Frank Watson: How Broke Are We?

How Broke Are We?

Every young man should own a motorcycle at least once in his life, and every aviator should fly in Alaska while they are still indestructible.

Thus, after I retired from the Air Force, I moved to Anchorage and flew for a small, family owned outfit.

It was fun, but the pay was next to nothing.

In order to feed my family, I took the requisite exams and was certified as a financial planner.

I hung out my shingle and offered my services in estate planning, investment guidance and debt counseling.

The normal procedure for those who honestly wanted debt counseling was to categorize and prioritize their expenditures and eliminate some badly wanted items until they were within their income.

It was a painful exercise.

Many, however, were beyond hope.

Their stories were surprisingly similar.

They had mortgages, car payments, everyday living expenses, a yard full of new toys, plus tens of thousands in overdue credit card payments.

Their total monthly payments far exceeded their take home pay.

There was nothing I could do for them.

It was interesting to examine how they got into their sad predicament.

As they became short on cash flow, they first stripped out their retirement accounts.

Then, when they were unable to make the payment on their new boat, they got a short-term cash loan and began to make more and more purchases with their credit cards.

They took cash advances on the new cards to make the minimum payments on their old ones.

They had passed the point of no return.

Inevitably their debt load was so large they could no longer get new cards.

They dug their financial hole gradually, but the collapse was sudden.

One day they were considering a new snowmobile and looking forward to their annual trip to Hawaii, the next day they were penniless.

Our national government’s spending habits are shockingly similar to those of my hopelessly-in-debt clients.

The numbers are hard to grasp.

Our debt will reach 20 trillion dollars this year.

The proportional share for a family of four is about the price of a new house.

Our government has already stripped out our retirement accounts.

The Social Security Trust is fully funded with IOUs.

There is no real money in the account.

The really scary part is that we continue to borrow in order to make payments on what we already borrowed.

The first $3,000 of the average working family’s taxes goes to interest on the debt! The debt doubled during Obama’s presidency! If we continue on our present course, adding debt every year, we will reach a point when we are refused additional credit.

When that happens, our entire national financial structure will implode.

If you need examples, look at Argentina in the 70s.

Puerto Rico is currently bankrupt.

Greece and Portugal are resisting pressure by the common market to rein in their spending.

The rest of Europe will not bail them out indefinitely.

I don’t mean to be an alarmist, and I realize that there are many liberal politicians and national media who refuse to believe there is a problem. But if we continue on our present course, we will reach a point at which our creditors call in their loans. I don’t know when that will be, but I do know we can’t continue borrowing forever. If we are to survive as a nation, we need to change our spending habits. We need to prioritize government expenditures and cut non-essential programs. It will be a painful process and will take considerable political fortitude to do what needs to be done. Not to do so, however, will lead to financial catastrophe.

(Frank Watson is a retired Air Force Colonel and a long time resident of Eastern Washington. He has been a free lance columnist for over 18 years.)