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Missed Fortune – A Problem That Will Not Fix Itself

Posted on | September 2, 2012

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Why the National Budget Cannot Be Balanced

It’s amazing how those responsible for our nation’s budget seem determined to do things that we could never get away with doing with our household budgets. The 2013 budget contains roughly $3.8 trillion in spending to run the federal government.

Keep in mind that the government only collects about $2.5 trillion in tax revenues, so there’s a $1.3 trillion shortfall for next years budget. That $1.3 trillion will simply be added to an already horrendous national debt.

There are a couple of notable areas where a good amount of that $3.8 trillion dollars will be spent. The first is on interest that must be paid on the money that they have borrowed in the past. The next area includes the mandatory programs like Social Security and Medicare, federal pensions and so forth.

These two areas gobble up all of the $2.5 trillion in tax revenue collected each year.

It is utterly impossible to balance the federal budget when interest and mandatory obligations consume one hundred percent of the tax revenue that the government hopes to collect. That leaves absolutely nothing to run the government or the military. Year after year they are spending more than they take in because our government has a horrible addiction to borrowing.

We’re left with two solutions to fix this problem. One is to raise taxes dramatically on every taxpayer. The other is to drastically cut government programs and spending. The first solution is likely to happen no matter what.

But virtually no one is giving serious consideration to reducing the size of government by cutting spending and programs.

Another consideration is the effect that raising taxes has on the overall economy. Hiking taxes creates a disincentive to the job creators and producers whose activities are the key to creating a thriving economy. This reality is one of the reasons that the Congressional Budget Office (CBO) recently warned of a “double dip” recession if Congress fails to avoid this fiscal cliff.

Watch Out for 2013

The CBO has been very clear about what to expect if the Bush-era tax cuts are allowed to expire at the end of this year. 2013 will almost certainly experience a deeper recession if those tax cuts go away resulting in one of the largest tax hikes in our history.

This means we’ll likely see unemployment rise above 8.2% to over 9.1% again with more people losing their jobs and adding to an already precarious situation.

The key thing to remember here is that if the government keeps doing what it has been doing, it will keep getting the same results it’s been getting.

The effects of this runaway spending have the potential to affect everyone, including those who think they can avoid the problem by ignoring it. Sticking your head in the sand is simply not an option.

This is why it’s essential that you take ownership of your future instead of depending upon the government to provide for your retirement. Social Security should be considered a bonus, if you’re to get it at all. Now is the time to get your retirement money out of those IRAs and 401(k)s where you’re merely postponing the taxes you’ll have to pay.

You won’t save money by deferring those taxes, in fact, you’re likely to find yourself in a higher tax bracket after you retire because you’ll no longer have many of the deductions you had during your peak earning years.

You’d be much better off to have a strategy in which your money is grandfathered in and grows tax-free. It’s essential that you protect your serious money from the dangers of rising taxes, higher inflation and continuing market uncertainty.

These are the strategies that Missed Fortune clients have been learning and using for decades so they can enjoy liquid assets safely earning a predictable rate of return.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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