Holland Column

Retirement & Financial Planning

Holland Financial

$21,203,252,989,829 and Counting

At the time I am writing this, the number in the headline of this column is the total of our national debt. In fact, the last several numbers were spinning so fast on the “debt clock” (http://www.usdebtclock.org) that the figure changed by over $100,000 by the time I was able to jot it down.

With that astronomical number in mind, “Richard,” asked my personal opinion on our country’s debt situation:

“[Your recent PlanStronger column] . . . does not mention the increasing federal cost for servicing the 20-trillion-dollar debt as interest rates rise. Eventually many federal programs will probably receive significant cuts as the amount of interest on treasury bonds, notes and bills increases. What do we do about all of that?”

I’m going to tread lightly on this subject because a question, like this one, can be a political “landmine,” and this is not a political column. That being said, I’m an eternal optimist. I believe there are ways to work through, and out of, debt. Maybe slowing it down first and then reducing it over time. What I know for certain is, if we choose to do nothing about the problem, interest costs will continue to increase. Why? Because, each year, our country borrows more and more money to make up the difference between the revenue it takes in and the expenses it pays out. Every year, interest is added to the debt. Eventually, it’s difficult to pay the interest because it becomes a larger and larger part of the total budget. Just ask Greece.

There are no easy answers, but here are a few options:

1. Increase revenue to exceed expenses. Translation: Raise taxes – nobody’s favorite solution. And, in light of the recent income tax overhaul, it’s probably unlikely there will be additional reform, at least for individuals, in the near future.

2. Reduce expenses so money is available to start paying down the debt (or so we can stop borrowing the money which is added to the debt each year). This is where governmental programs and excesses might have to be trimmed. It sounds like common sense . . . but, this requires votes by our elected representatives – most of whom want to get reelected.

3. My personal favorite is the optimistic solution: Grow our way out! Government needs to be “pro-business” and stimulate the economy! A vibrant, strong and growing economy can significantly reduce, or totally eradicate, debt without causing a financial hardship to the American people or to the programs and services on which some citizens rely.

Maybe the answer is a combination of the suggestions above. I don’t claim to have a solution to this dilemma. It’s a very big problem, and it didn’t happen overnight. I do believe we can turn the situation around so this enormous debt is not our legacy to future generations.

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