There is no doubt about the fact that the economy is the number one issue facing the nation at this moment and what drives our economic condition today is the fate of the Federal Budget.
The numbers are staggering. So staggering, in fact, that I believe the average person can’t even comprehend their magnitude. So, I am not going to talk in terms of annual expenditures, but monthly expenditures: annual numbers divided by 12.
And I will even be generous. The annual President’s Budget is $3.8 trillion dollars. Divided by 12, that is roughly $300 billion dollars per month. By the way, that is 10 billion dollars per day. You may argue whether we spend all of that wisely. For the record, we do not. We borrow a lot of money, too. Every month, it amounts to $120 billion. That’s almost a half a billion dollars per day.
Is it still too much to comprehend? Say you get paid, as I do every 2 weeks. Let’s say you spend $3000 each pay period. That’s a nice $78 grand per year. Here’s where it gets funky. Following the Federal model, you would only be earning about $47 grand per year. You would be borrowing the difference, some $2400 each month. That’s about $80 per day. Every day. And every month it keeps rolling.
But you make some assumptions that make you feel better. You’ll work harder. Your boss will recognize you. You’ll get a big fat raise of $10 per hour (up from about $6). You’ll inherit something big. You’ll hit the lottery. It’s no use.
As the saying goes, you can’t dig yourself out of a hole. You have to stop digging. You have to start changing behaviors.
As recently as 2008, our Federal budget was $2.9 trillion per year. Sorry, about $242 million per month. That’s 24% less than today’s budget. Now, ask yourself, “Am I earning 24% more today than three years ago?” In the words of John Boehner, “Hell no.” So why are we spending so much?
We continue to spend because we cannot say, “no.” Seemingly innocuous programs grow in size over time. No programs are sunsetted; none are eliminated. Our government pensions are defined benefits instead of defined contributions. Our fiscal house is in desperate shape and no one wants to give back anything. That goes for corporations to unions and homeowners and welfare recipients. But something has got to give.
With the sound turned down on my hotel TV this week, I watched unruly crowds gathering. I thought it was Egypt or Libya or Bahrain. Instead, it was Madison, Wisconsin! Schools closed, public buildings crowded with protesters, legislators on the run. And over what calamitous act were they demonstrating? Establishing contributions to their healthcare and pensions. The private sector averages a 20% healthcare contribution and about an 8% retirement contribution. The Wisconsin government unions contribute zero towards either.
No one is looking to balance the budget on the backs of public unions but it must start somewhere. We are not immune in Massachusetts. To fully fund our pension liability would require almost 3 annual budgets. That’s 100% of three annual budgets. That’s the hole we have dug for ourselves on Beacon Hill. It is worse for many other States and our appetite at the Federal level is just as voracious.
We are fortunate that the conservative movement has taken control of the House of Representatives. The power of the purse resides there. We have seen some tentative steps emanating from the House on fiscal leadership. We need to see more and we need to support them in their efforts.
I used to say that this is about our children’s future and that is still true. What is becoming very clear now is that our immediate future is at stake. Time is short for all of us.
Cairo, Tripoli, Manama. Now Madison. Protest is coming soon to a city near you.
The gravy train has left the station. Press on.
the american century 