A domestic analogy

It appears that Americans are, at long last, beginning to wrestle with the undeniable fiscal crisis that confronts our great nation.

The T.E.A. Party has raced across the nation like a brush fire, advocating “reduced spending”. Libertarian candidates, preaching “reduced government”, have gained an increasing following across the country. The nation has recoiled in disgust at the numerous bail-outs of private companies with public funds. President Obama’s only serious legislative victory, ObamaCare, has been sullied and defamed from its inception because of the outlandish spending that it entails. Republican Representative Paul Ryan has posed an unthinkable budget, which trims trillions of dollars from our nation’s impending debt (to the accolades from many, across the political spectrum). Just this month, (Apr ’11) the House won an actual cut of $38 billion in federal spending. (Which accounts for just over 1% of the national budget.)

I hope and pray this attitude is real, and the enthusiasm remains intense.

Throughout much of the ensuing discussions and heated exchanges, there has been (at least) one undeniable trend: Speaking in very broad terms, Democrats think we should tackle runaway debt by raising taxes, while Republicans think we should cut spending.

Of course, there are plenty who think we should do both. But, the intensity of the opinions held by the individuals will support this generalization.

So, as our duly-elected federal legislators continue to joust with our nation’s debt, we are confronted with the question of “compromise”? In short, should Republicans and Democrats “compromise” on the competing approaches of “raise taxes” and “cut spending”? Should they look for middle ground – some tax increases, and some spending cuts? Is compromise always a good idea?

If you find yourself undecided on this matter, I ask you to consider the following.

Let’s construct an analogy from our personal lives.

If your household should find itself living beyond its means… that is, spending more money than is being brought in… you are, by definition, going into debt. And, with every month or year of this budget imbalance, you will go further into debt.

When you decide to resolve this budget imbalance, you have only two options: either 1) you increase your income, or 2) you decrease your expenses. Right? That’s really it. It’s a simple math problem: increase income, or decrease outgo. Failure to do either means that the budget imbalance persists, and your debt rises.

If you decide to attack the income-spending imbalance through option #1, (increasing your income) what does that mean? That would mean, maybe, taking on some overtime at your job… or taking a different job, that pays better… or taking an additional job… or, if one of the spouses is staying at home, maybe that spouse needs to get a job... or, if you have children, getting them to take a job to help out the family. This is pretty much it, though. There aren’t a lot of creative options (at this general-level discussion) to increase your income. Simply put, your household needs to earn more money, and that’s going to require more work.

If you choose option #2, to attack the income-spending imbalance by decreasing your spending, what does that mean? It would mean cutting back on some frivolous spending (eating out, full-price movies, concert tix, sporting events)… or cutting back on some nice things that are “good” but not entirely necessary (vacations, nice clothes, fresh groceries). Again, there really aren’t that many choices (at this general level).

But, what if you wanted to compromise? What if you want to both take on another job, AND cut back on spending? That sounds good, right? Very balanced… very compromising.

If you can make it work, bully for you.

But, in this personal-budget analogy, can you imagine a time when option #1… “increasing your income”… simply ceases to be reasonable? Can you imagine a time, when you’re looking at your daily planner, and your own personal energy levels, and you decide, “I just can’t take on more work. I’m already working two jobs, and I’ve worked every weekend for the past five months. I need a rest.”? You can’t take on infinite jobs. You can’t work infinite hours of overtime. And, there will come a point, where you can’t find that new, better-paying job. At some point, option #1 just runs out of potential. If you go overboard in pursuit of option #1, you’ll wind up killing yourself under the weight of all this extra burden. You’ll burn out. You’ll quit. You’ll walk away from it all. Can you imagine such a scenario?

At that point, when you have decided that option #1 is no longer feasible, what options remain to get your domestic budget-imbalance in order? Following the simple logical model laid out above, only one option remains: #2… cut spending.

It is very possible that, at the personal level, you have simply been spending too much money. Even though much of that spending may be good, and meaningful, and beneficial to the recipients… it’s just too much spending. I would love to take my daughter to Europe every year. My! Wouldn’t that be beneficial to her, to have that experience? Should could learn languages, and gain an appreciation of other cultures. But, if my household can’t afford it -- if we are going into crushing debt because of these expensive trips -- it is quite irrelevant how “useful” or “educational” or “beneficial” such trips might be.

And, at the national level, I am convinced that is where we are.

In the face of a looming $13 TRILLION(!) debt bomb, the options available to our legislators are either, 1) increase the federal “income” (that is, raise taxes, usually on “rich” people), or 2) decrease our federal spending.

It’s easy to look at the rich people in our society, and to say, “Let’s raise taxes on the rich”. To be sure, we’ve been saying that for decades. But, is there a point at which that option can be exhausted? Can we infinitely raise taxes on wealthy people? Is there a point where these rich people will tire of the tax burden and either cut back on their earning potential,(“If I earn more, I’ll be bumped into the next tax bracket”) or they’ll simply walk away (to another country)?

Whatever a “fair” and “just” tax burden might be, this fact remains. We (the US of A) are encountering some serious problems in producing the necessary tax revenues to resolve our budgetary imbalance. Even though rich people are being taxed one-third of their incomes, we are NOT increasing our federal “income” to compensate our spending. And, every month or year that we continue without the requisite “income”, (taxes) we are going further and further into debt.

And, that is true, regardless of how useful and meaningful much of our spending may be. I am well aware that most of our spending is for very worthy causes: the poor, the uninsured, the under-insured, the disabled, farmers, single-mothers, children with learning disabilities, neighborhoods that need revitalization. Who doesn’t want the “best schools money can buy”? Who wants people to die on the highways? Who wants prisoners to suffer miserably? Who wants the elderly to live in pain, when a joint replacement would immeasurably improve their quality of life?

Once again, despite the “goodness” of all these spending programs, if we cannot afford them -- if they are hurtling our nation towards inescapable fiscal ruin – we need to revisit all of these programs, re-prioritize, and find ways to cut our spending to bring this budget-imbalance under control, despite the pain it will cause.

This link is to a very powerful video-response to this whole issue.

As the video demonstrates, if you rolled up all the rich people in America, and take EVERYTHING they have, and take EVERYTHING from all the fat companies… you still won’t have enough to resolve our nation’s current debt.

If you are still undecided… Do you understand that? Do those words sink in? There is NOT enough money in the private sector to pay for all our national debt. And, President Obama’s spending plans compound that debt by a factor of three over the next 10 years!

We can no longer rely upon response #1 (raising taxes) to resolve our national budget imbalance. Our only option is response #2: We MUST cut spending. And, we must do it drastically and soon!