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Columns | Go Far With Kovar

How Does the National Debt Affect Me

by Taylor Kovar

October 24, 2023

Hi Taylor - People have been talking about our country's overspending and outrageous debt for so long that I think I've gotten numb to it. So, question: how does it affect me? Why should I be bothered by the US carrying a balance?

Hi Sam - This is a great question. The concept of debt gets hammered constantly and the people beating that drum mostly forget to tell people why it matters. There are a lot of problems that can stem from excessive spending, but it's not as simple as "debt is bad." Let's dig a little deeper.

1. Interest and inflation. The first of these problems is very real, the second is real but harder to predict. With interest, it obviously just makes our debt problem worse. You've seen interest rates on your credit cards or car payments—now imagine paying interest on trillions of dollars in loans. It's a frightening amount of money to be paid, and it's only sustainable until it's not anymore. That issue runs parallel to the fear of inflation going up again and devaluing our dollar even more. We're on the other side of some historically bad inflation, and while that wasn't expressly caused by US spending, our deficits definitely didn't help. When a dozen eggs cost $9, you can't ignore how flippantly our country is spending money.

2. Future flexibility. Obviously, we can continue to borrow as long as we pay our debts. We remain a very wealthy country with an AA+ debt rating (down from AAA a few months ago, which is a little alarming). If you ask any investor, they'll tell you that debt can be an invaluable tool for making money. Unfortunately, when an investor is overleveraged and something goes wrong, the bottom can fall out really quickly. Should we deal with some kind of economic disaster or multiple crises arise at the same time, we run the risk of not being able to pay our debts, and then those disasters and crises will only get worse. Does the country's future stability affect your ability to buy lunch today? Not really, but it sure could in a few years if things take a turn.

3. How's the money being spent?
Here's the question that doesn't get asked enough and a lot of politicians choose to ignore. We have a huge amount of national debt and we keep on spending, and that's in large part due to the fact that we have a lot of things to spend on. Our military, our borders, our infrastructure—none of these expenses can be ignored completely. When the issue of national debt gets raised and how that affects you personally, you should consider what's driving the debt and whether or not you support those measures. After all, you can't be in favor of certain spending and then get upset when it costs money.

Our debt affects us all in various ways, some more pressing than others. It's important to understand where it comes from and how we can deal with it, so I really appreciate the question. Hope this was helpful, Sam!
Taylor Kovar

"Go Far With Kovar" October 24, 2023 Column
Legal Disclaimer: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.


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