Connect with me on LinkedIn

The Intersection of Blind Faith and Unvarnished Truth

[ 0 ] December 4, 2013 |

Spectrum Financial Group, NJ, FL, TruthI don’t claim to be the most well read person despite the fact that I read a great deal.  I also don’t claim to be the definitive source on all things economic and financial although I have worked my entire career counseling wealthy families on financial, estate and philanthropic planning matters.

What I do claim is that I am confused about the current state of our economy, the path of our country’s future and the blindness of both the right and left sides of our political and economic spectrum.  It strikes me that we may be near the intersection of blind faith and the unvarnished truth and that there will be a reckoning in the not-too-distant future.

As cathartic as writing thoughts and feelings may be, nothing mitigates the very real concern that I hold for our futures, not to mention our children’s and our grandchildren’s futures.  While Washington, Wall Street and the press “spin” a new reality almost daily, we as individuals, who have labored long and hard to reach where we are today, see a different reality…dare I say a true reality.

Truth…our national debt is somewhere in the area of $17 trillion (to get a grasp of its true enormity, that is $17,000,000,000,000…kind of feels different when all the zeros are added!).  When you add state and local debt (estimated to be in excess of $4 trillion), it becomes an even more significant number.  Even if the Affordable Care Act works perfectly and doesn’t cost the estimated $2 to $3 trillion as projected by various sources, folks, we have a national financial planning problem.

Just our basic national debt is in excess of $54,000 for every man, woman and child in our country…another truth!  And, the national debt is growing by over $2.7 billion every day (that’s $3,000 more each year for U.S. citizen).

It’s inevitable that our country will always have some element of debt.  Frankly, it would be virtually impossible not to have national debt.  And, to be equally frank, some national debt is desirable and necessary.  But, is this level of debt, not to mention the specter of increasing national debt, sustainable?

The problem is that, when and if national debt ever shrinks, it will only be done through tax collections.  This leads to the next set of truths which are equally as disturbing as those shared above.

Truth…the national unemployment rate is 7.3%.  The broader U-6 unemployment rate, which includes the unemployed, marginally attached workers, part-time workers who want full-time work and those who have dropped out of the workforce, is currently 14.3%.  These are not people who can pay taxes to reduce national debt.

Truth…47 million Americans are on food stamp programs.  It is estimated that over 100 million Americans receive some form of living subsidy or welfare. In several states (Massachusetts and Hawaii), the maximum welfare package available to families provide pre-tax wage equivalent benefits in excess of $50,000 per year (33 states provide welfare packages in excess of $30,000 pre-tax equivalents).  This group also isn’t capable of helping to reduce debt…or likely to find paying jobs at over $24 per hour to equal their welfare packages.

Truth…47% of all Americans pay no taxes.  As politically incorrect as his pre-election comments were, Mitt Romney was right.  The top 10% of taxpayers pay 70% of all tax collections.  The middle class in our country is stretched to its limits but is honestly trying to keep their jobs, save for retirement, support their communities and contribute to the Treasury.

So it appears glaringly obvious to this writer that reducing our national debt relies on either substantial economic growth in our country and/or higher taxation.  My sense is that our economy is faced with the task of untying a Gordian knot.

Where will good paying job opportunities be created?  What is the incentive for those unemployed to seek taxable jobs in light of various welfare subsidies?  What skills will be required to enter the new workforce?

When manufacturing represents only 17% of our GDP and with over 50% provided by finance, insurance, leasing, health care, social assistance, professional, business and educational services and government, where will the opportunities for modestly educated Americans be created?   And with government accounting for 13% of GDP, one wonders how it may expand the workforce in a meaningful way.

Quantitative Easing hasn’t made great inroads in spurring new job creation, although it certainly has helped the financial markets and banking industry.  Cheap money comes at a great cost though.  The trillions of dollars spent in this program haven’t percolated down equally to most Americans but it may enhance the already burgeoning national deficit in the future.

Thankfully, it has helped keep interest rates at historically low levels.  I can’t imagine the cost of carrying our national debt if natural market forces were allowed to prevail or, in another vein, how equity markets would perform in a more organic environment.

My guess is that, over time, equilibrium will be struck but it is likely to be very painful getting there.  In light of anemic job creation and the strong possibility of continued lackluster future growth, taxation is almost certainly to rise to not only support various entitlements but also to fund the national debt.  Additionally, because of the makeup of tax receipts in our country, the burden will fall squarely on the shoulders of our wealthiest citizens.  And, with the increasingly expanding pool of entitlement recipients coupled with spin on the wealthy embraced by the press and current political factions, tax based economic expansion (easing) has significant opposition in, at least, our near future.

How that affects job creation, capital development and philanthropic programs is sure to be an ongoing debate.  The prospect of higher marginal tax rates, elimination of deductions, “millionaire taxes” and estate taxation appear to be very real and logical future developments.  And, the question of morphing into a more European tax model is also a possibility.

While this column may give one a “sky is falling” impression, that is not its intent.  This is still the greatest country in the world and opportunities abound.  The closing thought is that it is time to understand the playing field ahead of us and to be proactive in our planning.  There are many programs available to address the emerging economy that wealthy clients, families and organizations should be aware of to make the best planning decisions for the future.  We are here to help eliminate blind faith and address the unvarnished truths of our future.  Give us a call.

Content provide by George Klahre.

Spectrum Financial

Spectrum Financial Solutions, LLC located in New Jersey and Spectrum Financial Solutions, LLC located in FL have been assisting individuals and businesses with their financial challenges for over 30 years.  Do you need to know about Privately Financed Universal Life Insurance located in FL? Call us today. Family Legacy Unitrust Edge located in NJ has been created to help families establish lifetime legacies in a unique manner that simultaneously addresses social and family needs. Applicable Federal Rates located in FL affect many of your planning tools.

George Klahre
10110 SE Osprey Pointe Dr.
Hobe Sound, FL 33455
732-450-9530
Facebook | LinkedIn | Blog |  Email

Share

Tags: , , ,

Category: About Us, Community Matters, General Information, George Klahre, CFP, LLC, Spectrum Financial Solutions

About Insurance Expert: View author profile.

Leave a Reply




If you want a picture to show with your comment, go get a Gravatar.

Complete to Proceed *