In a recent video a high school senior called in to Dave Ramsey’s show where he offered some good advice but also played down the severity of the nation’s debt crisis.
Dave refers to two different books on how the national debt was going to ruin the country back in the 80’s, which obviously did not come to pass.
The trouble is not the level of debt a country has in general, it’s how much debt there is in relation to their gross domestic product. This is why the current situation is different.
The single most important measurement is the debt-to-GDP ratio.
According to the World Bank, a healthy debt-to-GDP is 77% or lower. Right now, the debt-to-GDP ratio is trending well beyond that threshold over the next 16 years.
Dave claims the average American investor should not have to worry about the national debt. While that’s partly true, what they really should be worrying about is the kinds of accounts they are investing their money in.
Former Comptroller General David Walker explicitly predicted that by the time 2030 rolled around the national debt would be so high and out of control that the government would have to raise effective tax rates on middle America to 45%.
Given the abundance of studies highlighting the dangers of the national debt, Dave Ramsey dropped the ball on helping a huge number of listeners.
Americans of all ages should be concerned about the national debt. It should spur you to consider when you want to pay taxes, either now when they are at historical lows or roll the dice and see what happens in the future.
Dave Ramsey is underestimating the risk of the national debt on the fiscal outlook for the US, and he missed an important opportunity to inform more Americans.
Mentioned in this episode:
David’s books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David’s Tax-free Tool Kit at taxfreetoolkit.com