Over the past 7 months I have laid out the Top 7 items to be financially successful in your household. These 7 recommendations are foundational to not only less stress now, but to create a promising and high confidence financial future for you and your family. To build a good future, you must build your net worth. Every household in the United States is really its own business and it would be greatly beneficial to our younger citizens if we would educate them along this line. It occurred to me that having established these 7 financial underpinnings as good for the various bodies in your household, could we also use them to judge how well we are doing on the body-politic of these United States? The answer is not perfectly…but it would be instructive if we tried. This month’s letter will try to do so.
First, some perspective to the topic is needed as people often get the big numbers wrong. The United States government is not just an idea, it’s an operating entity. The United States is actually the largest entity in the world with a balance sheet all of its own (see the Federal Reserve). Any national government is one we call a “sovereign entity”, meaning the highest power in the land and no other nation or state exercises jurisdiction over it. All country governments of the world (not just the United States) start as an idea. If the particular entity never carves out any land for itself (their own sovereign land), employs any people or own any assets, and / or simultaneously if they never collect any revenues, there actually is no balance sheet and it remains just an idea. What separates sovereign entities from other business entities is that it possesses the absolute authority (power) to govern, pass rules and tax its citizens. A business entity operates under those rules and thus exercises limited authority and never itself has the power to tax citizens.
As citizens of these United States (“We the people”, in the Preamble to the Constitution), with a “government of the people, by the people and for the people” (not actually in the Constitution but in President Abraham Lincoln’s Gettysburg Address), how does the United States do against the Top 7 listed below? Let’s explore that construct by evaluating national fiscal policies using key investment strategies that work for individuals too. We will briefly explore and rate them below like a teacher would do;
- Get out of expensive debt
- Save money
- Be diversified
- Invest passively, not actively
- Don’t make behavioral mistakes
- Determine and maintain your asset allocation
- Do a financial plan
On #1 and the notion of ‘expensive debt’, we were fine and issued a lot of debt when interest rates were low. However, we ‘borrowed short’ and have a lot of debt ($36 Trillion) and interest rates are unfortunately going up. We deserve a B at best.
On ‘saving money’, the truth is the United States invests long-term (think Interstate Highways) and running a deficit of 3% per year as measured against Gross Domestic Product (GNP) would be fine (3.8% is our 50-year average). However, we are running a spending deficient of 6.4% of GNP, with government expenditures at $6,752 Billion and receipts at $4,919 Billion[i]. Further, we have an aging population and haven’t increased Social Security and Medicare taxes since 1983. We would rate a failing grade, a solid F.
Regarding ‘being diversified’, item #3, the productivity and ingenuity of USA businesses remains the envy of the world. Running successful businesses is important because it is these business entities that employ people – whether mom and pop cleaning services or the biomedical company research offices they clean — and taxpaying people contribute 84.1% of the total federal receipts[ii]. We deserve an A + on this one.
On ‘invest passively’, historically we rate an A, but we’re verging on sliding to a C -. The United States government should govern, not operate entries. No government in the world has ever picked ‘winners’, with the Japanese first trying it and failing in the 1970’s and then the Communist Party controlled Chinese trying it in the 2013 Xi Jinping era and seeing GNP growth drop to 1/3rd to ½ it’s nominal long-term averages[iii]. However, with the talk of a Washinton DC supported $500 Billion private-public AI-infrastructure (“Stargate”) and the creation of a sovereign wealth fund made up of cryptocurrencies plus inevitably hard to kill other political darlings, we’d be on a slippery slope to nowhere.
Regarding ‘behavioral mistakes’, those are called elections in a representative democracy. Each major political party has their own weird Uncles in the closet, and I keep these letters politically neutral. As long as the core institutions created by the Founders of this country hold up, we’ll be okay. Messy, but okay, and deserve a B.
It’s on item #6 we that we have been ‘hoisted on our own petard’ (as Shakespeare would have said it (Hamlet)). On a national scale, Asset Allocation means having balance, and enough tax generating entities to pay the bills. Frankly, the problem here is not the productive nature of the United States, but instead the egregious overspending we have been doing as a country. The essential impact of overspending revenues is you are forced then to borrow money…and borrow…and borrow…and incessantly borrow is what the US Treasury has done. As everyone knows, the cost of borrowing is called interest payments (in economic terms known as debt service), and for the very first time in the history of our great country, our federal debt exceeds an astounding $37 Trillion, a figure that now equals 123% of our annual GDP[iv]. Those numbers sound esoteric but try this on for size; our annual debt service payments now exceed the annual defense budget[v]. My sister Anne wisely asked me about year ago: “When does chicken little actually see the sky fall?” Perhaps the answer has arrived. In a new research paper, a study of the fall of great empires world history demonstrates they were precipitated by the burden of their excessive debt (as stated by Niall Ferguson in Debt Has Always Been the Ruin of Great Powers, Wall Street Journal). Notwithstanding the United States sovereign’s capacity to tax its citizens, we are disastrously and drunkenly advancing toward that end. I think it’s helpful to keep in mind the United States didn’t even begin to levy individual income taxes until 1913, and it was 1% at that time[vi].
Finally, on #7, the United States needs to figure out exactly who it is. What it stands for. It needs ‘a plan’. It doesn’t need hyperbole. It doesn’t need hype. It needs a plan. We don’t have one, so the grade here is ‘Incomplete’.
In summary, households are mostly doing their job, and businesses are doing their job. The government ‘for the people’ – is not doing their job, and this threat actually is existential.
It remains my deep and distinct honor to serve you.
Patrick Zumbusch
Founder and CEO
[i] “Monthly Budget Review: Summary for Fiscal Year 2024” (Congressional Budget Office, February 23, 2025)
[ii] -ditto-
[iii] “After the Fall: China’s Economy in 2025” (Daniel H. Rosen, Logan Wright, Jeremy Smith, Matthew Mingey and Rogan Quinn, Rhodium Group, December 31, 2024)
[iv] “What Is The National Debt?” (Fiscal Data, Treasury.gov, February 23, 2025)
[v] “For the First Time, the U.S. Is Spending More on Debt Interest than Defense” (Benn Steil and Elisabeth Harding, Council of Foreign Relations, May 23, 2024)
[vi] “Historical Highlights of the IRS” (IRS Website, February 25, 2025)
