July 25, 2011

National Budgeting 101

One expenditure in our budget cannot be looked at in a vacuum. The truth is this country needs to get a handle on its spending. Yes, we need to look at ways to generate revenue including trying to jump start the economy with a targeted stimulus package; however, we also need to gain control of the governments spending habits.

In order to do this on a rational basis, we need to look at total spending and prioritize expenditures. If we only look at each line item of expenditures separably, without considering the total revenues available, we will never get our budget in balance. A good example is how we went to war in Iraq. When President Bush led us to war, there was no discussion as to how much it was going to cost and how we were going to pay for it. In fact our President encouraged us citizens to not change the way we were living, including our shopping habits. He made the case if Americans changed their live style as a result of 911 and the Iraq war the enemy would have already won. He encouraged Middle America to continue buying ice cream from Cold Stone.

This is a primary reason why our budget is out of control. The nation starts to spend before determining how it is going to pay for it.

When a household reviews its budget it first identifies the amount of total funds it has to spend. After that, it determines what it needs and wants to spend. It first determines the necessities; food, clothing and shelter. It then ascertains the revenues that it has remaining and decides how the rest of the revenue will be spent.

Medicare may end up to be a high priority; however, first we must put it into the context of the revenues available and the importance of medicare relative to the other expenditures that this country deems to be worthwhile.

This is basic budgeting 101.

2 comments:

  1. Sure we can do this exercise. I think that your priority list will reflect your political leanings. One of the problems facing us now is that political factions are being "rewarded" for avoiding compromise. Without a commitment to find a common solution a damaging stalemate results.

    I appreciate your common sense approach, but have you considered that a country's budget cannot be treated like a household budget? A household doesn't have to budget in police protection, education, fire fighting BECAUSE THEIR LOCAL GOVERNMENT TAKES ON THESE OBLIGATIONS. The federal government is the same way. They have to fund obligations that cannot be covered by state and local governments. (How does Rhode Island pay for its' nuclear deterrence? How does Louisiana fund a state FEMA for Category 5 Hurricanes?)

    Finally, to be a democracy means giving everyone a say in the solution. The rhetoric I hear lately seems to say that poor people, or unions, or minorities have TOO much say so we shouldn't allow them their say. We can't come up with an equitable or even a rational solution if we force them into silence and don't let them sit at the table.

    ReplyDelete
  2. What I know is a disaster is about to happen and we created it.

    If nothing is done and we default we all will suffer because we let it happen

    ReplyDelete