Why National Debt is a Problem

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Think about the government the same way you think about your own budget. They “earn” money by charging taxes. They have “bills” that they need to pay, such as government programs, public subsidies, and make payments on loans to other countries.  The problem here is that the federal government does not need to balance its budget. It does not have to account for all the money that it spends but can’t actually pay for. If you want to see what we currently owe, check out this debt clock. At the time I’m writing this, each person has to make almost $58,000 more than they already are just to cover the amount of money the government has spent up til now.

This makes me angry. There are plenty of things that I want: a new rug for my ugly apartment, a fancy dinner out every once in awhile, a better computer, the newest iPhone. But these things cost money, and I don’t have enough. Plus I know I am incurring debt through student loans that I will have to pay off. I could use credit to get the stuff I want right now, but someone will come looking for the money. Because I won’t have it, I’ll have to file for bankruptcy. Yes, I might get to keep my new iPhone, but they would probably turn off my service and make it worthless. My credit will be so damaged that it will affect my job prospects and my financial choices.

If I was the federal government, though, it would not matter. If I were the government, I’d have a few choices. I could print more money so that I could pay off all my debt, causing inflation. If I didn’t want to do that, I could just raise taxes and make other people cover my debt so that I broke even. Another option would be to offer bonds. Kind of like that saving bond your grandma got you for your 8th birthday. Investors bid on the bond and whatever they pay for it is what the government earns. The problem with this system is that the loan will eventually come due. With interest. So the government will end up owing even more than they raised. If tax revenue has not increased, they will be unable to pay off the now-due loan. They will be presented with the same three options as before. So they will issue another bond. And it will go on and on.

Eventually, though, nobody will want to buy the bond because it will be too big of a risk. And if you don’t think that is a possibility, look at Greece. Then the government would be forced to either print more money—and make the dollar basically worthless—or raise taxes to a dangerously high level that could force companies out of business and people out of work.

It is a vicious and dangerous cycle. It worries me, and it should worry you, too.

Never Leave Home Without It

Books on economics can be weighty tomes. When they need to be transported, you need the right item for the job. I am fortunate to have a good, spacious backpack for such toting purposes. I couldn’t lug my thesis around, either, if it weren’t for this functional fellow. I have had it for ages—since high school actually—and it has never let me down. It keeps everything clean, dry, and wrinkle free, which means protected and preserved.

I didn’t know what I would be doing with this original item when I first forked over the cash some years ago. I wanted to be like everyone else and just have one over my shoulder. I was careful about the appearance and size, however, so that I would not regret my choice later on. I wanted a stylish (but not too) but workhorse model. I apparently was spot on. I still love its many hidden compartments, the adjustable strap, the roomy interior, and the waterproof and sturdy fabric. It is well made and will no doubt live to see many a new day ahead as my ubiquitous companion. It is a survivor to be sure.

Economics is my passion and I study it in its macrocosmic context as applied to the western world. But I have my own personal sort of economics as well. This has to do with staying frugal and avoiding an unnecessary strain on my meager budget—at least for the moment until after graduation. Thus, my reliable but cool backpack serves me well. It fulfills its purpose and I don’t have to start saving for a new one any time soon. I could recite a paean to it: it is that good. It wasn’t that expensive either; just looked well-made and dependable. I was right!

My books have found a happy home within its cozy confines. They seem to fall into place like magic. I can fit most all my books inside along with a fold-up rain jacket, my cell phone, a wallet, and some cosmetics. Yes, all that in one medium-sized model. I love the way it never shows dirt as it is a dark grey, almost charcoal, color. I wouldn’t care if it did. It is all about sturdiness and reliability. Frankly, if I had to get a new one, I am not sure what I would select.

So I never leave home without it. It goes to the movies, restaurants, class, on vacation, to the gym, shopping, to mom’s house, and more. It has a constant place at my side. It replaces the need for a handbag or fanny pack. It does double duty as a mini suitcase as well. It is all purpose and totally utilitarian. Practicality is its middle name. If I had to advise students of one item to splurge on before starting college, it would be to purchase a great backpack for their every need. As one for high school graduation at the very least and have it ready to do its work freshman year.

There’s a Reason it is Called a Pedi-CURE

I walk a lot and in all kinds of weather. Sometimes, I never know where my day will take me. I try to be vigilant about good footwear to avoid the pitfalls of ill-fitting shoes and bad weather. However, there is another kind of problem that plagues the feet and that is fungus. Yes, that unsightly, itchy condition that can happen to anyone. I am focused on not having it happen to me!

I bring this up because I was having a pedicure recently and looked over to the chair next to me, as I often do, just to make eye contact and perhaps have a chat. The woman ensconced before her manicurist had the worst case of toenail fungus I have ever seen. Her toes were a blackish yellow, brittle, and unsightly. The big toenail looked yellow and about to fall off. It gave me a scare. How did she get that way and how could I avoid it? Would I be next?

I vowed to take care of my feet. I selected a salon that used sterilizing equipment. I promised not to wear tight shoes and to put only waterproof ones on in the rain. I heard that excess moisture can be the culprit when it comes to contracting fungus. I bought some foot powder as a preventative and possible cure. I was on the lookout for any telltale signs. A smelly goo was a tipoff to be sure.

A pedicure for me became a pedi-cure, or a therapeutic procedure that I felt was now required. It is a great excuse to indulge often in something pleasurable in the interests of food health. I is no longer an infrequent treat. I justify the expenditure this way and keep it at the top of my budget. It is not a discretionary item that is optional and that can be shoved aside when you are busy. Plus, it is a great way to perk up the spirits when you are feeling down.

Young people don’t get many diseases. At best, they suffer from the flu or a cold. Thus, foot health is something concrete you can do for yourself that applies to people of any age. There is no limit as to whom may be afflicted, but from what I read, I know you can protect yourself. Keeping my feet attractive and fungus free is a newly found goal that is spurring my interest. I have done my research and at the top of my game when it comes to spotting signs and symptoms.

The ads on TV are pretty funny when it comes to toenail fungus. The levity might work for product sales, but it is no laughing matter. I have visions of that women in the salon in my nightmares! I also know that cures are iffy at best and take a long time. There are prescription medications, but they are hard on the liver. Topical treatments are a daily chore. I am bound and determined to avoid such recourse by taking care of myself.

It Doesn’t Matter What You Call It.

Because states—and Washington D.C.—have the right to tax its residents however it sees fit, it can vary greatly from state to state. In some states, there is no income tax at all. The following states do not tax individual income: Alaska, Florida, Nevada, South Dakota, Texas,Washington, and Wyoming. In addition, Tennessee and New Hampshire only tax things like interest earned from stocks and bonds. It sounds like a good deal and that people should be flocking there to keep more of their earned money in their pockets. But is that the whole story? Of course not.

States need money. It has to come from somewhere. Even if you aren’t paying income tax, it is coming from somewhere. Some states, like Alaska and Nevada, have other ways to make up for their loss in revenue. Nevada has gambling money, and Alaska has oil money. Other states use one or a combination of sales, corporate, and property taxes to generate capital. Most places even let governments on the local level get in on the action.

In other words, they’re still getting your money. They just call it something different. For example, Texas and New Hampshire both made the top 10 list of states with the highest property taxes. So maybe they don’t take your hard earned cash right out of your check every week but the land your house is sitting on is going to cost you. Wyoming and New Hampshire are in the top ten for vehicle taxes, too. Texas and Washington also break the top 15 of states with the highest sales tax rates. Wyoming’s tax base is 99% and is so different that I have to study it separately, and it taxes its residents enough that it ends up taking the 4th highest amount in the country. But, you know, no income tax.

Be smart, America. Don’t get suckered in by relocation sales pitches. When they throw things like “no sales tax,” “no income tax,” or “corporate tax breaks and incentives” at you, take a look at what they mean. Do real research when you are debating a move. If you have a choice on where to go, think about what you want your future to look like. Are you planning to buy a house or a car? Are you looking for somewhere that is small business friendly? What about if you are near retirement age? There is a lot to consider when you look at the tax implications. Look not just at how much they plan on taking out of your check. Look into how much they plan on getting out of your checking account, too. Some of these places might end up seeming too good to be true. You might change your mind and pick somewhere else. That low priced real estate they’re trying to sell you on might eat you alive in property taxes. Look at the state and local sales tax rates. You might be surprised.

You don’t have a choice about the cost of taxes at the federal level, but moving to a different county or state can impact how much of your money you get to keep. Don’t forget that.

Where is Your Money Going, America?

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This is an interesting question. Believe it or not, the White House actually tells you.

Since social security and medicare are collected separately and itemized on your W-2, these are the big ticket items. But they are obvious because they’re listed clearly on your tax forms. You can go back and look for exactly what you are paying into these.

Do you know where the rest of your money goes?

At least back through 2008, defense and healthcare have been the top two. They occasionally flip-flop for the top slot. But with the ACA being in full effect now, it probably is no surprise to anyone that healthcare is the biggest money grubber at a little over a quarter of all remaining funds collected. Nearly half of the money going into healthcare goes to Medicaid and CHiP.

As I mentioned, defense takes up the next biggest piece of thepie, at 24%. However, out of that total, less than 6% goes toward military pay and benefits. That is health care, insurance, and pay for members and their families. We are talking .015% of total budget. This is not a large amount. Equipment and supplies are the big ticket item here at nearly 10% of the defense budget. How much of that do you think are huge government contracts that senators push for projects in their respective states? I bet it’s an impressive number.

After that, most of your money goes toward federal pensions and public services. Which is not very surprising since congress can make back up to 80% of their pay for their retirement, and they get paid handsomely. You only have to serve five years—in contrast most companies and public service make people work 20—and senators are elected for six, so it is a done deal for them. They still have to wait for retirement age, but still.

The next thing your tax dollars pay for is interest on money that the government owes on bills they aren’t paying back or have not finished paying. Nice, right?

Rounding out the bottom are things like VA programs, the justice system, state parks and other natural resources, science and space programs, and natural disaster funds.

I know people who really like getting a large tax refund at the end of the year. I do not. Here’s why: If you get a lot of money back, you are giving the government an interest-free loan for whatever they want during the year. Then you or someone you hire has to navigate confusing tax code—all to get as much of your money back as you can. If your deductions were set up properly, the government could only take what it actually deserved. You would break even at tax time. Granted, it is not as fun anticipating a zero balance. But which would you rather have: that money in your accounts all year helping you pay bills or earn interest, or letting the government borrow it interest-free?

Think about it.