We’ve all been there at one point or another.
Life is humming along. You’re keeping up with your bills, meeting your obligations and trying to sock away just a little bit for a rainy day.
And then … BAM!
Torrential downpour out of nowhere.
Maybe it’s your car that’s decided to unexpectedly die on the side of the road, requiring not only a tow to the closest mechanic but several hundred dollars’ worth of work.
Or maybe it’s gallstones. Surprise! You need to have your gallbladder removed, and your insurance doesn’t quite cover as much as you hoped.
We all do what we can to plan for these unexpected emergencies and put money aside, but despite the rebound we’ve seen in the economy, Americans are still struggling and that spells trouble…
Something’s Not Right
Recent survey results released by the New York Fed reveal that 33% of consumers say they are unlikely to be able to come up with $2,000 for an emergency.
These results match a similar survey run by Pew Charitable Trusts, which showed that more than one-third of families that suffered large fluctuations in their income were more likely than those with stable incomes to be unable to come up with $2,000 to cover an emergency expense.
While the average American family struggles with expenses, we are also seeing data to indicate that the employment picture is downright rosy. For February, the headline unemployment rate dropped from 4.8% to 4.7%.
Something’s not right. If Americans are employed, shouldn’t they be more financially stable?
The truth is that lower- and middle-class Americans haven’t recovered. The broader unemployment rate — which includes people who want to work but have stopped searching and people who are working part-time jobs but want full-time work — sits at a relatively high 9.2%.
In fact, we’re still seeing a high rate of unemployment among American men aged 25 to 54 — the prime wage-earning age. Currently, 89% are either working or looking for work, which is down from 97% in 1957. The only other OECD country with a lower labor-force participation rate for men is Italy, which has been struggling under mounting debt, slow economic growth and unemployment at 11.9%.
Cutting the Safety Net
As more Americans struggle to make ends meet and are faced with those emergency expenses, we are also dealing with a situation where Washington is going to provide little to no help — if not make things worse. Today, the House is scheduled to vote on the American Health Care Act, otherwise known as Trumpcare.
If it passes, we are facing a world in which health care costs skyrocket for many people across the country, while the Congressional Budget Office estimates that 24 million people will lose coverage that was obtained under Obamacare.
In addition, the proposed budget has some massive cuts that will eliminate programs that will assist the very people who are currently struggling to get back on their feet.
For example, some of the programs slated to be cut completely are:
- Appalachian Regional Commission: Funds programs to develop economic opportunities, infrastructure and the workforce in 13 Appalachian states, with much of its work focused on coal-dependent communities.
- Delta Regional Authority: Funds economic development projects in the seven states in the Mississippi Delta region.
- Denali Commission: Provides utilities, infrastructure and economic support in Alaska.
Some other programs that will suffer significant fund cuts are:
- Manufacturing Extension Partnership: Regional centers that assist smaller U.S. manufacturing companies with adopting new technologies.
- Rural Business-Cooperative Service’s discretionary programs: Provides financial assistance for economic development programs in rural communities, including renewable energy and biofuel initiatives.
Of course, many believe that it’s better if we cut all the entitlement programs, but ripping them away as the country is fighting to get back on its feet is dangerous.
We are poised to build a country in which we have a struggling lower to middle class that has yet to get back on its feet following the Great Recession, while at the same time we are lifting health care costs and removing a system of support to help these people make ends meet.
There’s a massive imbalance that’s building that could derail the growth that we’ve started to see across many sectors. With less support and less opportunity for many Americans who are currently supporting our slowly expanding GDP, there will be an increase in debt and a sharp decrease in consumer spending.
The federal government is already drowning in debt, and we can no longer grow fast enough to support our debt addiction. The American economy is balanced on the edge of a precipice.
In the face of uncertainty within the market and the likelihood of a massive pullback, it is important to have some gold within your portfolio. Gold acts as an insurance policy for your wealth, growing in value when investors are abandoning stocks.
Sr. Managing Editor, Sovereign Investor Daily
P.S. America is facing potential financial collapse, and it’s not just due to our mounting debt problem. One economist has uncovered a crisis within the currency market that could crush the American dollar. Click here to learn strategies you can put in place right now to protect your savings, investments, real estate and all other assets of value.