By Tom Quiner
I spent a couple of hours with my financial planner yesterday.
Something struck me: baby boomers like me can really be hurt if America’s indebtedness isn’t addressed quickly. And if Baby Boomers run out of money, our kids could be wiped out because there are so many of us Baby Boomers they’re going to have to take care of (and pay for).
That’s why America’s financial house needs critical addressing.
We hear things like we’ve got a $13.5 TRILLION national debt. But what does that even mean? It means that EVERY U.S. citizen enjoys a $356,000 liability. This doesn’t even count unfunded pension liabilities at the state and local levels that add up to another $574 billion.
What could happen? Last year, the Congressional Budget Office warned that …
“… it’s possible that investors would lose confidence abruptly and interest rates on government debt would rise sharply.”
The former Comptroller General of the U.S., David Walker, warned:
“We are heading for a future where we will have to double federal taxes or cut federal spending by 60%.”
Thomas Hoenig, President of the Federal Reserve Bank of Kansas City, warned:
“The fiscal projections for the U.S. are so stunning that, one way or another, reform will occur. Fiscal policy is on an unstainable course. The U.S. government must make adjustments in its spending and tax programs. It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the U.S. is precipitating its own next crisis.”
How did we get into this mess? For the first time in history, according to the Wall Street Journal, half of Americans receive some form of government payments.
How bad is it? Laurence Kotlikoff, writing for www.bloomberg.com, puts it this way:
“Based on the CBO’s data, I calculate a fiscal gap of $202 trillion which is more than 15 times the official debt.”
Have you ever thought of the ramifications if America went bankrupt? It is possible if we don’t halt and reduce our spending binge. And the consequences would be dire:
1. Your life savings could be dramatically reduced as government inflates the currency in a foolish attempt to pay off debtors with funny money.
2. Your taxes will skyrocket. We can’t do it on the back of the rich. There just aren’t enough of them. As things stand now, only 53% of households in the U.S. even pay any federal income taxes.
3. Your social security and medicare payments would be jeopardized. The money for these programs aren’t stashed away in a vault. They come from your neighbors who pay taxes. If the U.S. is scrambling to pay off debtors, you may be left holding the bag.
4. Your standard of living will drop off a lot. National bankruptcy will plunge us into the worse economic downturn since the Great Depression, if not worse.
I get sick of hearing about doomsday scenarios, so forgive me for presenting such depressing information. But we can fix our fiscal problems if Congress begins acting like adults. In other words, they have to make tough decisions. That’s their job. They’re the ones spending the money. Congress needs to reduce spending now. Don’t tell me “we’re all responsible.” We’re not. Congress controls spending.
Congressman Paul Ryan’s “roadmap” is the only serious plan being presented. It’s not perfect, but it is intelligent, and it is doable.
We’d better do something fast. Time isn’t on our side.