For years we’ve heard various political figures argue about the viability of “trickle-down” economics, going back and forth on whether or not growth at the top spurs corresponding growth at lower income levels. One thing that’s unfortunately not up for debate is a very different kind of trickle-down phenomenon: the creeping influence of the Federal deficit and a massive national debt.
While the deficit may seem like an abstract concept to most of us, the reality is that it’s gradually making its presence known in our everyday lives. A toxic combination of strained entitlement programs and a government that has literally been printing money to bailout banks and a struggling auto industry has compounded the problem, and the result is an annual federal budget deficit that’s expected to hit $1.65 trillion this year and national debt that’s already at $14.34 trillion. That’s trillion, with a t. We are already starting to feel the impact as the cascading effects trickle down from the Federal level to the states, to cities, and on down to districts and communities around the country. The grim truth is that taxpayers are at the bottom of the financial food chain.
Whatever the long-term solution, spending cuts and tax increases are sure to be a part of it. To retirees, the result will be higher taxes and fewer benefits, with rising prices and inflation contributing to more volatility in the stock market. Savvy investors should plan for their retirement future today, and should do so in a way that acknowledges the very real likelihood that the deficit and the debt will have a significant impact on their financial future.