A Goal in Search of Leadership | Fee-Only Financial Planners Long Island

Our elected leaders in Washington, D.C. are playing a dangerous game of chicken. They are making everyone nervous about the deadline (August 2, 2011) for extending the debt ceiling. While every expert on the subject, including Congress, knows that the only solution is to raise the debt ceiling, they are using this to score points for the 2012 election year. Therefore, we should expect another week of this political circus to continue before there is any agreement.

My guess is as good as yours and your congressmen’s as to what the details will be. There will be a last minute solution to this. If not, our U.S. Treasury Bills, Notes and Bonds will be downgraded and that will be a huge tax on all Americans, because we will have to pay higher interest rates to borrow money. That in turn will increase the deficit and the debt of this country. It will not help solve the debt, deficit or the unemployment problems. It will make them worse.

Some Facts

Here are some of the facts. The United States of America has borrowed $14 trillion dollars from foreign countries, our own citizens and their pension plans. With about 300 million citizens in this country that means we each owe about $47,000. That’s every man, women and child in this country owes $47,000 and that number is increasing each year at an alarming rate. The Federal Government is now borrowing about 42 cents on every dollar it spends on our behalf.

The average citizen has not been paying attention to this topic. Most still have no clue about the subject, because it is not real to them, or, they think it’s someone else’s problem and hope it won’t impact their personal finances. I have been thinking about a way to engage the average citizen into thinking about how this might impact them and what they can do as individuals to solve the problem.


Here is an idea. Let’s have the government issue a loan payment book to each individual, based on their current age, life expectancy and their share of the debt.

Getting Real

A 45 year old person can be expected to live to age 85, so he or she would have 40 years of monthly payments of about $196 per month at 4% interest. A 65 year old would have about 20 years to pay down his or her portion of the debt at $285 per month. A newborn would get a payment book issued with their social security number that starts paying back their share of the debt at 18. With their life expectancy being 90 they will have 72 years to pay down their share of the debt. That payment would be about $166 per month for 72 years. Of course you could elect to pay the whole lump sum by writing a check for $47,000 to the U.S. Treasury. What happens if you die before the debt is paid off? Your estate would be responsible to paying off the remaining balance, or you could purchase life insurance that would pay off the debt on behalf of your estate.

The Tough Decisions

It sounds cruel to be issuing a payment book to a newborn. It is! It does not feel right to have our children and grandchildren stuck with this burden created by the people we sent to Washington, D.C. to represent us. It turns out, they represented themselves and we let them get away with it, because we did not think it was worth our time to debate the matter.

Instead of a debt ceiling, requiring a balanced budget will force us to pay our bills and make the tough decisions every year instead of kicking the can down the road as our politicians have been doing for decades. Each of our 50 States has to have a balanced budget, they have gotten into trouble with future promises (kicking the can down the road) to pay pensions and benefits they can’t afford anymore and now it’s time for them to pay the piper with a balanced budget requirement. Now they have to make the cuts to pay those promises. The Federal Government can print money, destroy the value of the U.S. Dollar and blame someone else for the problem. The States can’t print money, so they have to deal with the problems and make tough decisions on an annual basis.

We all know the Federal Government won’t issue a loan payment book. But you now know the impact on you and every member of your family. It’s a real liability on your personal balance sheet. To cure the problem, the Federal Government will extract this amount of money, and more, from your wallet. They would rather do it in a way you don’t notice. Less purchasing power of the U.S. Dollar, higher inflation, hidden taxes, higher oil prices (crude oil is traded in U.S. Dollars and the price of oil is inversely correlated with the value of the dollar).


“One of the true tests of leadership is the ability to recognize a problem before it becomes an emergency.” — Arnold H. Glasgow

I don’t expect the debt problem to be cured perfectly, but we need leadership to be on a path that will clearly stop the bleeding and reverse the current trajectory of the debt. Paying off the debt, by a certain date, is a goal looking for leadership. Progress, not perfection, is what we need between now and the 2012 election. Mr. President, it’s time to lead.

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