By Desmaie Guyton
Fear of managing wealth comes in many forms, most particularly; spiritual, financial and health. If we don’t understand how to manage these areas properly “fear” can manipulate our thinking to dismantling all of what we have achieved and worked very hard to obtain.
Guyton’s Corner is where we will address wealth fears and its success. We will offer tools we hope can assist you in maintaining and utilizing wealth in its proper standard. The goal is to provide you with knowledge of our economy, finances, and how it affects the health of our country as well as our people. Reviewing historical events and comparing them to the present to avoid repetitive losses; as well as provide real-life stories and tools to assist our readers in utilizing the resources we have been given by God correctly. If you really think about it, we’re not owners of anything, just managers. So, let us begin and welcome to Guyton’s Corner.
How many of you were taught how to balance a checkbook or checking account when you were a child? I must confess, this was a skill I was not taught as a child, or as a young adult. To be honest, it’s only when I was in my early 20’s that I learned how to use a checkbook (self-taught) now online banking, but it was later in life that I learn how to balance it due to over spending. This seems to be an epidemic that is going on across our country; writing checks for funds we don’t have at an accelerating pace of overspending. One would think we all need a refresher course on balancing our assets vs. debts.
To review what is going on with our government, currently we are $20 trillion in debt and to give you a more in-depth understanding of what $1 trillion looks like; it will be the equivalent of one thousand times one billion which equals one trillion or one with twelve zeros behind it ($1,000,000,000,000.) Our Gross Domestic Product (a basic measure of market value of all final goods and services made within the US border in a year) earnings are $18 trillion, while our spending is $6 trillion, which puts the GDP debt ratio at a negative -104%, the revenue to GDP ratio is 38.885%, and spending to GDP ratio is a negative -35.797%. In laymen terms, we are spending most of our earnings with little left. Now, you may be asking yourself, how does this affect me? Well, because the national debt is $20 trillion we the people are responsible for paying this back, so your portion of the debt per citizen is $61,000.00 and per taxpayer is $165,564.00 (usdebtclock.org 2017.)
According to the Congressional Budget Office or CBO (a Nonpartisan Analysis for the U.S. Congress), the 2017 Long-term Budget Outlook projections show a substantial imbalance looming in the federal budget over the next 30 years, with spending outpacing revenues by steadily increasing amounts. As a result, if current laws generally remained unchanged, federal debt would reach an unprecedented share of the GDP, intensifying pressures on the federal budget, dampening economic growth, limiting the nation’s ability to respond to unforeseen events, and increasing the likelihood of a fiscal crisis.
This means if we don’t start curtailing our spending, then we will not have the funds to cover the essentials for which we Americans depend on like; Medicare/Medicaid, Social Security, Pensions as well as our law enforcement, military, schools and social services will all feel the strain of which a potential financial crisis will cause. With Social Security being our largest federal programs, paying out benefits to retired workers which may include their dependents and survivors throughout their old age, (pay attention as it may change) as well as Survivors Insurance program and Disability, and because it is financed through payroll taxes a decline in the economy can cause for benefits to shrink. So, tell me, can you live without these benefits?
Currently, the average cost of healthcare for a family of four in our country is $25,826 annually according to the Milliman Medical Index (an actuarial firm). This cost has more than tripled since 2001 when healthcare cost was $8,414.00. And with a possible loss of benefits in Medicare/Medicaid and Social Security, this place the American people in a climacteric arena of their financial security. If healthcare cost should triple again, then we are looking at paying at least $78,000 per year by 2031, and this does not include prescription cost. Do you want to choose between your health and shelter?
The additional part of the Federal Debt conundrum is the statutory limit has come to an end as of March 2017. Under our current law, the Department of Treasury will have reached their limit of borrowing. What this means is the debt limit also known as the debt ceiling is at its maximum amount of debt the Department of Treasury can issue the public and other government agencies, which includes Social Security, and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
If the Department of Treasury does not increase the debt limit, it will cause the government to default on their loans and legal obligation which will be catastrophic for our economy and America. As of March 16th, the Department of Treasury has now taking “extraordinary measures” to borrow additional funds without breaching the new debt ceiling, and if the debt limit remains unchanged, those measures will probably be exhausted and the Treasury will probably run out of cash sometime in the fall of 2017 (Congressional Budget Office 2017.)
So, what are the “extraordinary measures the Department of Treasury must
take? According to the CBO, the following measures are available:
- Suspend the investments of the Thrift Savings Plan’s G Fund. (Otherwise rolled over or reinvested daily, such investments totaled $224 billion in Treasury securities as of January 31, 2017.)
- Suspend investments of the Exchange Stabilization Fund. (Otherwise rolled over daily, such investments totaled $22 billion as of January 31, 2017.)
- For the Civil Service Retirement and Disability Fund (CSRDF) and Postal Service Retiree Health Benefits Fund (PSRHBF), suspend the issuance of new securities (which total about $3 billion each month), the reinvestment of maturing securities (expected to amount to about $75 billion on June 30, 2017), semiannual interest payments (expected to total $14 billion on June 30, 2017), and amortization payments (expected to total $38 billion on September 30, 2017).
- Redeem, in advance, securities held by the CSRDF and the PSRHBF in amounts equal in value to benefit payments due soon. (Such payments are valued at about $8 billion per month.)
- Suspend the issuance of new State and Local Government Series (SLGS) securities and savings bonds. (Between $5 billion and $12 billion in SLGS securities and savings bonds are generally issued each month.)
- Exchange Federal Financing Bank securities, which do not count against the debt limit, for an equal amount of Treasury securities held by the CSRDF. (Approximately $2 billion in securities could be exchanged as of January 31, 2017.)
In a letter written to Paul D. Ryan Speaker of the House from Secretary of Treasure Steve T. Mnuchin dated March 16, 2017, the measures that were taken are:
- Suspension of the Government Security Investment Fund also known as the G Fund.
- A Thrift Savings Plan retirement program for federal employees and members of the uniformed services like a 401(k) plan; the G Fund is one component of the plan and is invested solely in Treasury securities.
- Civil Service Retirement and Disability Fund (CSRDF) and Postal Service Retiree Health Benefits Fund (PSRHBF), suspension.
These extraordinary events will give us some time; however, it depends on how much we are spending during the time frame. Also, if current governing taxes and spending remain in place without any changes, and continue in a full year, the government will find themselves defaulting on financial obligations, which will affect the people and create more debt.
What Are the Solutions?
Now that we have heard the bad news, I’m sure you are asking; what measures I can take to protect myself? Well, first I want you to know this is not the first time we have been in this position. History has a way of repeating itself as finance is not merely prone to crises, they shape them (Financial Crises n.a.), and we can take precaution measures.
History of Financial Crisis
- It was the Panic of 1792 when the expansion of credit by the new Bank of the United States prompted speculations of bank stocks and government debt by William Duer and others.
- 1857 Railroad crisis entranced by technology, investors piled into railway firms whose earnings did not match up to their valuation.
- 1907 Knickerbocker crisis when trust companies, which acted like banks but were lightly regulated, came unstuck when speculators tried to prop up falling share prices with borrowed funds.
- 1929 Wall Street crash. The end of the roaring 20’s when the Fed raised interest rates to cool markets, and a fraud in London triggered a crash.
- The oil crisis in 1973-1974. The collapse of the Bretton Wood system, combined with and embargo imposed by Arab oil exporters, caused a slump across the Western World.
- 2008 Subprime crisis. Elaborate mortgage-related securities designed to reduce risk encouraged investors to pile into the American housing market, which then crashed.
Here are five solutions that can assist you on your road to conquering your financial fears.
- Seek knowledge on financial matters and benefits that are given to you by a professional. As well as, do some checking on your own. The more you know, the more tools you have in your arsenal to make good decisions.
- Have a few buckets when it comes to savings. Don’t depend on one source. The more buckets you have, the better.
- Look for ways to save on taxes. You should want to pay tax on the seed, not the harvest.
- Spend money wisely. Think about how you purchase items and what value does it bring to your future.
- Finally, learn to manage what you have properly. If you do, you will be given so much more. When someone has been given much, much will be required in return; and when someone has been entrusted with much even more will be required (Luke 12:48 NLT.)