As the Federal Government occupies an increasingly larger share of the country’s economic landscape, it is worth a quick look at all the spending and the tax obligations that are being generated.
Not since a brief spike around the WWII timeframe has government expenditure gobbled up as large a percentage of the nation's GDP pie as it is gobbling up today.
The cost to run USA Inc at the start of the 20th century was a relatively modest 7% of the nation's entire economic activity. Today, these expenses account for almost 45% of the country’s GDP (Gross Domestic Product).
As recently as 1950, total government expenses - including pensions, health care, education, national defense, welfare and all other spending - were still in the vicinity of $70 billion, or roughly 25% of the nation's GDP.
Just two decades later, that number had more than tripled (in nominal terms) to $322 billion, or around one third of the nation's GDP.
By 1990, the government's expense figure had reached just over $2 trillion, edging its way toward 35% of GDP.
Today, it weighs in at over $6.5 trillion and is projected to top $8.6 trillion by 2015.
Because politicians don't typically spend other peoples' money as prudently as they might spend their own, state-funded activity generally leads to a mountain of waste and, eventually, an even bigger mountain of debt.
According to figures compiled by the Peterson Foundation, the government's debt was over $180,000 per person in 2008. Since then, it has grown at more than $4.2 billion dollars per day. This includes expenses like servicing the interest payments on the national debt, maintaining armed forces in hundreds of permanent bases around the world, funding various and multiplying welfare programs, and paying the swelling public workforce more than the private market would ever tolerate for the services they tend to provide.
Why is this important? Because an increase in the size and cost of maintaining a welfare state is directly proportional to a decrease in economic freedoms for those who are forced (through taxation and other coercive measures) to sponsor it.
As important, is that as the state’s presence in an economy grows, this presence equals more confiscation of private individuals' property and ultimately an unsupportable number of people living at the expense of the dwindling and productive few.
Unsurprisingly, Uncle Sam is increasing its tax collection efforts and there is an ever-tightening noose of capital controls.
Recently a provision was slipped unceremoniously into the “Hiring Incentives to Restore Employment Act”, aka 'the jobs bill,' which was passed into law on March 18, 2010. The provision "outlines new rules on 'Foreign Account Tax Compliance.” The gist is that if you send more than over $50,000 to a foreign bank, not on good terms with the US, then the IRS will withhold 30% of it for possible tax claw back and the IRS will obtain a boatload of your private account information.
What's more, with trillion dollar annual deficits as far as the eye can see, there is little chance that the political pressure to "eat the rich" will ease up anytime soon.
Plus the classification of rich is changing to include those with $250K or more annual earnings, frequently mentioned by the US President; it might even drop to the $150K to $200k level frequently mentioned by the VP of the USA?
Whatever definition of “rich” sticks, it is clear we are losing more and more of our economic freedoms and our standard of living is on the decline to service the empire of debt accumulated by the overspending activities of USA Inc.
As such, it is only natural that a large number of people are quickly undertaking efforts to become savvy with their money, like the insiders, by obtaining sufficient financial education to see the loss of our economic freedoms and the lowering of our standard of living, for what it is … a way to finance a political and economic system that overspends and is creating a menace to our wealth and way of life. It is destroying the purchasing power, of the average person, for the next several generations, and creating a looming tax burden. This loss of purchasing power and increased taxation will significantly decrease our standard of living.
I favor a quote from Steve Forbes … Forbes says that pursuing additional financial education and the resulting increase in our financial literacy will open our eyes to alternative wealth creating strategies and this will be they key to resolving our financial crisis.
To gain the necessary financial education, it is best to pursue association with, access to, and membership in, a wealth creation community. As a result, you will learn about alternative wealth creating strategies, you will be able to consider investments in non dollar denominated or non fiat currency assets and you will learn secrets to grow and protect your financial future by using methods and techniques of the rich, like Bank On Yourself.
Bank On Yourself is a unique, powerful, and time-tested method that Wall Street, Banks, and Finance Companies do not want you to know. Being part of a wealth creation community, you will learn the secrets of the rich and understand that certain whole life insurance contracts with special features (not widely known) like a “paid-up additions rider” on the policy, enable you to become the source of financing for your home, home repairs, business equipment, college education, and other major purchases like cars, vacations, and even vacation or retirement homes. By using this method, you are able to pay yourself the interest that you would have paid to banks, if you had financed these purchases. You thereby reduce or eliminate the control these institutions have over you.
I trust this post provides a little more insight into the financial crisis that is upon us in terms of the empire of debt and the lowering of our standard of living. If you take control of your financial life, you can reduce the impact of the volatile stock market and the loss of your nest egg. You can use this insight to increase your lifetime wealth and reach your goals and dreams.
I will continue to provide examples of things we need to learn, the secrets of the insiders, as part of being savvy with our money, and introduce alternative wealth creating strategies, in future articles and updates at my blog over the next few weeks.
In addition, a great book to read would be the “Empire of Debt” by Bill Bonner & Addison Wiggin.
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