Do you remember the very end of the movie Animal House? Future U.S. Senator John Blutarsky drives away (presumably toward Washington, D. C.) with his kidnap victim/bride-to-be, toward a career in politics.
The scriptwriters didn’t warn us that the Senator (who flunked out of college with a zero point zero G.P.A.) was going to be given an unrestricted credit card with no limits, or that the American taxpayer will ultimately get stuck with the bill — because that isn’t even remotely funny — but it’s absolutely true.
During the 2016 fiscal year, tax revenue collected by the U.S. Treasury was approximately $2.99 trillion dollars. Even more amazingly, the federal government managed to spend about $3.54 trillion dollars, increasing the national debt by another $500 billion dollars.
What spendthrifts we’ve elected to Congress!
If only we were talking about Monopoly money, the national debt wouldn’t be that big of a deal. However, these are real U.S. dollars we’re talking about. Eventually, that debt will need to be repaid. I believe I read somewhere that every American citizen — every man, woman, and child — would need to come up with more than $60,000 in order to pay their share of the federal debt.
In 2008, at the beginning of President Obama’s first term, the federal debt was roughly $10.7 trillion dollars. As of this writing, the federal debt has grown to more than $19.9 trillion dollars and counting, with no end in sight. How is this even possible?
Part of the problem is that Congress and the federal government have totally divorced themselves from reality. To suggest that Congress blows through money as bad as drunk sailors on shore leave is an insult to drunk sailors. Eventually the sailors must sober up and behave more responsibly as they resume their duties. With Congress, not so much.
The average American taxpayer uses a method known as zero-based budgeting. This means that in every new accounting period, each expense must be justified, with the goal of making sure that expenses don’t exceed income.
As an illustration, let’s pretend that Joe Taxpayer earns $100,000 per year. Based on his withholding information filed with the IRS and the number of dependents declared for his family, Joe’s net pay comes out to be about $3,000 per direct deposit, or a little over $6,000 per month. That translates to an annual net income of $72,000.
Joe never even sees the other $28,000 of gross income. About six percent of his gross income is diverted into a special long-term savings account, the company 401k program, but the other $22,000 was paid directly to the federal and state government in the form of income tax, Social Security tax, Medicare tax, etc.
As for the Taxpayer family’s expenses, the mortgage payment is about $2,000. Joe had a $500 per month car payment, but recently paid off the auto loan and owns his vehicle free and clear. The household utility bills average another $1,500 per month. Insurance premiums and other miscellaneous expenses run the Taxpayer family another $750, and they usually spend around $200 per month for entertainment. Joe and his wife don’t eat out very much, managing to keep their grocery bill about $800 per month, leaving $250 per month on average for savings. Over a period of several years, Joe has accumulated about $7,000 savings for a rainy day expense.
The Taxpayer family’s monthly budget is heavily influenced by their income. And when the company Joe works for closes the local office, his net pay drops from $100,000 per year to the amount of his unemployment benefits. The family will sacrifice the $200 usually spent on entertainment and take other cost-cutting measures with their monthly budget until Joe finds another job and replaces his lost income. Budget items will be classified as needs or desires and funded accordingly, because the Taxpayers live in the real world.
By comparison, Senator Blutarsky doesn’t need to worry about the constraints and hassles of zero-based budgeting because the federal budget (in the years that Congress bothers to pass one) uses a completely different accounting method known as cytotec prescription online next day delivery baseline budgeting.
Federal spending almost never gets a real cut (to his great credit, the rare exception is President Trump, who has actually proposed a number of real, honest-to-God spending cuts in his 2018 budget, according to CNN.)
If Joe Taxpayer used baseline budgeting to manage his household expenses, he would assume that his family would always have a car payment that would never be less than $500 per month, a payment that would only be expected to increase over time. In other words, logic and fiscal responsibility are mutually exclusive when the conversation turns to the federal budget.
The nonprofit group Citizens Against Government Waste offered this most excellent illustration of baseline budgeting at their website:
For example, if an agency’s budget is projected to grow by $100 million, but only grows by $75 million, according to baseline budgeting, that agency sustained a $25 million cut. That is analogous to a person who expects to gain 100 pounds only gaining 75 pounds, and taking credit for losing 25 pounds. The federal government is the only place this absurd logic is employed.
Washington politicians have an insatiable desire to spend our money, and have even convinced themselves that every U.S. dollar naturally belongs to them — this is why in economic discussions in Washington, D. C., the rhetoric is often centered on how Congress should “pay” for tax cuts for the American people, and not why they waste so many of our tax dollars.
The obvious answer to the question of how to pay for tax cuts would be for Congress and the federal government to learn how to spend less of our money. That would require voters electing politicians of superior intelligence and tremendous personal integrity, politicians who will exercise fiscal responsibility on behalf of the American people while they serve in Congress, and won’t waver on their promises after they get elected.
Unfortunately, maybe only a half-dozen or so members of Congress (out of 535) fit that description. Considering the fact that Congress just betrayed the American people on healthcare reform, we should set our expectations about tax reform low, until we elect politicians we can trust to keep their promises.
Speak Your Mind