Spending isn’t the problem. Unsustainable spending is.
Our national debt continues to climb to new heights and recently reached the $15.2 trillion level. The only saving grace for America is the historically low level of the U.S. Treasury yield curve.
Moreover, now that the congressional “super committee” failed to enact a plan to cut $1.2 trillion from the deficit over the next decade, automatic spending cuts will begin in January 2013.
President Barack Obama has vowed to veto any attempt to undo those scheduled cuts, which include expiration of the Bush tax cuts.
Democrats oppose reducing entitlement programs such as Medicare and Social Security unless the Republicans agree to larger tax revenue increases. Political gridlock remains very much alive in Washington.
And if you think this is the only debt issue in this country, here’s a list of eye-opening facts courtesy of The American Dream website article, “Debt slavery: 30 facts about debts in America that will blow your mind”:
‰Credit card debt: Today, 46 percent of all Americans carry credit card balances from month to month. Together, we are bearing $798 billion in credit card debt. For households with such debt, the average amount owed is nearly $16,000.
If you can believe it, one out of every seven Americans has at least 10 credit cards.
According to the Federal Reserve’s website calculator, a $10,000 credit card balance with a 13.10 percent interest rate will take 27 years to pay off if you can only make the minimum monthly payments. You will end up repaying a total $21,271.
‰Auto loan debt: The length of auto loans in America keeps getting longer. Today, 45 percent of all new car loans are for more than six years. At some point, this will become a massive problem.
‰Mortgage debt: Home mortgage debt in the United States today is about five times larger than it was 20 years ago.
Historically, the percentage of U.S. residential mortgages in foreclosure has hovered between 1 and 1.15 percent. Today, it’s up around 4.5 percent.
According to MSNBC TV show host Dylan Ratigan, 46 percent of all mortgage properties in Florida, 50 percent in Arizona and 63 percent in Nevada are under water. Overall, nearly 29 percent of all U.S. homes with a mortgage are under water.
‰Medical debt: This is a major problem for a growing number of Americans. One study discovered that 41 percent of all working age Americans either have medical bill problems or are paying off medical debt.
Sadly, the number of Americans who are protected by health insurance continues to decline. An all-time record of 49.9 million Americans do not have health insurance right now, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.
‰Student debt loan: The total today is rapidly approaching $1 trillion. About two-thirds of all college students today graduate with student loan debt, averaging $25,000.
The key to sustaining the current level of debt in the intermediate term is to maintain low interest rates.
Longer term, unsustainable spending is a problem.
Alan P. Weiss is the president of Regent Wealth Management Group in Woodbridge. He is also a certified financial planner and a certified public accountant. Readers are reminded that certain investments and investment strategies may not be appropriate for them and that all investments involve risks and uncertainties. Consult an expert of your choosing if you have questions about investments. More information is available at www.regentwealth.com .