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Lessons in Budgeting and Adulthood
It’s never too late to learn how to budget —even for the U.S. Government
Learning to create and stick to a financial budget is one of the many rites of passage to adulthood. Part of growing-up is learning that you can’t have everything you want. Responsible adults know their income limitations and learn how to stay out of debt.
The United States government, on the other hand, has not set a budget for the nation in almost 1,200 days. While the last budget passed in 2009 allowed for $400 billion beyond what the government expected to collect in tax revenue, without a budget, spending has spiraled even more out of control. In total, the federal government has overspent by $4.1 trillion since 2009, bringing our mounting national debt from about $11.4 trillion to more than $15 trillion.
When ordinary people spend unwisely and go into debt, they individually bear the consequences of their actions. But when government spends excessively, everybody suffers the repercussions. Too much government spending hurts Americans in a number of ways. Here are two significant ones:
1. The Checkbook has to be balanced eventually
The taxpayer is left with the bill when government spending swells. A basic principle of economic freedom is the freedom to use your financial resources how you see fit — assuming that what you do doesn’t interfere with another person’s ability to do the same. Raising taxes to enable more government spending erodes economic freedom by reducing the ability of individuals to spend their own incomes.
Furthermore, as government keeps overspending, the bill to the taxpayers grows. In fact, national debt recently surpassed the size of the entire private economy. In order to pay off $15.4 trillion in national debt, each taxpayer would have to contribute $137,000. If current federal expenditures continue at this rate, in 40 years the national debt will be almost four times the size of the private economy. Someone is going to have to foot the bill and that someone is us and our children.
2. What happens when the government bounces a check?
Money doesn’t grow on trees, and if debt continues to increase at its current rate, federal and local governments will literally run out of money. In fact, this is already happening, and many Americans are acutely feeling the effects.
The small Rhode Island town of Central Falls recently declared bankruptcy and is cutting pension payments for retired firemen and policemen by as much as 50 percent! One retired fireman was unable to meet the payments on his house and was forced to move into a small apartment when his monthly pension payment was cut by $1,100.
Central Falls is not alone. There are more than nine cities and counties in serious danger of going bankrupt in states across the country including in Michigan, Alabama, and Illinois.
Local government failures are not a future phenomenon, but are happening right now in places all over America. For years, local and federal governments have been making promises to citizens that they can’t uphold. If the reckless spending continues, the U.S. will one day face similar wide-spread austerity measures that have brought Greece to its knees.
So what do we learn from all of this?
America has yet to default on its debt, and there is still time to alter the country’s course. But first, we need a budget. A budget helps manage finances responsibly and avoid overspending and debt. It is a tool to understand what you can afford, and what you can’t afford. Adults realize this principle and use a budget to spend within their means.
It’s time the government starts doing the same.