Is Government Spending Leading Us Down an Unsustainable Path?

Last week, the Congressional Budget Office issued an analysis that the U.S. is on an unsustainable budget course:  Click Here for the Article.

A few of the important points from the article you need to know:

  • The nonpartisan Congressional Budget Office said that the U.S. national debt is now 73% of gross domestic product, the highest in history except for a period around World War II. The figure is twice the percentage it was at the end of 2007.
  • It warned that under current law, growing future deficits will push the debt to 100% of GDP 25 years from now. And under another scenario that envisions changes being made to some laws — including removing the so-called automatic budget cuts known as the sequester — the debt would be even higher, at nearly 190%, by 2038.
  • Social Security, Medicare, and Medicaid alone are on a path of costing 14% of GDP by 2038.  That represents $1 out of every $7 made throughout the entire economy on just those three items.

The CBO is addressing that the government needs to act now and if our spending doesn't significantly change with the entitlement programs, we could potentially see a collapse in the economy.

A few things you should prepare for include:

  1. Medicare benefits reducing in the future. So, it important to prepare a health care plan to ensure you don't outlive your life savings.
  2. Tax rates increasing.  This will have a potentially large impact on your IRAs and 401ks.  It’s a good time to convert those IRAs and other retirement accounts to Roth IRAs and life insurance.
  3. You need to expect that inflation will play a more important role as we move forward.

 Make sure you are talking to your advisors to plan ahead for continued governmental fiscal spending so you end up as well as you can what will sure be troubling times in the future.

Chris Abts