There is a common but mistaken belief that the children and grandchildren of older Americans will be the ones who will be paying for today’s massive government deficits.
In this article we will look at six different layers of the deficit and unfunded government promises and put them into personal, per household terms in order to get to the truth of the matter.
This truth is that the deficits are far too large to be repaid by taxpayers decades from now, but will be instead effectively repaid through the destruction of retiree savings and retirement investment portfolios in the coming years.
The value of your checking account, the value of your IRA or Keogh, and the value of all your investments are – and will be – the true source of payment for deficits.
The end result could be a 95% reduction in value for all of our savings, retirement and otherwise, as we will illustrate step by step herein.
Layer 1: Annual US Government Deficit
The headline annual budget deficit for the United States government is about $1.3 trillion per year. This is our first layer, and it is a number that is so big that it becomes almost abstract. To better understand the very real and personal implications, we will express it in per household terms, and compare it to our household incomes.
According to the US Census bureau, there are about 113 million households in the US, of which about 16 million are below the poverty line. These 16 million households add to the deficit, they don’t help pay for it, so that leaves about 97 million households above the poverty line whose taxes will be repaying government borrowing.
On a per able-to-pay household basis, when we take $1.3 trillion, and divide by 97 million able-to-pay households, then each household’s share of the government’s annual borrowing is about $13,400, as shown in the graph below.
Keep reading ‘Six Layers Of Deficits Mean Retirement Disaster’ →
This post originally appeared at DanielAmerman.com.