What The U.S. Deficit Means For Us

Dear Reader, This letter was published in the Daily Breeze, a Los Angeles area newspaper on 2/6/11.

Our nation is on the brink of financial disaster. For every dollar our government spends, it brings in just 60 cents! The nonpartisan Congressional Budget Office last month said the U.S. deficit will hit $1.5 trillion this year, and there is no end in sight to these deficits. Already, every man, woman and child in America owes $45,300 and that number is growing fast. Just to pay the interest on our nation's current debt takes $200 billion a year and that's at all-time low, near-zero interest rates.

Why should you care? Because as an American you will pay it through much higher taxes and cuts in essential programs such as Social Security, Medicare and education. The alternative to higher taxes and slashed spending is for the U.S. government to keep printing money out of thin air, which will lead to rampant inflation and will wipe out the value of your savings.

Politicians are talking about "freezing" some costs and even cutting as much as $100 billion in spending. But don't be fooled. Our debts are now so big, even cutting $100 billion amounts to just a half-cent on the dollar. Although we are going broke, politicians don't even talk about the wars in Iraq or Afghanistan or the massive weapons programs because weapons and wars mean jobs and corporate profits.

Meanwhile, our job market is a disaster. Small businesses, which are our nation's job engine, are sputtering and real estate foreclosures are rapidly rising. States, counties and cities are wallowing in debt with no idea how they will continue some essential services or how to pay pensions promised to their employees, even with massive potential layoffs.

What can you do to protect yourself? If you haven't done so already, slash your overhead. Pay off or pay down your credit cards and if you can't afford them, negotiate a settlement and lower payments from your credit suppliers. Sell any toys you don't need such as an extra car or an unused boat or motorcycle. If you are planning to sell your home, do it now. Don't wait for prices to fall further. And make yourself more valuable at work by cross-training and by finding ways to help your company make more money. Whatever happens, you need your job.

But if you are well off financially and can afford your home, then lock in today's record-low interest rates with a 30-year, fixed-rate mortgage. And if you have other investment financings, lock them in as well, at long-term fixed rates.

America is in unchartered waters.

- Dick Kazan