A New Financial Milestone For America
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I remember when my mother paid off her mortgage. The entire family celebrated; Mom would have no more house payments. It was a joyous occasion when someone got out of debt. Back in the day, many would burn the mortgage document putting the finishing touches on their financial freedom. Becoming debt free was a goal for most in the country, but it was not without a price, real sacrifice.
Families can change a lot over the expanse of a home mortgage; we’d lost my Dad years before. But still, Mom remained steadfast, and in the end, she could live the last years of her life with no mortgage! Mom reminded me that it had taken 30 years, through 4 homes, to reach this goal.
Today, you and I are on the opposite side of that road. Few people I know are willing to stay in a home long enough to pay off the mortgage, and few even have that goal. Debt has become a way of life for most, from car payments to credit cards, health insurance, and, yes, mortgage payments; life is an endless list of “bills due.” The costs of the debt we’ve incurred.
It’s often said that we are the “richest country on earth.” Look at what we own in this nation, vast stretches of land owned directly by the people through national parks and preserves: the cities and urban centers, the natural resources, the industrial and technological plants, and equipment. The list of this nation’s physical wealth could go on and on.
These are the tangible assets that make up our Nation’s Balance Sheet. Add to that the future taxable income of hard-working Americans like my Mom, and you have a pretty good credit score. And we found out some time ago that with that credit score and those assets, we could borrow and borrow big.
How much we can borrow has been the cause of all that debate going on in Washington over these last few weeks. As you undoubtedly realize, President Biden has distinguished himself as the largest spender in our country’s history. He has added more debt to our balance sheet than ever before.
This hyper-pending got underway in the last year of the Trump Administration when, for the first time, the Federal Budget exceeded $1 Trillion. In the first two years under President Biden, the average annual budget has been nearly $4 Trillion, and next year’s proposal will come in at a cool $6.8 Trillion. It’s spending at a level that would make King Solomon blush.
Washington has an incredibly backward way of running our financial affairs. First, they decide how much they will spend. Only later do they figure out if there is any income to offset that spending. It isn’t a “budgeting process” at all. It’s a “how much can we get away with” process. One in which the President promotes specific pet programs and leaves it up to others to figure out how to pay the bills.
We are driving the nation’s debt higher and higher. According to the Tax Foundation, under the best circumstances, we will be looking at accumulating deficits of $2 trillion per year for the next ten years. In other words, the Government’s total revenue from taxes, fees, and other regulatory devices, will be $2 trillion less every year for the next decade than the amount the Government intends to spend.
Add those accumulating deficits to our already existing debt, and that’s the right-hand side of our country’s balance sheet, the liabilities. So, on the left-hand side of the balance sheet is what we own: our assets. While on the right-hand side is what we owe: our liabilities. Our assets remain solid, with the physical properties and improvements all flourishing. While our tax receipts also project out as positive as long as we don’t get hit with a significant recession.
The big problem remains on the liability side, those steadily increasing deficits Washington continues to create. We are about to reach a historic milestone in the amount of debt we’ve accumulated. According to the US Debt Clock dot org., our country’s assets per person stand at $562,094. If we sold off all the country’s assets and gave us each a check, it would be more than half a million per person. Amazing.
But before you get ready to spend your windfall, you must know that you also owe the country’s creditors: $561,055. While our assets have appreciated, our liabilities have multiplied even more. Government spending and higher interest rates have caused our debt to skyrocket. In the next couple of weeks, our obligations will exceed our assets. The amount we owe will exceed the amount we own. Our liabilities will exceed our assets. And we will have officially become a debtor nation.
Mom, and all the generations who worked so hard to get out of their debt, would not be pleased.
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