When I teach I often tell my students how national, even international, situations often mirror what occurs with the individual. No clearer case can be made than with the debt. The national debt roared past $9 trillion and the runaway spending continues without check. In essence, the federal government is using its credit card. The sad reality is Americans are choosing to spend like the government is spending, by pulling out the plastic. For the first time since the Great Depression, Americans have a negative savings rate. Credit card debt averages about $10,000 per household today.

              (Click the graph to see a larger image)

The federal government continues to struggle with spending. As I mentioned in a prior entry, the debate over the Alternative Minimum Tax (AMT) reveals many in Congress would choose to continue the tax cuts and not require there to be offsets for them. There is also the illusion that the wars overseas are necessary and thus do not need to be balanced with taxes. Just like with those who took out adjustable mortgages in the last  half decade, when interest rates are low the debt is manageable but once interest rates rise the result is catastrophic. Such is the case with the national debt. If interest rates rise the amount the government is required to pay rises with it. Making this even more troublesome is the fact that many of our creditors reside overseas and possess forms of government that our current president would rather overthrow than borrow from (if the Neo-con playbook were in force everywhere). Combine all this bad news with the crisis looming over entitlement programs such as medicare, medicaid and social security and it does make for a nasty fiscal cocktail.

The wars in Afghanistan and Iraq are extremely costly. If security is required in the next ten years there, the price tag will continue to burden this country. The Christian Science Monitor reports, “The CBO (Congressional Budget Office) estimates that the wars in Iraq and Afghanistan could cost $2.4 trillion over the next decade. Nearly $700 billion of that cost will be interest on the debt to finance the wars.” 

Since taking control of Congress, the Democrats are trying to get Republicans to utilize what is known as PayGo, or Pay-as-you-go, on such issues as the AMT relief and the war but the GOP, usually the party of fiscal responsibility, is running away from their mantra for either reasons of political expediency or to endear themselves to corporate sponsors.

These are issues our nation faces as the election nears. It is time for us to get our fiscal situation in order, whether it be personal or national.