August 2008

Do you ever feel like you’re legally getting robbed? Maybe you don’t, but after reading this, you may feel different. Who’s robbing you?

The tax man.

Do We Need to Send Congress to School to Take Financial IQ 101?

There is a fundamental difference between how a business or household operates and how a government operates in terms of money management. A business cannot over-extend itself or it will eventually go bankrupt; and it cannot get credit to expand without financial projections or established revenues. You and I cannot spend more than we make, unless we use credit cards. Once we have too much debt or ruin our credit, we’re cut off from borrowing. The government? Why it can easily get it’s hands on more money: it either prints more of it, borrows more from foreign countries, or simply raises taxes on anything from personal income to gasoline. Imagine if the Government had to follow the basic rules of money like everyone else…

We know the Government can’t spend wisely, so why is this so important now?

The U.S. Government debt is at such strikingly high levels. According to David Walker, Comptroller of the United States in the explosive documentary I.O.U.S.A ., our total debt level including future obligations is at a staggering $53 trillion dollars! Yes, you heard that right: $53,000,000,000,000. Hope you like counting zeros!

How did it get that big? See video: Is the U.S. Bankrupt?

When the government doesn’t bring in enough money to pay expenses, it borrows it by issuing government securities. In the past, this wasn’t as big of a problem because most of the debtors were U.S. citizens. As time wore on, Americans began consuming more and saving less (in fact, the savings rate in America is currently negative), leading the government to look overseas to find investors with the capital to finance our spending. This has been going on for most of our country’s history. The borrowed money went to fight wars, expand government, and pay for entitlement programs such as Social Security, Medicare, and Medicaid. It’s the same as you and me charging purchases to our credit cards that we don’t have money for year after year. Eventually, something’s got to give. Under the weight of the debt, things are beginning to give. So what happens when foreigners stop lending to us? We’ll need to find a way to raise more capital to pay our expenses. The Government will have to either raise taxes or cut back on expenses.

Possible solutions to our nations problems include:

1. Raising income taxes

2. Changing the retirement ages for Social Security and Medicare

3. Making citizens aware of our excessive consumption and encourage them to cut back consumption and begin to save money so we can finance our own needs without having to borrow foreign money.

We have to make some tough choices. None of them seem appealing, but they must be made nonetheless. No matter how you look at it, your future earnings are being stolen. While it’s true we must all pay taxes to live in a civilized society, should we be paying for the irresponsibility of our leaders?

What Can I Do?

To Help Make a Difference and Learn More About America’s Challenges, visit the Peter G. Peterson Foundation . Here you can send pre-made correspondence to your Senator and Representative and encourage them to make better policy decisions regarding the future of our country. To stay ahead of the curve and put yourself in a better place financially, continue to educate yourself by continually visiting this blog.

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