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Family Resemblance

Richard Quinn  |  August 22, 2018

THERE’S LITTLE difference between the typical American family’s spending habits and that of our federal government—and many state governments as well. We run our government like many Americans run their financial lives, living above our means, seeking instant gratification, saving inadequately, showing little concern for the future, supporting our lifestyle with debt and denying the risks we face.

According to the Congressional Budget Office, all the major trust funds are headed for insolvency in the near future. The CBO projects that the federal government’s highway, disability insurance, Social Security retirement benefits and Medicare trust funds will all be exhausted by 2032 without action to stabilize their finances.

In seems, as a society, we always want more and yet rarely ask how or who will pay for what we want—or even if it will be paid for. To achieve our social goals, we borrow and borrow and put future financial concerns on the back burner.

This is similar to what Americans do as individuals. Our saving rate is notoriously low and our debt high. Reports vary, but it appears about 40% of U.S. households carry credit card debt. One study found that the average household that carries credit card debt has a balance that exceeds $15,000 at an interest rate of about 15% and a late payment rate of 30%. Most individuals admit the debt is mostly due to unnecessary spending.

More (ahem) good news: To their liabilities, each American can add $64,000 for their share of our national debt. The annual interest on federal debt is more than $294 billion and growing, with over $80 billion of that going toward current Social Security benefits. What about federal spending cuts? We don’t like them. Some claim we can afford more spending because we are the “richest country in the world.”

On a personal level, look at any survey and you will find money to be the first or second reason for discord between couples. We don’t seem to be able to handle money well at either the government or the household level. All the while, retirement is looming. Younger Americans don’t think they will collect much, if anything, from Social Security, while others overestimate what it will provide. According to survey responses, three-quarters of Americans are behind on their retirement planning. The reality: Americans as a group simply aren’t prepared for retirement.

And neither is the U.S. government. Social Security is spending down its reserves. Sooner or later, our financial problems must be dealt with on both an individual and national level. Dealing with our national budgetary issues will likely mean higher taxes or lower government benefits, thereby compounding individual fiscal problems. Warning: Trouble ahead. Plan accordingly.

Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous blogs include Late Start, Ten Commandments and Running on Empty. Follow Dick on Twitter @QuinnsComments.

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