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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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