The Budget Mess Is, Well, A Mess!

Our Federal Government has been broke for a long time.  That is, of course, if you define broke as spending (federal expenditures) far more money than you have (US Treasury) or are likely to earn (tax revenues).

If our Federal Government was a family in similar circumstances, it would have to do just what you or I would do in order to survive.  We'd cut spending to a level consistent with our ability to pay or borrow enough to pay the mortgage and buy the groceries until we could reduce spending or increase our income.

The problem with our Federal Government is it isn't a family and it doesn't play by the same rules that apply to you and me.  If the family wanted to borrow to cover its cash shortage, it could only borrow an amount consistent with its ability to repay and the loan would only be a short-term solution.  If the family overextended itself by borrowing more than it could repay, the house of cards would eventually collapse and foreclosure, bankruptcy and possibly homelessness could follow.  During the real estate boom during the middle of the previous decade a lot of folks learned all about this outcome.

Our Federal Government's rules are very different.  If it wants (notice I said wants, rather than needs) to spend more money than it has, it too can borrow.  The difference is, unlike most families, lenders seem willing to loan any amount for which the government is foolish enough to ask.  Our government, the borrower, and the buyers of US Treasury securities, the lenders, appear to believe the house of cards can and will never fall.  The reality is it would fall eventually but that's a longer-term problem.

There is, however, one real limit to how much the Feds can borrow.  It's called the Federal Debt Ceiling, which is about to be reached.

Since the government is unwilling (notice I said unwilling, rather than unable) to cut its spending to match its earnings and since the Feds are about to hit the Debt Ceiling, our government is about to stop paying many of its bills.  The only way to stop the shutdown is for Congress and the Administration to agree on a new, higher Debt Ceiling and various funding resolutions that will authorize payments.

Seems pretty simple, doesn't it?  It should be.  The problem is Congress can't agree on future spending and the Administration isn't helping.

Before I go any farther, I need to remind everyone this isn't a Democrat or Republican issue.  It's a national issue affecting all of us.

On one side (the Democrats) we had a proposal to trim the budget by a whopping $13 billion, to which the other side (Republicans) cried, "Foul!"  That's a lot of money, isn't it?  Not really.  It represents about 1/3 of 1 percent of the total proposed 2012 budget of $3.7 trillion.

On the other side (the Republicans) we had a proposal to trim the budget by an even more whopping $61 billion, to which the Democrats cried, "Foul!"  Come on--$61 billion out of a total budget of $3.7 trillion represents only 1.6% of spending.

Are the Democrats telling the Republicans and the taxpayers they can't find 1.6% of the budget to trim?  Could you reduce your family's expenditures by 1.6% next year.  Well, yeah.  We all can and have.

Quite frankly, the $61 billion reduction proposal is not nearly enough.  If it were three or four times that amount, it would be a good start.  The proposed 2012 budget deficit is $1.1 TRILLION.  That's an enormous 30% of proposed expenditures or 42% more than projected revenues.

Returning briefly to the $3.7 trillion budget figure, if you think that is a large number, you're right.  It is almost exactly double the total proposed expenditures of the Federal Government in 2001, only a decade earlier.

If the Federal Government shuts down on Friday, which is not improbable, remember why.  The Republicans didn't ask for nearly enough and the Democrats are rejecting reality as well as reasonableness.  It appears the only thing wrong with government is politics.