A Million Dollars a Minute

by John Haggerty

On Friday January 29, 2016 the United States national debt reached 19 trillion dollars. In the last few decades we have seen an unprecedented escalation of government borrowing, currently a million dollars a minute! In 1989, our nation's debt was 2.7 trillion, in 2001 five trillion. When the fiscally challenged Bush and Obama administrations are concluded the amount will top $20,000,000,000.

What is the national debt?

In simple terms it is the total amount the federal government owes to creditors. It exists (grows) because government expenses exceed its revenues. There are two components; Intragovernmental holdings and debt owed to the public.

Intergovernmental debt represents the balances of U.S. Treasury securities owed to federal government agencies with either the requirement or authority to invest their receipts in these securities with a guarantee of principal and interest. The Social Security Administration is one example owning nearly three trillion dollars of U.S. Treasuries.

Public debt, often called sovereign debt, is the amount owed to individuals, businesses and foreign governments. It is the accumulation of budget deficits caused by government spending more than it receives in taxes. Treasury bills, notes and bonds make up most of this debt.

How will our out of control debt affect retirees?

First, Social Security is NOT a welfare program! Americans thru payroll taxes contribute a portion of every paycheck. The government acts as a fiduciary holding these contributions in trust, then distributing to the beneficiaries.

The current flaws with Social Security and by association Americans' retirements began with the 1983 reform act under President Reagan. While no fan of any social programs, in fact calling unemployment insurance "a prepaid vacation for freeloaders" Reagan’s tax cuts reduced revenues and put the government in a severe cash shortage.

Using Alan Greenspan as his spokesman he lobbied Congress to increase the payroll tax and soon the Social Security Trust fund had a three trillion dollar surplus. Sadly, he funneled this new surplus into the general fund and he, followed by subsequent Presidents, used the money for other purposes; wars and government bailouts among them.

The combination of our burgeoning national debt and politicians using Social Security funds for other purposes will have dire consequences for future retirees. Every day 10,000 Americans attain age 65 and that trend will continue until 2039. Factor in that retirees are living an additional twenty years after retirement and it is reasonable to envision a "retirement catastrophe" for those 70 million Americans.

What can be done?

On the political front, we the people need to demand term limits on Congress. These are the men and women that have created this enormous debt and routinely voting for the incumbent who spends most of their time on re-election has proven futile.

On an individual level, self funding retirement should be of paramount importance. Taxes are going to escalate considerably, healthcare costs will continue to rise and people are living longer. Focusing on financial vehicles that guarantee a lifelong revenue stream rather than volatile asset accumulation products is a good strategy.

In concluding, this article was written to bring light on an impending retirement crisis. While the United States is "only" a couple of hundred years old, our citizenry, constitution and adherence to law has made us the best country in the history of the world. Hopefully our retirees can live out their lives with the dignity they have earned.