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A
Tale of Two Budgets
February
5, 2004
By David Michael Rothschild
I know several college economic majors who routinely confuse
the deficit and the debt. The deficit is the difference between
how much money the government acquires and spends in a given
year. The debt is the total amount of money the government
owes, compiled from years of deficits. There are thousands
of nuances involved with calculating acceptable and desirable
levels of yearly deficit and total debt, but those debates
are meaningless for the vast majority of the electorate. To
teach the main points of budget management, use the most relevant
example: the family budget. Meet the Americans: Mom, Dad,
Daughter in high school and schoolboy Son.
The Americans understand the value of properly balancing
the family budget, thus not running a deficit. Mom and Dad
estimate that they are going to earn $50,000 per year. Therefore,
when Mom and Dad make up a budget each year, they try to keep
the expenses to around $40,000 for the year. This is because
they are planning for both retirement and the prospect of
some expensive emergency.
The Bushes operate slightly differently - they propose a
budget with a $550,000,000,000 deficit. They have done three
dangerous things. First, they have proposed a budget where
they spend much more than they expect to earn. Second, they
have not only failed to plan for emergencies but they did
not include Gulf War II, even though they know that it is
already happening. Finally, instead of putting money away
for retirement, they have "re-organized" the social security
trust fund, essentially borrowing from their retirement plan.
Thus, while the Americans end the year with savings, the
Bushes have added to their debt.
The Americans, especially in times of crisis, may want to
run a small debt, but a large debt is dangerous. The Americans,
like many families, have a small running debt on their credit
cards and are annually paying off their mortgage. This allows
them to spread out large purchases over time and leaves them
with more money at their disposal. Yet, they also realize
that debt has interest and if they have too much debt, the
interest will start to become a major budgetary concern. If
they carry $20,000 in debt, they are going to be paying around
$2,000 year in interest, which is a lot of spending money
wasted. In addition, people are going to charge them even
more if they need to borrow in the future (because they are
a credit risk), making every major purchase more costly.
The Bushes are unconcerned about their debt, even as it approaches
$6,000,000,000,000. Yearly interest payments are now a large
part of their budget. Furthermore, all of those people who
hold their debt are going to start to charge them more and
more interest as the debt grows. This is a serious problem
when the Bushes try to control the US dollar and international
exchange rates and realize that international creditors have
a substantial control over them. This is also a problem for
the Americans, because when they need to borrow for a new
car, their $15,000 loan is competing against the Bushes' $550,000,000,000
loan.
When deciding on how to stay within their budget, the Americans
concern themselves with education, health, and housing. The
Americans are obsessive about ensuring that they provide the
best education possible for their children. They realize that
education is the key to opportunity and comfort. They are
also equally concerned about ensuring the health and well
being of their children (and themselves), sacrificing to provide
regular checkups and shots. Furthermore, they save up some
money to make sure that Grandma and Grandpa are well provided
for, if necessary. Finally, they work on guaranteeing safe
and friendly housing.
The Bushes are more concerned with helping finance their
rich uncle's new yacht. Sure, they pretend to care about education,
health, and housing, but they are more concerned with appearance
over subsistence. Almost all of their budget cuts are in the
17% of the budget dedicated to domestic programs directly
impacting American families. The Bushes spent a lot of time
making a new plan to monitor and improve their children's
education, but then under-funded it so much that even their
friends were appalled (Virginia's Republican legislature blocked
Bush's entire education initiative, because it was unrealistic
and unfunded). The Bushes show little concern over the growing
list of people who are unemployed and uninsured. The Bushes
are eliminating the Even Start family literacy program ($247
million), the Hope VI housing project revitalization program
($149 million), and drop-out prevention efforts, while decimating
the Section 8 housing for the homeless program, vocational
and adult education funding (down 35%), rural development
assistance, and, of course, the EPA, which will be taking
its largest decrease ever.
What the Bushes do fund is billions of dollars for
discredited defense and energy projects (Star Wars, de-forestation
plans, expensive drilling schemes, etc.). Star Wars is getting
a higher increase in spending than all of the money saved
by scrapping programs aimed at working families and the poor.
The Bushes also give billions in tax breaks to companies who,
in an absurd theory, are suppose to make everyone better off
by having their revenues "trickle down" to the masses. They
feel that money should be given indirectly to large corporations
who will eventually help the people, instead of directly funding
programs that assist needy citizens.
The biggest concern about deficits and debts is the cost
to future generations. When the Americans retire, their children
will be secure in that their parents are provided for and
they are not encumbered by any of their parent's debt. Yet,
the Bushes leave behind trillions in debt, money that must
be paid by future generations. Money that hampers the ability
of future generations to borrow if they need to. Interest
that future generations will have to cover in their budget.
So next time someone tells you that the government should
give us back our money, make sure that you have paid off your
share of the debt. Surely, the Americans, encumbered with
a $100,000 credit card debt, would not give money to their
rich uncle after one good year - they would plan for the future
and balance their budgets.
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