Use Household Economics to Solve Budget Crisis
Around the State
It is a simple fact in household economics that you can’t spend more money than you make.
Yes -- there are exceptions. You can run up credit card debt, but credit cards have limits and if you have a large amount of credit card debt, the interest payments will kill you. It is also true that you can incur long-term debt by purchasing a home -- but you have to demonstrate that you can make the payments before the bank will loan you the money, and the bank is protected since it has an ownership interest in your property.
The bottom line is this: Every household has a budget. Families all over America struggle every month to match their expenses to their income. They know they can’t spend more than they make, so the number that controls spending activity is income. If someone makes only $1,000 per month, they don’t spend $2,000 -- in fact, they can’t. I remember my dad sitting down at the kitchen table every month writing out the list of bills for the month on a yellow tablet of paper. He would budget our money to the penny on everything from the electric bill to the cost of school lunches.
While the basic economic principle of not spending more than you make is practiced every day by American families, it appears the concept is foreign to our federal government. How else can you explain the endless debate and the constant beat of the “blame game” while the federal government recklessly spends away our future?
Our national debt is $14 trillion and counting. That is a debt of over $130,000 per taxpayer. The cause of this debt is simple -- the federal government is spending far more than it takes in, to the tune of $1.4 trillion per year. As a result of this giant budget black hole, American taxpayers pay over $200 billion a year for interest on the national debt. It makes you wonder how the members of Congress pay their own bills.
Facing the obvious fact that we are spending too much money should lead the president and all members of Congress to the obvious conclusion that we have to reduce government spending -- dramatically -- and now. Yet, we continue to see debate on what we should do, as well as proposals that are nothing more than budgetary gimmicks that put off real spending cuts until 2021. Even worse -- we have yet to see any concrete spending-cut proposal from the president. He is so worried about re-election that he won’t specifically identify where he would make cuts.
The solution to the current budget crisis is not complicated. First, you must apply household economics and only spend what is taken in -- or, put another way, balance the budget. Second, you must set forth a realistic debt reduction plan that will pay down the federal debt, thus reducing our interest payments and freeing up more money for necessary federal expenses.
Congress has the ability to balance the budget every year, but it doesn't. So passing a balanced budget amendment is the only way for the citizens of this country to force Congress to do what it should be doing. Therefore, passage of the balanced budget amendment is critical if we are going to right the economic ship for future generations.
Spending cuts are another matter. Current federal tax revenue can cover Medicare, Medicaid, Social Security and national defense. Even if you eliminated all other federal spending, changes would still be needed because the cost of entitlement programs is growing so fast. There is no need to politicize this issue. You can make meaningful reforms without impacting those who currently benefit from such programs. If we don’t, the programs will collapse anyway.
With respect to “other federal spending,” a simple litmus test would help. Federal money should only be spent on matters that are essential functions of the federal government. There are many programs that should either be developed by state and local governments, by the private sector, or not at all. It would also help if government bureaucrats used greater care with our money.
A Heritage Foundation report noted that the federal government made $72 billion in improper payments in 2008 alone. The Government Accountability Office classified nearly half of all purchases on government credit cards as improper, fraudulent or embezzeled. Examples of taxpayer-funded purchases included gambling, mortgage payments, liquor, lingerie, iPods, Xboxes, jewelry, Internet dating services, and Hawaiian vacations. In one outrageous example, the Postal Service spent $13,500 on one dinner at a Ruth's Chris Steakhouse, including "over 200 appetizers and over $3,000 of alcohol, including more than 40 bottles of wine costing more than $50 each and brand-name liquor such as Courvoisier, Belvedere and Johnny Walker Gold."
Then there are the outrageous line-item expenditures. Examples range from $200,000 for a tattoo removal program in California to the unbelievable $2.6 million used to train Chinese prostitutes to drink more responsibly. Fraud related to Hurricane Katrina spending is estimated to have topped $2 billion. In addition, debit cards provided to hurricane victims were used to pay for Caribbean vacations, NFL tickets, Dom Perignon champagne, "Girls Gone Wild" videos, and at least one sex-change operation. And don’t get me started on TARP or the “stimulus plan” (which only stimulated our federal deficit, not our economy). Is it any wonder taxpayers are angry?
So as the debate continues on the federal budget, remember two things: Those doing the debating are the ones who got us in to this mess; the so-called “budget crisis” can be resolved by applying some good, old-fashioned household economics. We have to sharply reduce spending immediately, balance the budget, reform entitlement programs -- and take steps to grow the economy.
Jeff Kottkamp served as Florida's 17th lieutenant governor and he served for three terms in the Florida House of Representatives.