“Crises and deadlocks when they occur have at least this advantage, that they force us to think”
—Jawaharlal Nehru
The Heritage Foundation released a seminal report on America’s colossal budget problem.
Although the exposé was penned by prominent and nonpartisan scholars, and was the result of monthslong research, it received very little attention in the news media.
Why? — you would ask.
Well, the simple answer is that this topic is not “sexy” enough; talking about a “plan to fix the debt, cut spending and restore prosperity” seems to hold little editorial weight in newsrooms across the country.
Yet we have a looming problem, folks, an ominous dilemma unheralded in prime-time news and rarely discussed in government circles — but one that’s threatening to shatter the very foundation of our American way of life. The Wall Street Journal indicated recently the enormous federal budget deficit is indeed “an urgent problem.”
How urgent? Nobody knows. At least, it looks as though officials aren’t sold on the idea of budget controls and fiscal discipline as worthwhile goals when so many Americans seem not to care about what’s really going on. That makes it incumbent upon each of us to look beyond the headlines — and recognize there are times when we’re going to have to connect the dots for ourselves to get to the bottom of the real story.
And what’s the real story? It all starts with the debt.
A Runaway Deficit That Keeps “Running Away”
It’s official.
Just a few weeks ago, on Friday, September 30, the United States government closed out its 2016 fiscal year — with a debt level of more than $19.3 trillion. Now, that’s an amount of money most can’t even begin to fathom but it affects all of us in a big way, from retirees to entry-level workers, from college students, even to the babies being born every day across this great land of ours. While the enormous debt remains a concern, there was another, almost unbelievable number revealed that day — it was the amount of new debt added over the past year: $1,422,827,047,452.46.
Incredible, especially when you consider that it is more than twice the $700 billion required to bail out the banks during the early stages of the 2008 financial crisis. So, what exactly did we get for that money? Did the government spend $1.4 trillion achieving world peace, eradicating poverty, or fulfilling some other pipe dream? Did they begin making repairs to America’s crumbling infrastructure, or did they send a giant tax refund check to every man, woman, and child in the country?
We know the answer: It’s gone, having already disappeared down the Washington D.C. rabbit hole….
And consider this: The growth in the deficit during the last fiscal year was the third largest increase in government debt in US history, the two previous occurrences coming in the aftermath of the 2008 financial crisis.
However, there was no financial crisis in 2016 — or was there?
The Fed Keeps Playing the Same “Interest Rate Game”
Larry Summers, a former Harvard University president and prominent government official during and after the 2008 crisis, recently said in Washington Post op-ed, “The Federal Reserve Bank is making the same mistakes over and over again.”
Meanwhile, stories speculating on the future of interest rates have become a daily feature of the financial news. Practically everyone, from the self-taught, pseudo-economist to the self-proclaimed “monetary policy experts,” thinks they are reading the FED tea leaves with just a little better focus and clarity than the next guy.
But they are all wrong — and here’s why.
Let’s take a quick look back. In December 2014, it was anticipated the FED would begin the long-awaited interest rate normalization program with a rumored quarter-point rate increase. However, no rate increase came at that time though it was announced we should expect at least two, and perhaps three hikes the following year.
But that didn’t happen either.
Instead, we got just one, a quarter point increase that came a full year later in December 2015. It was the first increase in almost 10 years.
Then, the FED told everyone to expect four rate increases the coming year.
And just how’s that working out? Well, so far, we’re “oh for three” this year — all three opportunities to raise rates were instead met with a variety of convoluted reasons not to.
Are We Learning Lessons from Past Mistakes?
So, where does this whole conundrum (high debt, low rates) leave us?
Well, it’s starting to look to many, including myself, that the economic crisis of 2008 never really ended — in fact, this theory makes a lot of sense and would largely explain why FED officials have been so reluctant to hike rates as well as why Uncle Sam needed to go another $1.4 trillion in the hole this year.
It’s the crisis no one’s talking about — that no one cares to ponder. Kicking the can down the road seems an easier route…
However, it’s important we glean some insight from the last eight years of crisis-level interest rates along with the escalating, ongoing crisis-level government borrowing. I see it as a clear indication something’s wrong — very wrong. I think the numbers are a warning, a message to Baby Boomers they may only have one chance to get their retirement right, and a warning to the rest of the nation that we have never been down this road before.
Let’s Recap
At a time when government officials go to great lengths to allay citizens’ fears and reassure them the economy is on a solid pathway, the facts suggest there’s a much larger story going unreported. Stratospheric, runaway deficits keep getting bigger; meanwhile, the FED keeps rates low because they understand, perhaps better than anyone, the nation is still in a bit of a financial pickle and that government policymaking has produced little more than ineffective, highly questionable results over the last eight years.
Whatever the truth is, it’s a story neither the government nor media seems interested in reporting.
That said, retirees must take steps now to preserve their wealth more than ever — they must take the time to plan, seek professional guidance regarding retirement concerns, and do everything they can in their power to keep their finances in check. Logically, it’s the only practical way to counter the uncertain policymaking environment and the unspoken, on-going crisis we find ourselves in every day.
It’s the quiet crisis.
It is warning us all to tread softly and be prepared.
Are you listening?
