So many people have been talking about the debt ceiling, deficit, debt, treasury bonds, stocks, China, etc. If you ask twenty people on the street what it all means, you’ll get twenty different answers. Most Americans truly don’t understand what is going on. And believe me when I say that included me. So after reading up on things and trying to understand, let me see if I can shed some light on the issues:

What do they mean by “Debt-Ceiling”?

Simply put, just like we, as Americans, should have to limit the amount of debt we take on, so too, does the government. By definition, the debt ceiling refers to the legal limit allowed for the amount of debt the government can accumulate. There are a few ways the government can rack up debt. Just like you go for a loan at the bank, the government borrows money from investors. They issue and sell treasury bonds that accrue interest at fixed periods until maturity when they are worth the face value (and are worth more than the investors initially paid for them.)

The government also borrows from the Social Security trust fund created from the payroll tax paid by employers. As unemployment increases in this country, the amount of money from payrolls decreases and the Social Security fund is depleted. In my opinion, history will show that the worst investments Americans will have made is having their earnings directed to social security. It should be an optional deduction, not mandatory. We’re essentially being forced to invest (and allow the government to use our hard-earned money interest-free.) The government, in theory needs to pay back the value of all the treasuries they have issued as well as all the draws they have made on the Social Security trust. This is part of the debt and it is pushing at the ceiling of the limit on how much they should sensibly hold.

What about the “Deficit”?

We hear a lot about the deficit. What it is; where it comes from. We all pay taxes–in one way or another. Tax revenue should be enough to support our country. By definition, the deficit is how much the government spends in excess of how much annual tax revenue they collect. The present administration feels that the wealthy should pay more in taxes (which, of course, would increase the revenues to the government.) So, if in fact, the wealthy (as defined by those who make more than 250,000 annually) pays more, the deficit should go down. The problem is that the government is no more responsible with their budget than the average American seems to be. They can’t seem to cut back on spending in order to reduce the discrepancy between how much they take in, and how much goes out. Like so many of us, the more they have, the more they spend.

I believe that those of us who are blessed with financial stability don’t want to see any American go without. There is nothing wrong with helping the less fortunate. We have plenty of money in this country. The issue is where that money comes from. We need to do away with unnecessary administrative offices and committee and to admit that this government is poorly organized and stuck in bureaucracy that unless we stop the slow bleed, the deficit will continue to grow until the very future of our country is compromised.

Last year, the deficit was 1.29 trillion dollars — meaning that over and above the tax revenue we generated, the government still ended up that much in the hole. Imagine a household that takes in $2000 per month, but spends $10,000. And those figures are not even proportional to the government overspending.  It wouldn’t take that household long to be in default and financial ruin. The national debt is $14 trillion — the total of all the deficits, past and present. What if your household ran like this? The people we have elected over the years continue to print money and spend it like it’s real. At this point, it’s no more real than Monopoly money!

We Americans owe debt to mortgage companies and credit cards, but who does the government owe money to? For starters, the government owes $4.6 trillion borrowed from Social Security — the alleged retirement security for the American worker.  Why should these outrageous acts of government compromise our future? They are thieves without masks, risking our future without our consent, and with no sense of guilt that I can detect. More debt comes from the reported $9.7 trillion owed to investors in treasury securities. Half of these investors are reported as foreign entities, including China who owns a reported $1.15 trillion and Japan who owns $907 billion worth of U.S. government backed securities.

And the worst thing? Many Americans just don’t understand. Our government officials stand together as if they are doing a great job. In private enterprise none of them would have a job left and with their credibility issues would never be rehired except to maybe collect the garbage. That is their legacy as leaders.

I have to ask — why is it we Americans are not more outraged? Why are we not marching in the streets of Washington D.C., demanding that our leaders become accountable to us. Although I am not an Obama guy, I blame every single government official of the last 40 years. Those who acted and those who did not stand up to stop this egregious situation. American is the greatest country in the world. We cannot–and should not–allow this to go on.

 

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