“So, together, we have cleared away the rubble of crisis, and we can say with renewed confidence that the state of our union is stronger.” - President Obama during Tuesday’s State of the Union address
I’m all for leaders inspiring optimism. But not when it entails lying to my face! Is the United States stronger from an economic standpoint? Compared to 2008, absolutely. Out of the woods and on solid footing? Not even close!
The President went on to say that there’s still an “unfinished task” ahead of us. Instead of calling that a lie, too, I’ll give him the benefit of the doubt and say it was merely an understatement of epic proportions…
Although the official unemployment rate is exactly the same as it was when President Obama first took office (7.8%), the labor participation rate keeps trending lower, and currently rests at 58.6%.
I’m sorry. But when more than 40% of all working-age Americans aren’t working, that’s not good for our economy. Investing in education might be a long-term solution. In the here and now, though, we simply need to create more jobs. And not just in the healthcare sector.
It’s not good either when 1 in 4 children are on food stamps. Or when 1 in 13 Americans are collecting disability. Or when the median household income falls for four consecutive years.
I could go on with a laundry list of statistics testifying to the persistently sad state of our economic affairs. But that’s not my intention today. Instead, I want to share the biggest threat facing our nation and, in turn, our investments.
And I can do it with a single chart.
When President Obama first took office, the U.S. debt-to-GDP ratio checked in under 50%. It’s now nearing 100%, according to BlackRock’s calculations. Other calculations peg the current ratio much higher.
But that’s beside the point. What matters most is that by all calculations, if our government continues on its current trajectory, we’re going to be in rarefied air with Japan. And not in a good way.
Forget about blaming any President or political party for the problem. First, we need to get politicians to realize that it’s actually a problem.
Minority Leader of the House, Nancy Pelosi, recently said we have a “budget deficit problem.” Then, House Minority Whip, Steny Hoyer, said it’s really just a “paying-for problem.”
Come again? For those of us who confront the reality of home economics with every paycheck, it’s a spending problem. Plain and simple. And denial is the first indication that there is a problem.
Bottom line: The “state of our union” might be stronger. But much more progress is necessary. Otherwise, it’s going to get much weaker… in a hurry!
Straight up, it’s time for politicians to stop talking about debts and deficits, and instead start doing something about eliminating them. They remain the biggest threat to our democracy and our investments.
So don’t be afraid to speak up and let them know that the time to act is long overdue. After all, this is a democracy.
Feel differently? Let me know at email@example.com. I could use some fodder for an upcoming question and answer column. So feel free to fire away the most challenging investing question, the most over-the-top testimonial, or the most biting criticism you can muster up.