American debt and the consumer economy

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 I feel that the government, by promoting a “spend” mentality instead of a “savings” economy, has effectively doomed us to a debt crisis. It takes true willpower to enforce a savings plan, and stick to it, in our personal finances, but when individuals are prodded into spending verses saving as a government goal, we all suffer.

The next iPhone, the new tablets one MUST have, the second car, that house that you can barely afford, all add up, and in the end create a debt based economy. A debt based economy means that to keep up with the Jones family, both you and the Jones’ have to be constantly paying off credit cards, mortgages, cell phone bills,  and so on, never really saving up for any sort of emergency. Replace iPhone with a tank, and you see our governmental policy in a nutshell.

Oddly enough, the emergency may well turn out to be the inability of the  Federal government to service its own debt, which as of this writing is over 100% GDP. This number itself is hotly debated, as the actual debt the Government owes far outstrips the monies owed to sovereign countries. The US government owes trillions to the Social Security Fund, among other enforced savings plans whose balances were never meant to be spent, but rather saved so as to be used for the purposes intended by the enacting of those funds.

In short, we as Americans have a monumental task ahead of us: Pay off decades of misused funds and debt, while keeping our economy going as well as it can. And this is entirely doable, as the better our balance sheet, the more likely we are to be able to loan monies in the event of a disaster.

The current state of politics cannot and will not be able to enforce a debt reform package substantial enough to get the job done. Republicans wish to cut taxes drastically, while cutting entitlement programs that keep those in poverty housed, clothed, and fed. Cutting taxes at the expense of the poor just won’t put much money in the coffers, and will stress society to the breaking point. Not only that, but the GOP is always starting wars. For example, our most recent war has cost us over 3 trillion dollars, most of which I hazard to guess was borrowed from China and other, more economically sensible principalities. The Democrats have just the reverse problem: increase taxes to pay for increased entitlements, which is a zero sum game when it comes to paying down the debt. They also have a penchant for spending much more than there is money in the coffers, borrowing copious amounts of money, that when spent, has little long term investment potential. Neither party has substantial debt reduction as a major plank in their rhetoric.

Significantly increased taxation, and reduced spending is the only visible way forward in reducing national debt, however that road is fraught with seemingly intractable differences, with both major parties unwilling to compromise on core spending platforms, and a lack of desire to reign in pork barrel items passed as legislation.

” In general, debt held by the public increases as a result of government spending and decreases as a result of government tax or other receipts, which fluctuate in the course of the fiscal year”  – Wikipedia

It is a simple calculus: The more that is not spent, and the more revenue that comes in, results in less debt, since there is a surplus to pay said debts.

It is high time we as a nation stopped our credit card mentality and started focusing on maintaining a sound fiscal policy. If we don’t save when we can,  there is no way we will be able to borrow when we will need to. Seven years of plenty is nearly gone, and there is no grain saved.

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