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Ben said “A penny saved is a penny earned”.  Less famously, he also said “When you run in debt; you give to another power over your liberty.”  Our nation has now relinquished $33 trillion worth of power for the first time in history, and sets itself up for another squabble over the debt ceiling and controlled spending.  Congress better act fast because there are only 11 calendar days before the next imposed shutdown coming at the end of the month if they don’t collectively come to another agreement.

Although I peddle debt for a living I don’t love the idea of owing other people money myself.  Sometimes I feel like a walking hypocrite, and need to remind myself that some debt is a great idea.  For example, provided that you have the means to make it happen, buying a home is still one of the greatest investments that most households will ever make.  On a broader scale, although $33 trillion is a staggering number to choke down, it’s also aggregated among 334 million Americans (or $98K each).  That’s a small price to pay to live in the greatest country in the world.

Treasury Secretary Janet Yellen recently said “The metric that I look at most often to judge our fiscal course is net interest as a share of GDP. Even with the rise we have seen in interest rates that remains at a very reasonable level.”  The interest payments on federal debt was most recently (YE 2022) calculated at 1.86% of gross domestic product.  Since 1960 we’ve managed to stay under the 2.0% payment threshold. However, the last few breaches of the previous debt ceilings have caused a 61% increase in spending from this time a year ago.  Over the same period, interest rates have doubled. Measuring payments against our country’s output is about to take a massive shift.  Our GDP growth has shrunk from 8.71% in 2020, 5.9% in 2021, 2.06% in 2022, and is anticipated to end 2023 with a 1.6% growth rate.

Whether talking about individuals, households, or our nation as a whole, we are at a crucial time when it’s imperative to spend less than we earn.  It’s time to start amassing those pennies. Interesting isn’t it that Ben Franklin is notorious for talking about pennies and yet his image is on our country’s largest currency?

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