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The Potential Death of the American DreamBy
Wednesday, April 14, 2010
When I was a kid, the world was my oyster...
Some days, my buddies and I would go exploring in the woods. Other days, we'd play wiffle ball in Wade Welch's yard... or we'd play "kill the man with the ball" in Mike Bruner's yard.
I always had a secret mission, though: I was going to be a "pro" at something. Fortunately, I had the work ethic to get there...
When I wanted to be a pro basketball player, I'd shoot baskets in the driveway until late at night. And when I wanted to be a professional musician, I'd practice for hours a day... in the garage... in Florida. I didn't mind sweating in the garage, I didn't even think about it. Remember, I was on a mission.
The problem was, my mission changed about every year. But this fact never changed: I believed I could succeed at whatever I wanted if I tried hard enough.
I had no burdens in front of me... I had no impediments to my potential success. If I put my mind to it, I could make it happen. And thankfully, succeed I did. I'm living proof of the American dream – the idea that you could set out to make your own success and achieve it.
Today? I'm not so sure about things.
When I was a kid, we didn't have money. But that was OK. We were starting from scratch.
Unfortunately, my son will not even have the "luxury" of starting from scratch. Instead, he will start out in the hole...
According to public awareness firm the Peterson Foundation, the government's debt was $184,000 per person in 2008. For my little family of four, that's $736,000 of government debt. And it keeps growing.
By the time my son grows up, the federal government will have already "mortgaged" his household earnings by hundreds of thousands of dollars, by spending more than it takes in before he was born. Even worse, the government will force him (with the threat of jail time) to pay its debt.
Instead of improving the outlook for my son, the federal government is making the situation much worse... Consider these facts:
For 2009's taxes, 47% of tax filers will pay $0, according to the Tax Policy Center, a Washington think tank. This is an alarming trend. As recently as the 1980s, just 10%-15% of Americans had no tax bill. And in 2000, around 22% paid no taxes, according to www.taxfoundation.org.
To say it another way, a family of four with a household income of $50,000 will have a federal income tax bill of $0... Actually it will receive a "refundable tax credit" – a check from the government! A full 40% of tax filers will receive a check.
It astounds me that nearly half of the tax-filing population will have the benefit of government services... and pay none of the costs.
I hope my son has the ability, like I did, to start with a clean slate... with the world as his oyster... with no shackles holding him back... so he can be successful.
But I shouldn't hold out hope.
We're facing the potential death of the American Dream – the thought that if you work hard and try hard, you can be as successful as you want.
We're quickly replacing the American Dream with the European Politician's Dream – that if you're lazy and don't try hard, the government will take from those who do try hard and give their money to you. That is not the America I was raised in. And that's not the America I want to live in.
So what can we do?
We can protect ourselves from the government taking more from us in future taxes. One of the best ways for most people right now is to convert your traditional IRA to a Roth IRA. I'm doing this now.
The other things I will do are: 1) hold my politicians accountable for their actions and 2) give my son the tools to succeed... an education and a work ethic. That way he is best equipped to succeed in whatever world he inherits.
Regards,
Steve
Further Reading:
Don't miss Steve's writeup of the IRA-to-Roth conversion. Once you make the conversion, Steve explains, "Inflation won't hurt you, nor will higher taxes, and you get to keep all your profits, tax-free. Good stuff!" Get the full story here: The Best Way to Beat Higher Taxes.
Our colleague Porter Stansberry calls the trend of bigger debts and more spending "The End of America." He recently sat down with our sister publication The Daily Crux to determine exactly what the risks are and the best way to protect yourself. To get access, click here.
Finally, get all the facts and figures on who's skipping out on taxes and how in this quick article from the Associated Press: Nearly half of US households escape fed income tax.
Market NotesALL'S WELL... THE BOND MARKET IS SOARING Everywhere we look, we see signs the great government "goosing" of the economy is pushing assets higher. In just the past couple months, we've profiled rising crude oil, copper, bank stocks, home-improvement stocks, and restaurant stocks to show you this trend at work.
Today, we show you a market far larger and more important than measly restaurant shares... We show you the bond market.
Seasoned investors pay close attention to the bond market... even more than the stock market. Companies are legally obligated to pay off bondholders before shareholders see a penny in dividends. So if the price of bonds is headed lower, you know there's serious trouble in the markets.
Today's chart displays the price action in HYG, one of the largest investment funds that owns corporate debt. As you can see, there's no "serious trouble" in the bond market right now. Debts are being serviced... creditors are pleased... and bond prices are near their highs for the year. Sure, the U.S. government debt problems will come home to roost, but for now, the trend in most everything is UP. It will end when it ends.
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