Tremors in the financial system felt late last year—such as the crumbling of Countrywide—at first felt like blips on the radar screen, and they were tempered by all-time highs in stock indexes as recently as last October. What a difference a year makes.
As a physician and an investor, chances are you are not at risk of defaulting on a home loan. But your balance sheet has most likely taken some substantial hits. Some of you may be putting off retirement longer than you had hoped. Others may be moving funds away from volatile stocks into more secure investments. All the while, a larger danger looms.
Recently, news unfolded that the National Debt Clock near Times Square needed to add another digit to keep track of the hole we’ve dug ourselves. Most Americans don’t know much about the national debt. But if you have children and if you have grandchildren—or if you expect to at some point in the future—you should strive to learn more about the extra digits.
In short, our government spends more than it has. The national debt is like a giant credit card bill, and that bill has just soared over the $10 trillion mark. One reason credit cards are so dangerous is that they allow buyers to purchase something without feeling the pain of that purchase. You want a new sweater. You hand the cashier a credit card. The cashier hands you the sweater, and gives you the card back. You’ve gotten something for nothing. Until 30 days later, when the bill comes, with the finance charges added.
That’s the national debt in its simplest terms. We spend more than we have. The debt piles up, with interest. And the problem is about to get significantly worse as the Baby Boomers near retirement and become eligible for Medicare. When that debt comes due, the costs will be severe.
Some economists speculate that without cuts to government entitlement programs, by 2020, we’ll have only enough money to pay the interest on the debt and a few programs, like Social Security. What a frightening thought.
You and I won’t bear the consequences of “spend now, pay later.” But our children and their children will. As an investor, there isn’t much you can do about our $10 trillion national debt. Your best bet is to save like mad for your own family, and to use the power of your vote wisely.
When you hear a candidate for President say that he will cut taxes for 95% of American working families, increase education spending, push for universal healthcare coverage, and all in a financial downturn, and all while reducing the national debt…ask yourself if that sounds remotely possible.
Mike Hennessy is Chairman and CEO of MJH & Associates.Click here for more Hennessy's Highlights
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