In order to pay off the long-term promises made by the U.S. government to various groups, every person in America would currently have to pay $145,000, and that number is rising. That number does not include personal debt from credit cards, mortgages, or loans. Meanwhile, the average American puts only $1 out of every $100 earned into savings.
Many are warning that this combination of factors is leading to a major fiscal disaster, and could result in decreasing home values, increasing interest rates, job losses, stagnating wages, and cuts in crucial government services.
Savings Down
Americans have gone from saving 8 percent of their income in the 1950s to saving less than 1 percent today. At the same time, household debt is rising, and in 2000 surpassed 18 percent of disposable income for the first time in 20 years. Credit card debt alone accounts for an average of $7,200 per household.
Some see the rise in debt as echoed by the rise of obesity: a pervasive I-must-have-it-now attitude.
Government Debt Another Problem
The government's debt is also a problem. But while many are concerned about the size of the national debt, a poll showed that only 35 percent were willing to experience a drop in services to balance the budget. Only 18 percent were willing to raise taxes to keep current services.
The nation's three biggest service programs (Social Security, Medicare and Medicaid) involve huge costs that increase as the population ages. If you add up current debt and deficit, and promises for those and other programs, the total comes to $43 trillion, or $145,000 for every American.
Catastrophe may still be avoidable, but it may require the American people and government to take steps to reduce the federal deficit, the trade deficit, and possibly personal debt.
In many ways, our economy is a house of cards, depending on debts that everyone hopes never get called in. But costs are increasing, and the house of cards could eventually collapse.
Some of the biggest costs are in medical bills--you'll note that two of the three big programs are Medicare and Medicaid. The Medicare drug bill passed in 2003 was initially projected to cost $400 billion over a 10-year period, but the estimate now is closer to $1.5 trillion.
The healthier we are as a nation, the healthier our economy will be. And the healthier you are as a person, the healthier your personal finances will be, as you will avoid crippling medical costs. Here's my prescription for beating the statisticians: