US Deficit (3)
This month if you need to spend more than what you earn, you would obviously borrow and the amount you borrow is called your debt.
What happens if the next month also you spend more than what you earn?
You will borrow again, while you are required to pay interest on the amount that you already borrowed last month.
If you continue doing this month after month, without actually paying off anything – either the principal amount you borrowed or the interest that you incur on it, very soon, your debts will pile up and there will come a time when your monthly earnings wouldn’t be sufficient to just pay the interest on the amounts that you borrowed!
That’s what the government is facing today – no money to pay the amounts borrowed, and an income that’s not even sufficient to pay off the interests on the amounts borrowed!!
So, where does the government get the money to clear off all these dues?
The government doesn’t have money of its own – every single cent is collected from you and me.
Someone, somewhere, has to pay up for the process of clearing these debts to happen.
You might say that the government gets revenue in the form of social security payments – I would say that’s not right – because the social security payments go into the social security trust fund, and is not a revenue for the government.
So, how will the government clear this debt?
By collecting taxes from us again!
All of us have to pay interest on the national debt.
But you know what?
Some of us might have invested in savings bonds and national bonds, which means some of the interest payment also goes to such investors.
If you are one of them, then you would want the interests to keep coming in, but how will the government get that money to pay your interests?
By again collecting some amount from you!
So, it’s seems to be a never ending story, with the cycle getting repeated again and again and the debts mounting continuously, and ultimately reaching a stage where the Congress has to do something serious about it.
As a preview to a complete overhaul of the current tax system, I invite you to download my report “Done with Cash” for free, when you apply for it.
Tags: Banking Crisis, Corney's Model, Financial Crisis, Geithner, IRS, Stimulus Bill, Taxes
