Record Federal Deficit for February 2019
The U.S. budget deficit for the month of February was 234 billion dollars! Yes, you read that right. For one month, our deficit was 234 billion, setting the all-time record for a single month in the history of our nation. As most of you know, our current national debt is hovering just over $22 trillion, also the largest in our history. Our exploding debt is a mounting threat to our nation, and is going to have a significant impact on the future of our nation for our children and grandchildren.
As bad as that sounds, consider also that we might be defining the word “debt” a bit too narrowly. If we receive something now and promise to give something back later, isn’t that a debt? Aren’t we giving our government money in the form of FICA, Social Security and Medicare while they promise to provide those “entitlements” to us later in life? So isn’t the government in debt to us also? Think about Social Security, Medicare, government pensions, corporate pensions, retiree healthcare, etc. Those are all debts owed to the American people. Aren’t we counting on getting back the promises governments and corporations and businesses promised if we let them tend our money for us? Will those promises have any possibility of being kept?
We have made tens of trillions of dollars in future “promises” that we expect the next generations to keep. Economists call these “unfunded liabilities” because we currently do not have enough money to fulfill those promises. In fact, according to official government numbers, Medicare is facing a staggering 37 trillion dollar unfunded liability over the next 75 years and Social Security is under funded by 13 trillion dollars over the same time frame. Where are we going to get the money for these programs while we are literally drowning in debt? And with 10,000 Baby Boomers turning 65 every single day, won’t these programs become even more strained as retirees begin to take Social Security and use their Medicare benefits?
Fact: The Congressional Budget Office predicts that by 2041, Social Security, Healthcare and interest on our national debt will consume all of our federal revenue.
What kind of an effect will that have on our national debt if we don’t stop spending at the current rates? Well, according to the same Congressional Budget Office, in just the next 10 years they expect our debt to DOUBLE!
The "Hidden" Tax
If history tells us anything, when the federal government needs money, they just print it. It’s no secret that the federal government owns the printing press for all federal currency in this country. Not only do they get to print it, but they also get to spend it first. What this means is that when they print large amounts of money and spend it, they are benefiting from the power of the dollar at current inflation rates. Once they spend the money and it begins to trickle-down and dilute the buying power of everyone else’s dollar, that’s when inflation hits the economy. We call this the “Hidden Tax” and while we may not write a check for it or get a bill for it or have to report it to the IRS, it’s a tax nonetheless and it can have a major effect on our quality of life. In fact, Inflation is one of the Four Enemies of Wealth (Taxes, Inflation, Market Losses and Interest) and it’s important we understand how it fits into our retirement plan.
History also shows that the government has another trick up their sleeve when they need money: They simply raise taxes. We all know how that works, and considering we are currently at record low tax rates with record high budget deficits and unfunded liabilities, it’s a pretty good bet that the federal government will have to do something in an attempt to get us out of the red. Do you think they’ll print more money or raise taxes? Or both?
Food For Thought
It is easy to see that current economic stability is no predictor of future economic stability. And while we are told all the time that our economy is strong, there are many reasons, including the ones we just discussed, to believe that our economy won’t be that way for long. And if it starts to take a downturn, the government could very well print more money and raise taxes. Shouldn’t we start preparing for that?
So the question remains, why are Americans deferring enormous amounts of money that has never been taxed (think: 401(k)s, IRAs) into an uncertain economic future where tax rates are almost guaranteed to be higher? Why aren’t we paying the tax on that money now while taxes are at historic lows and reducing or even eliminating the possibility of it being taxed when the government will need to get their hands on it? Should we talk about a strategy that will help you do just that? Should we bulletproof your retirement fund and protect it from the 4 Enemies of Wealth – Taxes, Inflation, Market Losses and Interest? Did you even know that you could do that? Would you like to find out how?
Please Follow and Like Us On Social Media
Focus Financial Group has investment and retirement strategies that are designed to maximize your growth and minimize your risk. Our tax strategies reduce and often eliminate the tax liability on your retirement savings so you can take control of your money now and in the future. Building wealth and providing security for your family are just a few of things we do here at Focus Financial Group. Our mission is to help you achieve your financial goals, whatever they may be. We have helped clients from all walks of life and circumstances safely and securely grow their money. Whether it’s retirement planning you’re focused on or saving money to put your kids through college, we have solutions for that. Let’s start with a conversation about where you want to go and then make a plan to get you there. Consultations are always free so contact one of our experienced financial professionals today and get started down the path to financial peace.