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Admittedly, I am not an expert on the national budget so this paper will rely heavily on what the experts say. However I believe I know a little about smart money management and what my research has revealed is sobering. Additional Article Information: =============================== 1405 Words; formatted to 65 Characters per Line Distribution Date and Time: 2008-03-11 11:48:00 Written By: Bill Garrett Copyright: 2008 Contact Email: mailto:[EMAIL PROTECTED] Bill Garrett's Picture URL: http://www.garrettfinancial.com/section1.cfm For more free-reprint articles by Bill Garrett, please visit: http://www.thePhantomWriters.com/recent/author/bill-garrett.html ============================================= Special Notice For Publishers and Webmasters: ============================================= If you use this article on your website or in your ezine, We Want To Know About It. Use the following URL to let us know where you have used this article, and we will include a link to your website on thePhantomWriters.com: http://thephantomwriters.com/notify.php?id=5790&p=load HTML Copy-and-Paste and TEXT Copy-and-Paste Versions Of Article Are Available at: http://thePhantomWriters.com/free_content/db/g/americas-coming-economic-disaster.shtml#get_code --------------------------------------------------------------------- The Specter of America's Coming Economic Disaster - Congress Continues on Its Path of Fiscal Irresponsibility Copyright (c) 2008 Bill Garrett Garrett Financial, LLC http://www.GarrettFinancial.com The purpose of this paper is to raise awareness of the threat our nation's deficit spending poses to all Americans in the future. As a financial planner I deal with cash flow issues daily. Perhaps that's why I have become increasingly disturbed by Washington's irresponsibility when it comes to its budget. Admittedly, I am not an expert on the national budget so this paper will rely heavily on what the experts say. However I believe I know a little about smart money management and what my research has revealed is sobering. Forces in America are coming together to create an economic disaster for the U.S. unless solutions to our overspending as a nation are dealt with soon! The forces I refer to are the retirement of 78 million Baby Boomers, rising healthcare costs, and the growing national debt. For decades our country has engaged in deficit spending. Another way to describe it is spending money we don't have. The national debt has risen to $9.2 Trillion. That averages out to over $400,000 owed per household in the U.S. >From 1996 to 2006, the percentage of the public debt owed to foreign and international investors rose from 28% to 44%. This trend is disturbing as it indicates a growing breech in our security because we now are heavily dependent on foreign money to operate our government and all its programs. Left unchecked we might even see the day when foreign nations would not want to loan us money. Make no mistake; the rest of the world is watching us. David Walker, Comptroller General of the United States, said in an interview on the Glen Beck show that he thinks we have five to ten years to demonstrate to the world that we are serious about fixing our financial problems or we may find them unwilling to loan us money. The Government has been borrowing from Social Security's surpluses for years to avoid dealing with its overspending. However, those surpluses will begin to decline in 2009 and will end in 2017. After that the government will have to begin repaying Social Security to pay out retirement benefits to Americans. Repayment will have to come through additional borrowing, raising taxes, spending cuts or a combination. Some of the cuts may be in Social Security benefits. In January, 2007, the Comptroller General warned the Senate Committee on the Budget that, "Continuing on our current fiscal path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately even our domestic tranquility and our national security." If substantial changes are not made very soon we could see government cutbacks of 60% or taxes raised by 100% by 2040 just to balance the budget. Walker warns, "If nothing changes, the federal government's not going to be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won't have money left for anything else national defense, homeland security, education, you name it." Federal Reserve Chairman Ben Bernanke validated much of Walker's take on the situation at the 2007 Congressional hearings, and so did ranking Republicans and Democrats on the Senate Budget Committee. Senator Kent Conrad of North Dakota, Chairman of the Budget Committee, was asked by 60 Minutes reporter Steve Kroft, if he agrees with Walker's figures and his projections. Sen. Conrad said, "I do. ... he is telling [it] exactly correct." Conrad acknowledges that most people in Washington are aware how bad the situation is. "They know in large measure here, Republicans and Democrats, that we are on a course that doesn't add up," the Senator told CBS reporter Steve Kroft. When asked why somebody doesn't do something about it? Conrad replied, "Because it's ... always easier to defer, to kick the can down the road to avoid making choices. You know, you get in trouble in politics when you make choices." When Congress and the Administration recently added prescription drugs to Medicare they only looked at the estimated $400 billion cost over ten years. The GAO estimates the real long term cost at over $9 Trillion! We cannot afford this Alice in Wonderland attitude nor should we tolerate it. Although Social Security spending is projected to increase, it is not rising as rapidly as healthcare costs. The Congressional Budget Office (CBO) estimates that Medicare and Medicaid spending will be more than three times that of Social Security by 2016." By 2032 it is expected that our Gross Domestic Product will rise 71%. Social Security will rise 127%, Medicaid will rise 224%, and Medicare will rise 235%! The Comptroller General has also said, "... the U.S. government's total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the nation's total output, or gross domestic product (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000...Simply put, our nation is on an imprudent and unsustainable fiscal path." This year the Baby Boomers begin leaving the labor force. Reflecting this demographic shift, the CBO projects the average annual growth rate of real GDP will decline from 3.1 percent in 2008 to 2.6 percent in the period 2012-2016. This slowing of economic growth will come just as spending on Social Security, Medicare and Medicaid will begin to accelerate-accounting for 56 percent of all federal spending by 2016 compared to 43 percent in 2006." It is too easy for us to rely on simplistic solutions. There are no easy answers. The reality is that: * we cannot grow our way out this problem; * eliminating earmarks will not solve the problem; * wiping out fraud, waste and abuse will not solve the problem; * ending the war or cutting way back on defense will not solve the problem; and * letting the recent tax cuts expire will not solve this problem. We will have to look at all of these and probably make some fundamental changes in the way our government operates. It's encouraging that there are many experts who are willing to work on a non-partisan basis to suggest solutions. We have the means to get on the right track but we cannot afford to wait. The longer we wait to address the problem, the harder it will be on everyone. Every day the interest on the debt compounds. In the future we may find ourselves paying trillions (yes, trillions with a't') of dollars in interest on the debt each year! The specter we face is that of living in a country that is bankrupt, vulnerable, and in jeopardy of losing our freedom. Our leaders must acknowledge and publicize this most vital issue and soon. We need a national dialogue about how to deal with this threat to our security. Americans will have to decide what they want government to provide and how much they are willing to pay for it. Yes, it takes political courage. No, it is not pleasant. We can no longer live for today without regard to tomorrow's costs. To do so will condemn us, our children and our grandchildren to a future no one wants. Our greatest threat lies not with extremists but rather may be expressed in the insightful words of Walt Kelly's Pogo, "We have met the enemy and he is us." References: Testimony Before the Committee on the Budget, U.S. Senate United States Government Accountability Office GAO LONG-TERM BUDGET OUTLOOK Saving Our Future Requires Tough Choices Today Statement of David M. Walker Comptroller General of the United States Comptroller General of the United States who is the non-partisan head of the General Accounting Office (GAO) and is responsible for oversight of Congressional spending Testimony Before the Committee on the Budget, U.S. Senate United States Government Accountability Office GAO LONG-TERM BUDGET OUTLOOK Saving Our Future Requires Tough Choices Today Statement of David M. Walker Comptroller General of the United States Ibid. U.S. Heading For Financial Trouble? July 8, 2007, CBS News ibid Testimony Source: GAO analysis based on data from the Office of the Chief Actuary, Social Security Administration; Office of the Actuary,Centers for Medicare and Medicaid Services; and the Congressional Budget Office.Notes: Social Security and Medicare projections based on the intermediate assumptions of the 2007 Trustees' Reports. Medicaid projections based on CBO's August 2007 short-term Medicaid estimates and CBO's December 2005 long-term Medicaid projections under mid-range assumptions. >From the foreword to The Pogo Papers, Copyright 1952-53 --------------------------------------------------------------------- Bill Garrett is a practicing Certified Financial Planner(tm) in Brentwood, TN specializing in retirement income planning and portfolio management. He may be reached through his website at http://www.GarrettFinancial.com Securities Offered through Securities America, Inc., Member FINRA/SIPC, Wm. B. Garrett, CFP, CCPS, a Registered Representative. Securities America, Inc. is not affiliated with Garrett Financial, LLC. --- END ARTICLE --- Get HTML or TEXT Copy-and-Paste Versions Of This Article at: http://thePhantomWriters.com/free_content/db/g/americas-coming-economic-disaster.shtml#get_code ..................................... 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