For the first time in the history of this great country the United States of America has been downgraded. We have lost our AAA credit rating due to our levels of national debt and the foolishness on Capitol Hill.

What this means for markets, interest rates, and our economy in general time will tell. Tomorrow and the days that follow could prove frightening, or we might see more of the same economic results that we have seen this year. Which is to say, not good.

I am disgusted by the behavior in Washington D.C.

Every household in the U.S.A. has to balance its budget if they want to be successful in life. Where do these politicians get off thinking they don’t have to live by the same rules? That’s not to say you never go in debt. Everyone knows there are some things that justify it but those things make up a very short list! A home, your education, an automobile, and very little else justifies major debt to satisfy the wants of now and jeopardize the needs of the future. And how much MORE immoral would it be if I were allowed to reach into your pocket to pay for my financial indiscretions?

Running national debt of 100% of GDP or more is a national security risk. We are at the tipping point. Can we recover? Yes we certainly can, but serious challenge require serious solutions! Otherwise the tipping point could go over and we could get crushed under a mountain of debt. Keep in mind our current debt level does NOT include all the future spending commitments that these professional politicians have made and for which the U.S.A. cannot fulfill.

How Might We Limit Washington?

Having a fixed dollar amount debt limit seems silly. As our country has grown and as it continues to grow federal spending will increase. (We can debate if that should be the case, but to deny that reality currently would also be silly.) What should be in place is a structure that makes it harder for the congress and the president to spend money as the debt gets larger (as a % of GDP.) I do not know what numbers should be used but to illustrate the point it would be something like this:

If government debt to GDP was under 40% then new budget/appropriations bills would require a simple majority of 51% to pass congress. If the ratio was between 40% and 75% those bills would now require a super majority of 66% to pass congress. if the ratio of debt was over 75% then those bills would require a massive majority (a term I just made up) of 88% to pass; and if debt was 100% of GDP or higher it would require a unanimous vote.

This would allow for needs which are truly urgent to the survival of our nation, like World War, to get the funding it needed, but slow down and create natural resistance to spending as the debt grew larger. Like I said, those numbers are for illustration purposes only so don’t get hung up on the details.

Would our current congress ever vote for something like this? I doubt it, that’s why we should get rid of the professional politicians, institute term limits and get some rational Americans voted in who can bring some common sense, kitchen table budgeting to that town of gluttony and crony capitalism.

The U.S. has had the idea of a debt ceiling for a long time. Through the 40’s, 50’s, 60’s, 70’s and 80’s the debt ceiling was raised but only by small amounts. Why in the late 80’s and through today has the debt limit been raised so fast? Yes, we have had wars to fund and recession we have tried to spend our way out of, but that does not tell the story of the past 30 years. Surely, we have not needed 20-30 years of record spending. Has the government promised us more then they can deliver in order to get elected?

We all like our promises. We like politicians who make promises to us and we elect them, even when those promises just cost the country more and more.

For years some politicians and others have warned us about our entitlement spending. Do they really know what they are talking about? Are entitlements really a root cause of our spending issues?  To the right is a chart of our government expenditures since 1950. The chart shows what, I am sure you have seen a lot of over the past few weeks. While this shows we have a problem it does not help us understand how to solve the issue. Let’s take this this chart down one more level, and look at government expenditures by major category.  In this chart you can see that entitlement spending in social security and Medicare having been spiking. Nearly headed straight up. Defense spending also has a very steep trend.

I am sure you have heard both Democrats and Republicans blame either entitlements or defense spending for our current issues. While it is a hard message to hear, we obviously cannot continue this spending trend. If we continue to elect only people who say what we want to hear how can we expect this to change. Politicians tell us they will pay for this or buy us that because it helps them get elected. Have we become like spoiled children clinging to which ever parent will buy us the most?

We have to demand more from our leaders? We have to demand more from ourselves. We must be willing to make hard choices and those hard choices cannot be to have the rich pay more taxes. As you can see from those charts, increased revenue cannot keep up with these trend lines without sucking it all dry.

The following video from Bankrupting America does a great job and explaining all of this. May we all, democrat, republican, independent demand more.

It’s hard to believe that only a few generations ago the United States of America was the largest creditor nation in the world and today we have become the largest debtor nation in the world. How could we be so careless and to put at jeopardy our future and our children's future and our grandchildren's future and beyond. It’s immoral what we have done.

Imagine a friend who calls you up and says, “I have a financial problem. I make $58,000 a year. I have been spending about $75,000 a year and I have found myself with $327,000 in credit card debt. But I think I have a solution, spend less! From now on I am only going to spend about $72,000 a year.” (adapted from the Dave Ramsey show)

How do you feel about your friend's plan to get back to financial stability? You should feel sick and want to slap your friend in the face. Well folks, this is exactly the situation going on in Washington. The numbers are different but the ratios are the same. This friend is the government of the United States of America. What are you going to say to your friend?

Click Here for an Excellent Visualization of this Problem

Federal government daily spend under our last three presidents:

Obama: $4.1 Billion Dollars Per Day

Bush: $1.6 Billion Dollars Per Day

Clinton: $757 Million Dollars Per Day

The republicans missed a HUGE opportunity to fix the mistakes of both Bush and Obama regarding their gluttony of spending.

The GOP plan should have been focused on one idea:

We propose the Clinton administration's budget.

They could adjust for inflation and the wars, and even bump up taxes some and we would be in a better place than we are now!

Mitch McConnell’s proposal to give away congress’s authority to raise the debt limit to the President is childish, and at a minimum borderline unconstitutional if not outright so. The founding fathers setup a divided federal government to enforce checks and balances and to slow down the process by which the government gets things done. They feared unilateral power in one branch of government. One branch of government cannot and should not delegate away their power to another branch – it is blatantly un-American according to the constitution.

The federal budget is loaded with wasteful spending. Anyone who denies this reality is simply not serious or honest. Just like every American family that has to sit down at the table and figure out where their money is going and cancel the Xbox Live subscription, or the Netflix subscription, or sell the ATVs in order to pay for the mortgage and purchase groceries when the paycheck simply doesn’t cover everything, our elected officials should be serious about doing the same. Where are the grownups willing to go through the budget and cut? Who is willing to reform or disband programs that cannot continue without jeopardizing our solvency? Yes, some people will be impacted negatively but that is the price we have to pay to get healthy again.

When it was discovered that my new born daughter was sick in a way that threatened her life and it would required a bone marrow biopsy, a liver biopsy, countless pin pricks to take blood samples, and ultimately chemotherapy to get her well we didn’t hesitate. It took 9 months of struggle but now at age 6 she has been healthy and a light in our life for over 5 years.

America is ours to lose. If we don’t demand our politicians act like adults then as the country gets sicker we have no one to blame but ourselves. Toss out the professional politicians who are blinded by their re-election fund raising and replace them with normal Americans that know how to do the hard work of fixing real problems.