America Peals

Are you addicted to debt? According to I.O.U.S.A author and movie producer Addison Wiggins, America is in serious trouble. “The only issue more severe than this is the idea that an Islamic fundamentalist would get his or her hands on a nuclear weapon and use it against us. Beyond that there’s nothing more severe than this,” said Judd Gregg, the Republican leader in the Senate Budget Committee, regarding the Federal Balance sheet.

According to Wiggin, Main Street America manages credit limits and not savings. So while the media covers every minute of bailout package’s debate, Americans need to know about their money, Wall Street and the government’s role in the economy, now more than ever. Wiggin’s stresses that Americans need to take charge of their money and their understanding of the democratic process if our country is to survive a recession.

Wiggin, who spoke to me a few months back, breaks down the economic crisis into four deficits.

The Budget Deficit:

The budget deficit is the difference between what the federal government spends and what it takes in revenues annually. At present, the federal budget is running a deficit. During the past 40 years, the government has run 35 budget deficits and only five surpluses. To defray a deficit, the government can cut spending or raise revenues. However, this slows the government down. Now, Social Security during this time, has run, large annual surpluses. Since the early 1980’s, the government has dipped into the social security surpluses to pay down the federal government debt.

By 2017, the social security program will pay out more than it receives. I refer to this as the looming Silver Tsunami. Baby Boomers start needing their Social Security, which has offset federal deficits. Unless the country raises taxes dramatically or the federal government closes down, Americans will be begetting the largest history of debt to its children. And, this is not ethical.

Right now, currency is what takes the biggest blow. The public doesn’t understand deficit and debt, so don’t know how to hold politicians accountable.

The Personal Savings Deficit:

As a country, we live beyond our means.

The economic trouble we are seeing on Wall Street is the result of saving deficit. In the past a couple would save money and make a down payment on a home. There were no adjustable rate mortgage 30 years ago. After the tech bubble burst and 9/11, there was enormous competition for riskier and risker borrowers. As a result, people now manage credit limits and NOT SAVINGS.

In stark comparison, the average Chinese couple saves 40% of each paycheck, not knowing what tomorrow will bring.

Americans haven’t seen a rainy day so they do not save for one. Most American’s live from paycheck to paycheck.

Our traditional values have been discarded. People don’t change behavior until crisis. And, the value of currency is hard to define…in what currency do you save money? The government prints money but that places currency in jeopardy. We can pretend and dole out $700 million dollars but we need to borrow from future generation and overseas.

The Trade deficit:

The United States and China have an important relationship that public needs to understand. We are exporting more than we are importing. We are not manufacturing the goods we used to. Developing economies are less dependent on US consumption. As the US exports our production of goods to China, China re-invests in the US by purchasing US treasuries. If China were to ask us for the money they have invested, the US interest rates would sore and the blow would be crippling to the US economy.

More of the US debt purchased by banks and foreign lenders. Foreign entities own us. Reliance on foreign lenders will not have our interest in mind.

The Leadership Deficit:

We need to be harder on our politicians. Expect government programs to cut back. The purpose of I.O.U.S.A. is to empower Americans to know more about our economy. The more the people know, the more congress will know. We need to talk about social security, without promising more.

The budget committee with Greenspan comprises bankers! Not elected officials. No one is standing up. NO one is addressing issues.

Is there hope: Yes! Focus on balance, an attitude we bring to government. Americans need to hold their politicians accountable. Americans should expect that the government will cut back on programs.