Brian Tracy compares personal finance to national economics, arguing the U.S. fiscal crisis stems from spending more than it earns. He cites Stein's Law: whatever cannot go on will not go on. His solution: drastically cut government size to free up private-sector growth.
Questions this video answers
$16 trillion.
About $5 trillion.
Growing at more than $1 trillion a year.
The government is spending $1 for every $0.60 it takes in (i.e., borrowing $0.40 of every dollar).
$107 trillion.
Chapters
Hello there. I'd like to talk now about the current financial situation in America. And if it doesn't worry you, nothing would worry you. We say the key to personal financial success can be put into five words. And the five words are spend less than you earn if you want to become financially independent in life. That's it. Five words and every other book, thousands of books and articles all come to that. Spend less than you earn. The key to corporate or business or national success is just the same, just as you and I have to save our money if we want to be financially independent, our government has to spend less if the US is not going to go into bankruptcy, which unfortunately it already is, at least on paper. Now, the rule of life is that you can't get out more than you put in unless someone else is getting out less than he puts in. This is called theft. By the way, America today, like all the Western countries, is bankrupt. When you simply compare assets to liabilities. We owe $16 trillion in short term debt. Sort of like money you owe on your credit cards with an extra $5 trillion added in the last four years of reckless and out of control government spending. This $16 trillion national debt represents one full year of US gross national product or income from all sources before any expenses. So just think about your own financial situation if you owed a year's wages on your credit cards. What's worse is that the US national debt is growing at more than a trillion dollars a year. The US government is spending $1 for every 60 cents it takes in in taxes. This means that we're now borrowing 40 cents of every dollar from our children and our grandchildren who will have to pay it back for the rest of their lives. Now at this rate, the US is essentially bankrupt. At this rate we will never be able to pay it back. We will have to live with lowered standards of living for decades and unless something is done. But our national financial situation is far worse than that. In addition to the basic 16 trillion in short term debt, we owe another $107 trillion in promised benefits. Social Security, Medicare, Medicaid, and dozens of other entitlements that are promised to Americans today if we never pass another spending bill. Now think of it. $107 trillion. And that's conservative. That is the entire gross income of the US for the next seven years before any expenditure for defense, education, welfare, roads, dams, bridges, and the thousands of government departments that are busily spending millions and trillions of dollars every year, many of them on things that nobody wants or is willing to pay. For. But it gets even worse. Business Week magazine did a 50 year projection of the amount that the federal government has committed to spending over the next 50 years, which is very much the lifespan of young people today and for which not a penny has been put aside. And the number comes to $277 trillion that we as a nation are in the hole. Now, that's more than 7 trillion, 17 times the gross income of America. Imagine if you personally owed 17 times your annual income and you were currently borrowing 40 cents of every dollar that you were spending to support your lifestyle. The economist Herb Stein, after a lifetime of studying government spending, came up with what is now called Stein's Law. This law says that whatever cannot go on will not go on. And this is true in national affairs and personal affairs as well. Whatever cannot go on will not go on. Now, how do we get into this incredible financial hole that we can never get out of? Simple. Ever since World War II, when the U.S. was the only major country not destroyed by war, the politicians have been playing a dishonest and cynical game with the American people. They have been spending, borrowing and promising more and more money that we didn't have in order to buy votes to get elected one more time. For example, they have taken a lifetime of Social Security contributions by tens of millions of Americans and spent it all, plus hundreds of billions and trillions more to just keep buying votes with our own money. Thomas Jefferson once wrote that America will be a great country until the voters discover that they can get more money through the ballot box than by working for it. After that, he said, it will be a war of all against all. Now the desire, the insatiable lust for free money, money that people have not earned and do not deserve, is driving us into national bankruptcy. And the politicians in charge today have no solution other than to raise taxes, increase regulations that strangle wealth creation, and grow the size of government. So what's the solution? Well, we have two choices. The first is national bankruptcy and collapse like the Great Depression that America may never recover from, just as Greece will not recover for many years, if ever. The second solution is to dramatically reduce the size of the government and the trillions in wasteful spending and to unlock the creative powers and energies of the entrepreneurs and the builders and the wealth creators of America. These are the only people who can save, invest, grow businesses and create jobs. These are the only two choices that we have, and we are just about out of time.
