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Friday, November 2, 2012

Finance 101

In slightly less than a month, the federal budget control act is scheduled to implement spending cuts that might very well result in a serious new blow to our economy.  If nothing is changed in that law, on January 1, 2013 the average person’s household tax payments will go up by $3,500, and the mandated spending cut of $110 billion would potentially threaten the nation's security by being mostly taken from the defense budget.  Nonetheless, the independent Congressional Budget Office projects that it will at least improve the U.S. $16 trillion dollar part of the debt problem markedly by 2014, though we will still be in debt somewhere in the vicinity of 2 trillion dollars each year going forward from 2014.

But the hidden real story is even more significant.  The current national debt is actually much more than 16 Trillion dollars (over $140,000 per U.S. taxpayer by the way.)  Not only is this increasing debt from the money our government borrows from investors (like China) but also money the government owes itself (like the Social Security trust fund which has been raided by congress to attempt to balance its spending nearly every year for almost 40 years and is virtually empty.)  When you take all of this into account, our government actually owes more than $70 trillion going forward. This number also includes money we can project that we have committed to pay in the relatively near future for things like Medicare (about $38 trillion.) 

Part of the problem with both Medicare and Social Security is our U.S. population’s increased life expectancy.  Back in 1935, when the official retirement age was put at 65, life expectancy averaged out at about 62, now men live on average to 83, women to 85.  Additionally, when Medicare was created in 1965, 16 workers contributed retirement funds to the program for every person receiving these funds.  The situation was similar with Social Security when it was created.  Today the ratio is about three to one and estimates are that in 2030, it could be around two to one. If you extend it out even further, the number of Americans over 65 will double from about 40 million to 80 million by around 2050. 

The huge amount of money planned to be chopped from the Federal budget in the arena of Defense spending is particularly troubling.  Since about 1960 the percentage of the national budget that was provided for defense has fallen from 52 percent to 23 percent; the part spent on health has gone up from one percent to 23 percent.  Both are important, but how do we go about financing both adequately?  Which of the many demands like these two are really the responsibility of the federal government?

Our nation needs a complete budget overhaul in what government is expected to provide and when, especially at the federal level.  We have seen much of Europe plunge into chaos from its reliance on the socialist provider model, and unless someone takes the reins to change our approach to government, we could very likely follow in that collapse.

If we are to be good and faithful stewards of what we are given in this world, we need to think long and hard about what we allow and expect our government to do.  We also need to think about what God expects us to do in serving our fellow man.  Many in this country have turned the job of “charity assistance” over to the government.  Does the government do an efficient job of providing this assistance, or does the government just make those who receive it comfortable and dependent on it?  Is the government efficient at the work it does with our money?  I don’t pretend to know the answer to those questions, but it is certainly part of the overall question that needs to be answered.  What exactly is government expected to provide versus what is my personal responsibility?

I don’t know what either of the main presidential candidates or congressional candidates will really do in January to improve the situation.  They all seem to have very different positions in the matter.  I do know that if the ones elected continue to spend at the wicked rate that both republicans and democrats have done over the last 12 years, we are in serious trouble.  I pray that God guides us all in our decisions on voting day.

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