Budgets & Deficit
The issue of fiscal responsibility is primarily a matter of morals. The Government should not spend money it does not have, just as individuals should avoid spending money they don’t have.
To fully understand the Government’s advantage in debt spending, we must reference the previous category. John Maynard Keynes believed in massive Government spending in times of economic downturn. Huge deficits were a necessity to remedy the sluggish economy. However, he only believed that the Government should spend money on things the free market was unable or unwilling to fulfill. This included public works projects like roads, military spending, and public utilities. Most average people believe this to be true. However, Keynes did not expect that those spending programs and projects would require Government spending to maintain their efficiency. The result is a sub-economic culture of massive Government spending. Certain areas of the economy are completely controlled by the Government, allowing little to no competition. Under limited competition, prices will soar and fraud will run rampant. This is no different from your personal life. With an excess of capital and monopoly on labor in a specific market, you can price your product at what market analyzers call “WTMWB” or “What the Market Will Bear”. It essentially means the maximum price you can charge based on what people are willing to pay. Since you’re not concerned about competition, and you’re receiving money to perform a task, you can price that task as high as you wish, as long as people continue to pay it. Not only does this process produce massive amount of inflation, a lack of competition usually produces poor quality, massive over-spending and little to no liability. Take roads for instance. The argument that is always had is, “without the Government, who will build the roads?” Aside from the obvious, (that roads existed prior to Government public works projects) they are almost always over budget, behind schedule, and poor quality. Their maintenance (or lack thereof) is constantly the target of critics, and no one is ever quite satisfied with the end result. Much of the time, road construction and bridge projects make little to no sense to the average commuter, and the process through which you can complain about the services you are provided with are overly arduous. Keynes, although a brilliant man, failed to place a limit on his expectations of Government spending. The result today is nearly $20 Trillion in debt, with a $500 Billion budget deficit. As a percent of GDP (Gross Domestic Product, the value of all the products and services produced in a specific country), our debt is well over 100% and continues to climb every day. At this point, balancing the budget (a $0 deficit), would require a roughly 15% reduction in all Government spending, across the board. To pay off our $20 Trillion debt, deeper cuts need to be made in order to curb the possibility of a default. At present, our Government only intends to pay the interest on our debt, and not the principle. It doesn’t take a finance manager to understand that doesn’t meet our financial obligations to pay that money back to our lenders. If we don’t, we risk default. If we print the money, we risk a phenomenon known as hyperinflation, when the value of the money in our country becomes exponentially less valuable overnight, and the outcome of which is severe poverty.
It is financially responsible and economically imperative that we reduce our spending and work to balance our State and Federal Budgets. Deficit spending is not an “investment”. Sound financial principle suggests you invest money when you have extra capital, and not gambling on a credit card.
To fully understand the Government’s advantage in debt spending, we must reference the previous category. John Maynard Keynes believed in massive Government spending in times of economic downturn. Huge deficits were a necessity to remedy the sluggish economy. However, he only believed that the Government should spend money on things the free market was unable or unwilling to fulfill. This included public works projects like roads, military spending, and public utilities. Most average people believe this to be true. However, Keynes did not expect that those spending programs and projects would require Government spending to maintain their efficiency. The result is a sub-economic culture of massive Government spending. Certain areas of the economy are completely controlled by the Government, allowing little to no competition. Under limited competition, prices will soar and fraud will run rampant. This is no different from your personal life. With an excess of capital and monopoly on labor in a specific market, you can price your product at what market analyzers call “WTMWB” or “What the Market Will Bear”. It essentially means the maximum price you can charge based on what people are willing to pay. Since you’re not concerned about competition, and you’re receiving money to perform a task, you can price that task as high as you wish, as long as people continue to pay it. Not only does this process produce massive amount of inflation, a lack of competition usually produces poor quality, massive over-spending and little to no liability. Take roads for instance. The argument that is always had is, “without the Government, who will build the roads?” Aside from the obvious, (that roads existed prior to Government public works projects) they are almost always over budget, behind schedule, and poor quality. Their maintenance (or lack thereof) is constantly the target of critics, and no one is ever quite satisfied with the end result. Much of the time, road construction and bridge projects make little to no sense to the average commuter, and the process through which you can complain about the services you are provided with are overly arduous. Keynes, although a brilliant man, failed to place a limit on his expectations of Government spending. The result today is nearly $20 Trillion in debt, with a $500 Billion budget deficit. As a percent of GDP (Gross Domestic Product, the value of all the products and services produced in a specific country), our debt is well over 100% and continues to climb every day. At this point, balancing the budget (a $0 deficit), would require a roughly 15% reduction in all Government spending, across the board. To pay off our $20 Trillion debt, deeper cuts need to be made in order to curb the possibility of a default. At present, our Government only intends to pay the interest on our debt, and not the principle. It doesn’t take a finance manager to understand that doesn’t meet our financial obligations to pay that money back to our lenders. If we don’t, we risk default. If we print the money, we risk a phenomenon known as hyperinflation, when the value of the money in our country becomes exponentially less valuable overnight, and the outcome of which is severe poverty.
It is financially responsible and economically imperative that we reduce our spending and work to balance our State and Federal Budgets. Deficit spending is not an “investment”. Sound financial principle suggests you invest money when you have extra capital, and not gambling on a credit card.