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May 12, 2009 -- What the federal deficit will mean to you
CLARKONOMICS: We're set to reach a level of federal spending that is unprecedented since World War II.
For every dollar the federal government spends next year, they'll have to borrow 48 cents to pay for that spending. The deficit the feds are now talking about is $1.84 trillion. That's a whopping 13% of our nation's gross domestic product.
You'd be hard pressed to find any economist who thinks it's reasonable to have a deficit that's more than 3% of the GDP!
In fairness to President Obama, he's responsible for nearly a third of the $1.84 trillion deficit with his stimulus law. Most of the remainder was already in place from his predecessor.
But this is a bad situation made worse by increasing federal spending instead of reining it in.
Some try to justify a deficit by arguing that we're just borrowing from ourselves. Their rationale is that it's wealthy Americans who buy the bonds to fund the debt. But that's not true any longer.
Today it's more likely to be wealthy foreigners who buy the debt. For example, we already owe China $1 trillion that we had to borrow in order to fund our federal spending.
What does this all mean for you and your life?
The promises of Social Security and Medicare can't be kept for the baby boomers. We have to be responsible for ourselves as we age. That means either saving money for retirement along the way or working well beyond your desired retirement age.
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What others are saying
Inflation plus deflation
We face incredibly powerful forces for deflation and inflation. We'll probably get the worst of both. Oil is the best inflation hedge. The world is running out of it. It will almost certainly return to 2008 level and I will double my money at least some time in the next five years.
Social Security
Clark, I am sick about all the whining about Medicare and Social Security. These are not promises they are suppose to be grantees! Backed by the US government. Social Security and Medicare are not welfare (though Social Security has funded these programs) nor are they the reason for the current deficit problems. Boomers specially those in the late fifties are getting the royal screw. We paid for our grandparents and parents, we put our kids through collage. Now we are told sorry but now we have to think about the kids future!! Give me a break, or better yet give me back just the money I paid into the system and I will be good!!! Because with the loss of most of my retirement fund coupled with low value on my home I guess I will work till the day I die oh, wait I can’t get a job!!
can't eat dirt, but
I don't know about eating dirt (real estate), you certainly can GROW stuff in it. And a little bit of gold certainly isn't bad as failsafe "financial insurance."
A case of Ramen noodles will be worth more than all that gold you own. You can't eat gold. As for real estate you can't eat dirt either.
Deficit Gov't Spending
Last week Clark wanted to add a new gov't program where the gov't buys clunker cars and gets them off the streets. Clark wants to be able to criticize gov't for crazy spending but then he wants to add to it. Clark Howard, wake up. You are part of the problem. "The problem with socialism is that sooner or later you run out of other people's money." Margaret Thatcher.
Wrong Wrong Wrong
Sorry Clark but you are wrong here. If the government doesn't grow and spend more money unnecessarily, we'll all have to work harder and be accountable for our actions. And I think we can all agree that NOBODY wants to work harder or be accountable for mistakes in life (caused by others). More government spending = less hard work for everyone...duh. Do your homework Clark.
The politicians will "fix" it
Our good friends in DC will do what politicians throughout history have done when faced with a similar problem. They will "fix" the problem by inflating away their debts and used a debased currency to pay debtors. Baby boomers will get every cent of the Social security payments they were promised, that's right, every cent. Unfortunately a loaf of bread will probably cost them $40 when the dust settles.
Get your assets out of paper money and into something tangible like precious metals or real estate - preferably held in another country. Do it before it's too late!
