The US Debt Clock is ticking and has already crossed 26 trillion mark. Debt owed per citizen is nearing $80,000, and the debt per taxpayer has already passed $209,000. Years of mismanagement by both Republicans and Democrats parties have drowned America in debt. United States interest payment on the Federal Debt is more than one-third of the national budget.
George Bush added nearly 6 trillion to the national debt. President Obama added 8.5 trillion during his tenure, and amid the coronavirus pandemic President Trump may very well create a new world record. According to CBO, the total amount of outstanding federal debt has soared from 79% of GDP in 2019 to 101% this year and will hit 108% next year.
The USA is still the world leader despite its reckless financial situation because the US dollar is the reserve currency of the world. However, the appetite of the world for US debt is decreasing gradually.
Eventually, all this borrowing has to end or reduced drastically. This can only be achieved by a combination of tax hikes, spending cuts and benefit modifications.
Tax hikes will devastate already struggling businesses. Bad debt will propel the commercial debt collection activity by many folds. To cope with increased taxes, businesses tent to lay off employees and streamline employees, which pushes the unemployment rate up. Tax increases are not that simple to implement. Higher unemployment means less money to spend, that in turn directly hurts the profit margins of businesses. This is a vicious circle.
The Libertarian idea of responsibility at both government and individual levels is the perfect answer to our mounting debt problems. Governments have to stop spoon-feeding citizens and citizens need to take personal responsibility as well. However, the astronomical rise in national debt could derail all ideas to the point of no return. National bankruptcy is not an option for governments. If the USA were to print money to pay off all the debt, the value of the dollar would drop like a rock, and inflation will rise drastically. Everything we buy will become expensive by many folds.
Rising debt will eventually trickle down to ordinary citizens. The good life which baby boomers have enjoyed during their lifetime may not last. Gen Y and Gen Z will have to be far financially responsible. People who do not adapt will have to bear the wrath of unemployment and debt recovery calls from a business collection agency.
Many business and stock market analysts recommend to have 10% of your wealth in physical gold or invest in gold mining companies. Russia and China have been increasing the gold reserves in the last two decades. They are predicting the end of the US dollar as a global currency, as we know today.
Personal saving rates in Japan, China and in most South-Asian countries has traditionally been higher. Most countries do not have a government-funded support system like in the USA. Saving 20% of their paycheck is a fairly common strategy to build personal wealth over time. Building a good retirement portfolio means a lot of personal sacrifices, and controlling the urge to spend.
Mutual responsibility of government and citizens is required immediately. Otherwise, our rising national debt will burst one day and the quality of life we are used to with the borrowed money will permanently end.
