We've seen the impact of national debt and its effect on Greece and the European Union. Politicians are slow to deal with difficult situations, but they know that something must be done to turn things around. Raising taxes is polically dangerous at a time when voters feel pressed on all sides and see their hopes diminishing. However, ignoring the problem of fiscal irresponsibility is no longer an option. Increased taxes are coming, and the time to prepare is now.
READ MY LIPS.........TAXES ARE GOING UP
??Remember when President George H. Bush made that infamous promise to America?"Read my lips, no new taxes!" Well, he was forced to raise taxes, and it cost him the reelection. Politicians ever since have been scared to death of the "T" word. Any mention of increasing taxes makes voters furious and means almost certain death at the next election. Politicians stay away from issues that upset voters and snuggle up to issues that make them happy. It's much easier to campaign on the vague promise of a better life, more jobs, and pie in the sky than to deal with the serious matters at hand.
It's sad fact that politicians avoid making serious decisions because of the fear of negative voter reaction from some group or another, which if they do anything at all, is inevitable. But, mark my words; the time is coming, very soon, when they will have to face the issue of America's staggering national debt. It will soon be impossible to ignore, and the ramifications of continued avoidance will be castastrophic.Take a look at the following information. This helps to clarify the seriousness of America's national debt and the inability of the federal government and congress to deal with the crisis. Below is a breakdown of the national financial balance sheet. You can see why our credit rating was lowered.
WHY THE U.S CREDIT RATING WAS DOWNGRADED
- 2011 U.S Tax Revenue $2,170,000,000,000
- Federal budget $3,820,000,000,000
- New debt $1,650,000,000,000
- National debt $16,293,000,000,000
- Recent budget cuts: $ 38,500,000,000
You can see that the government budget exceeds its income by more than $1.75 Trillion per year! If you remove 8 zeros from these figures and view it not as government expenditure but as a house hold budget it puts it in a perspective that is easier to understand. You can easily see that, in spite of all the growing rehetoric about cutting the budget, congress hasn't got a clue about fiscal responsibility.
- Annual family income: $21,700
- Money the family spent: $38,300
- New debt on the credit card: $16,500
- Outstanding credit card balance: $162,930
- Total budget cuts: $ 385
If this was your family financial situation, you would be in big , big trouble. Your spending would be nearly twice your annual salary, and you'd be piling on credit card debt like there's no tomorrow! Y0ur credit card debt would have grown to nealy 7 times your annual income, and you would have to be borrowing to mke the minimum monthly payments. Now, here's the real eye opener. In this hypothetical situation, you have decided that you need to fix this, so you cut only $385 from the budget and keep spending like crazy, maxing out your credit cards at every opportunity.
Our government leaders have known about the massive problems with Social Security and Medicaid for decades but failed to deal with them decisively. They knew the truth about how bad things had gotten, long before the public got wind of it. Washington uses fuzzy math and convoluted accounting practices to move on or off the books as they see fit. They do things that, if we tried on our personal or business tax returns, would have you or me sent to prison for life. But, the time will soon be here,when they will be forced to deal with the truth of the issue, and it won't be pretty. When they do, you need to be ready for the massive tax increases and cutbacks that will come.
INFLATION AND LONGEVITY
In addition to higher taxes, you must also prepare for inflation.This has always been a concern, but it's specially important now that Americans are living longer. There is a very good chance that you could live to age 90 or 100 due to recent advances in medical technology. You may think that you have saved enough to retire comfortably, but did you figure on living another 25 0r 30 years on a fixed income? You might need to take another look at your financial future and consider longevity and inflation. Inflation is a term which refers to the financial loss of the value of the dollar over time. This is a major concern, especially for those holding cash and those who are living on a fixed income. This loss of value is reflected in the reduction of purchasing power. For example, what $1.00 purchased in 1980 would require $1.75 in 1993 and $2.79 in 2012.
It is not hard to remember how far a dollar went when we were younger. You might be old enough to remember when you could by a coke for a dime and candy bars were a nickel. And,it wasn't that long ago that you could go to the movies for 75 cents. In the 1960's , a salary of $100 a week was pretty good money. You could have bought a new Mustgang convertible for $2500! So, if you've experienced that quantum leap in inflated prices in your life to date, imagine what the future could hold for you over the next 20,30 or 40 years. It takes the glimmer off of the golden years pretty fast. This is especially frightening when you realize that you won't be earning an inflated salary to counter balance inflation but will have to cut back your life style as you watch the cracks appear in your nest egg.
Many economists believe that inflation affects the lower and middle classes more than the rich because they have a greater percentage of their income in cash. In 1993, a gallon of gasoline cost 87 cents. In April 2012, the price of a gallon of gas fluctuated between $3.50 and $4.25!The average tax on a gallon of gasoline, in April 2012, was 49.5 cents and 54.6 cents for a gallon of diesel fuel. In Indiana, the gas tax in May 2012 averaged 62 cents and diesel 76 cents. That's about a 400% increase in just a few years!
Higher fuel prices cause price increases on most of the goods and services in the economy because it takes fuel to ship in raw materials, manufacture products, and ship products to stores. If you're wealthy, and have investments that earn more than the rate of inflation, you can sigh about rising prices, but you can still keep moving forward financially. But if you're not wealthy, if you're part of the mass of middle and lower income class Americans, your retirement years could be the most difficult time of your life.
The America you grew up in is different from the America today, and, with the national debt and underfunded liabilities of Social Security and Medicaid, the America of tomorrow is in serious trouble. As our nation, and the world, struggle to deal with the new financial era, higher taxes are a given and inflation is almost a sure bet. register here for more one and information:
https://HSBA58.toolsrock.com and or apply for a loan at :
http://www.moneyguy07.com. We provide private equity financing.