Recently, Congress approved a notable $150 billion increase in discretionary spending for 2018. As the U.S. boosts its defense spending, the average taxpayer feels more pressure. This is worsened by tax cuts, which are expected to significantly reduce government revenue.
Despite this, the strong appeal of the U.S. dollar continues to attract foreign investment. The primary concern for the U.S. credit outlook could be a protectionist trade policy, reflecting President Trump’s campaign promises. In 2017, the U.S. had a debt-to-GDP ratio of 77%, with a substantial concern due to a 3.4% GDP deficit.
**The Trickle-Down Effect: How National Debt Affects the Average Taxpayer**
The U.S. national debt stands at $20.924 trillion, which means a debt of $63,925 per citizen and $172,669 per taxpayer. The U.S. federal tax revenue is $3.368 trillion or $10,292 per citizen, highlighting significant concerns.
Household debt in the U.S. is also on the rise, nearly reaching $13 trillion at the end of 2017. The Federal Reserve Bank of New York reports that total household debt increased by $193 billion, topping $13.15 trillion at the start of 2018. Credit card debt alone rose by $26 billion, reaching $834 billion by the end of 2017, and recent statistics suggest it’s even higher now.
– **Mortgage borrowing** has increased by 3%.
– **Consumer spending** went up by 3.8%.
– The **annualized consumer credit rate** surged by 7.8%.
The U.S. economy has performed better than expected, with real estate assets increasing by $454.3 billion—the highest count since the third quarter of 2016. Corporate liquid assets rose from $2.43 trillion to $2.5 trillion, while federal government obligations dropped by 0.2% on an annualized basis.
This data shows mixed implications for households. While economic growth is strong, rising credit card debt and personal credit lines create issues. Debt from student loans, auto loans, mortgages, and other types of household debt is making it harder for U.S. households to manage their earnings effectively.
The Federal Reserve Bank’s policy of quantitative tightening is a significant worry. With an 88.8% chance of a 25-basis point interest rate hike projected for March 21, 2018, future interest rates might land around 1.50% to 1.75%. Rate increases greatly affect disposable income and debt obligations.
As interest rates climb, U.S. households face greater pressure due to higher interest repayments. Even a 25-basis point increase can accumulate over time, reducing disposable incomes. However, some economic benefits are evident, primarily from personal tax reductions that put more money into taxpayers’ pockets.
Dealing with debt is tough, but possible. Tyler Perry’s story is an example of overcoming financial hardship to achieve a net worth of over $400 million, thanks to a five-point plan for financial success. His strategy, guided by advice from Oprah Winfrey, included:
– Narrowing focus
– Concentrating on finances
– Understanding the target market
– Saving as much as possible
– Maintaining self-belief
His success story is just one example in the U.S. of how focusing on big-picture goals and adopting debt-reduction and savings strategies can improve financial health. By managing personal finances wisely, we can better navigate the broader economic landscape.
Strategies like debt consolidation, debt mitigation, debt settlement, and credit counseling can ease the debt burden by lowering repayments tied to credit. The goal is to manage debt by aligning spending with financial capability, ensuring a surplus at the end of the month. Living within one’s means is key to financial stability.