your retirement planning and the financial health our our country.
In order to fund this large National Debt and increased spending we just covered the taxes that are coming. But with tax revenues down and the downside that more taxes will have on the economy, taxes alone will not be enough to cover the debt.
What we are doing is borrowing money from China, Japan and other folks who don't like us a lot. That money is borrowed and is expected to be paid back with interest. It is so bad that foreign countries own more of our debt then we do. That gives them all kinds of leverage that they can use in against us to apply pressure for all kinds of favors and things they want from us. As a debtor nation we are slaves to the countries that we owe. No one knows what perils lie ahead should China for example decide not to lend us any more money.
After we tax our own people until they are close to revolt, we borrow until no one will give us any more money we have another time bomb ticking away. We are printing more and more money to pay for the rest of the debt and bloating federal budget. The money is just paper. It's no longer backed by gold. The more we print the less value the dollar has on the world market.
As a retiree or one thinking of retiring soon, expect that your dollars will be worth less and less the more we print.
The end result of all of these financial factors at play at the same time is the kind of inflation we saw during the Carter Administration or perhaps even worse. I lived through the long gas lines and paying 18% interest in more to buy a home. Inflation will make everything worth less and cost more.
The current administration and the feds are doing everything they can to keep inflation from rearing it's ugly head to allow the economy to bounce back and not have dramatic political fallout in the US in 2010 and beyond, but I don't personally see how we can did out of this mess without a lot of pain. We are right on the edge now and it concerns me that it would not take much for all these domino's to start falling down. Should this dire prediction come to pass we are all in the sinking boat together and retirement will become a matter of survival of the fittest.
Never Let a Crisis Go to Waste
Remember how Rom Emmanuel told us that you never let a good crisis go to wasted. Imagine if you will that there is a second wave of bank failures with no money left to bail them out. Imagine the housing market not recovering. Imagine the dollar shrinking and financial markets crashing so fast you would wake up one morning and just as we saw the planes crashing into the twin towers in NYC on TV, our financial system is in ruin.
God forbid that would ever happen its hard to say what we would do. I can just imagine the government would have to step in and take over everything and try to maintain law and order. There would be cries for a one world government and banking system. Power would be in the hands of a few and the country we dearly love would be history.
Things we Can Do Now
What can we do to avoid ending up a bankrupt nation? Here are my thoughts and I am sure you have some of your own you can add.
More spending only prolongs the agony and makes it worse and harder to fix. We had to stop spending like drunken sailors and do it now. It will be painful but not nearly as painful as racking up more debt on top of what we already have.
Starting in 2010 get rid of every politician we can that is part of the problem. Replace them with fiscal conservatives who will bring sanity back to our government.
Make it law that government ear marks and back room deals are a felony punishable by jail time and fines.
Make it law that any law the congress passes they have to live by it. There is not reason for them to get Cadillac health care while the rest of the country gets the left overs.
Downsize government. Right not we are super sizing government with 2 Million more workers, many making over $100,000 a year, added in 2009. Government makes nothing. It needs to be very lean and get out of the way of the great entrepreneurial spirit that built this country. Stop consuming our wealth and other than protecting us and providing services stated in the constitution, get the heck out of the way of the people.
Something has to be done with entitlement programs. That should be one of the top priorities of congress. If we don't start now then when?
Make America strong again. When we are hurting we can not save the world. Stop sending American dollars overseas to countries who don't appreciate us or like us. End foreign subsidies and charity. Every dollar must pay down the debt or go towards better the American People. Close most embassies and cut all that expense.
Get out of the UN and save the money. They are useless.
Instead of trying to spend our way out of recession take all the shackles off of small business and let them grow.
Rebuild our manufacturing base to compete worldwide. That meets get the Unions out of lives that are crippling our ability to sell our products at the best prices.
Pass real health care reform but do it one step at a time. Fix one area such as torte reform then move to insurance, portability, allowing more competition in the market place, and for God's sake we don't want our health care run like the DMV.
Pass the "fair tax" so everyone pays their share. That means scraping the entire tax code and replacing it with a simple easy to understand tax that is fair to all.
If you are in this county illegally, you must leave. End of story. We are not paying your bills any longer while you send your dollars back to some other country. Come in legally or pay the price.
End any thought of Cap and Trade. That is tax that will kill the economy. Let a few polar bears die. We can't afford this tax.
If going green was so great everyone would be doing it. Don't waste any more dollars on it. Let the market place determine what they want green and what they don't.
Get the teachers union out of our schools. They are not interested in education. They want to suck up money from Washington.
Get people off any kind of welfare unless they are absolutely in need of it and even then evaluate it so no one cheats the system. Incentivize work not government handouts.
Do not bring back the death tax. That money has already been taxed and parents need to be able to pass on something of value to their children.
What Should Retirees Do?
Now let's take a look at what retirees can do to help improve the quality of their retirement in the face of this runaway national debt and irresponsible congress.
* Retirement requires planning. You are never too young to start but you can be too old. So what are you waiting for?
* Ask around and find a financial planner that you like and can trust. Take your time but get a good one.
* Employ a tax consultant who specializes in ways to save money to when you pass on your estate.
* GET OUT OF DEBT NOW
* One credit card only. Tear up the rest and pay off the balance on the one card every month.
* Work on getting your credit score as high as possible. It will save you a lot of money in life.
* Start getting annual health check ups not later than 50 years old and do what the Doc says.
* Walk or do some for of mild exercise for 30 min every day if you can and at least three times a week.
* Retirement is about you and or your spouse first. Take care of yourselves and then think of the kids.
* Decide where you want to live before you retire and have a plan to make it happen.
* Consider exotic retirement destinations where life is easy and your money goes a lot further.
* Start downsizing your life. If you really don't need it, sell it or give it away
* Don't pay for more home, condo or apartment then you need. Let the kids find a hotel near by.
* If it's just two of you, you do not need three bedrooms. Downsize to what you need
* Make new friends and do not just stay at home.
* Do more of what you enjoy in life
* Hang out around younger people too. They will help keep you young.
* Start a new hobby.
* Keep you mind active. Force yourself to read and learn new things.
* Volunteer and get involved in your community. You will feel better doing it.
* Leave room in your retirement plan to travel, see new things, go to fun places.
* Take a cruise. Most people absolutely love it.
* Get back in touch with your spiritual roots. Time is running out.
* Maintain reliable transportation. Retirement is not the time to drive a total clunker.
* Plan, enjoy, and do the things that you dream about that will put a smile on your face.
The Least You can do Right Now
If you think that others you know need to read this report you have unlimited permission to distribute any where where or any way that you think it can help people understand just how serious our National Debt problem and and could become in the near future. Email the report to anyone you know. Send it to local news outlets. Publish it on your blog. Any way you can get the word out is good. We need a grassroots effort to educate as many people as we can. Time is running out.
Michael E. Deitsch Sr.
About the Author
Michael Deitsch Sr.is a retirement expert who blogs on all things related to retirement. .
His resumes includes working in marketing for over 30 years for several brand name companies such as Procter & Gamble and Stanley Tools. He, along His family also owned a successful advertising and marketing firm for 10 years. After turning the business over to the oldest son, Mr. Deitsch has owned three other business in the field of health care recruiting. He has kept active doing consulting work in the field of market research, spent 5 years as the VP of Marketing for a Billion Dollar Mortgage Company (before the crash of sub-prime lending) and most recently is been blogging for over five years on the subject of retirement.