Monday, July 25, 2011

Making Sense of America’s Debt Ceiling Talk

Making Sense of America’s Debt Ceiling Talk

Today I’m taking a little detour from the “Financial Fiction” series I began last week. We’ll reconvene with that topic next week.

Unless you’ve been living under a rock, you are aware that intense negotiations are going up on Capitol Hill and in the White House about America’s “debt ceiling” – whether to raise it or not? That’s pretty much the only news these days.
Okay, what exactly is this debt ceiling?

It's the legal amount of debt that the federal government can borrow. That cap is implemented by Congress. This nation’s current debt, which includes money owed to anyone who owns U.S. government bonds, as well as money borrowed from the Social Security and Medicare trust funds, among others.

So, what’s all this back-and-forth about?

The current debt ceiling is $14.3 TRILIION. The problem is that our debt hit that $14.3 TRILLION cap back on May 16 of this year. So unless Congress raises this ceiling, the federal government cannot borrow any more money – that’s pretty much it!

Some argue that if this ceiling is not raised, the world as we know it will literally grind to a halt. On the other hand, there are those who believe that assessment is baloney because nothing is going to happen. Personally, I’d say that no one can really predict what will happen, but it’s probably not going to be good, either way.
I don’t know about you, but I’m baffled by the fact that the same politicians who are 100 percent responsible for today’s debt ceiling are complaining about America having “too much debt.” Who exactly approved the current $14.3 trillion to begin with?

Is the solution to this issue that difficult?

That’s a good question. This is how I see it: America is in debt up to her eyeballs for only one reason – for decades, we’ve been spending way more money than we collect in revenue. If you think about it, what other reason could have caused our need to borrow money? That said, I can think of only three possibilities for fixing our debt problem:
  1. Reduce spending by cutting programs, including Social Security, Medicare, and Medicaid – my dear seniors, please don’t judge me until after you read my entire thought.
  2. Increase revenue by taxing people and corporations more.
  3. Some combination of numbers 1 and 2 above.
This is it folks – there’s no other solution that will appear from anywhere! I understand that our elected officials are spending a lot of time on this. Well, maybe it really is very difficult – BUT regardless of how long it takes to get there, the solution they’ll end up with MUST be one of the three possibilities I mentioned above. 

Has this whole drama got anything to do with you?

The straight-forward answer is, “You bet!” and here’s why: Of the 3 possible solutions I identified, #3 is the most likely and practical solution. HOWEVER, I must caution you that Congress (and the federal government) has been working on “spending cuts” for as far back as I can remember. The thing is that after all that effort, our federal spending has been steadily increasing. I’m not being sarcastic, here; I’m just saying that Washington, D.C. cannot control spending, period!

That takes any credible spending cuts out of the equation. We are therefore left with one logical option – increase taxes! Raising taxes has nothing to do with Democrats or Republicans; it has everything to do with the fact that politicians see less damage in raising taxes than in cutting spending. I mean whose Social Security, Medicare, or other program are they going to cut? Not the programs of the people who elect them. As far as raising taxes goes, D.C. can easily stick it to “the rich,” which, when you think about it, is an arbitrary distinction.

Here’s something that may surprise many Americans who think that Republicans are opposed to all tax increases. What I hear the Republicans saying is, “Now is not a good time to raise taxes.” I hope you can read between the lines!

If you have money tucked away in a yet-to-be-taxed 401(k) or IRA, you MUST seriously reexamine your overall retirement strategy. Did you know there are relatively simple changes you may make in your retirement planning that could legally insulate you from looming tax hikes? You need to be talking to a savvy, out-of-the-box financial professional.
Contact Laser Financial Group today to schedule your appointment with a financial professional who will show you legal, ethical tax-free retirement planning options you may not have known about. 301.949.4449 or

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