With the fiscal crap hitting the fan in a few states of the Union, I’d thought it’d be a good time to go over something here that I find near and dear: personal finance for politicians. Originally, I thought I’d use the word dummies, but even dummies will stop spending money after a short while.
Take Wisconsin, for example. Seriously, take the stupid cheeseheads. I’m still mad that they beat the Steelers. OK, now that I’ve got that out of my system (wasn’t hard considering I’m not a huge football fan), I want to highlight how the state has to run a balanced budget. This is a large part of their budgetary process. If only the Founding Fathers had the foresight to codify this concept into the United States Constitution…
In any case, Wisconsin is one of the several states that requires a balanced budget. But let’s examine what exactly that means in real people terms. If you sit down to do a budget, which I hope you do every month, do you find yourself running a deficit each month? If you did, are you taking steps to ensure that this deficit is taken care of quickly by cutting spending or by getting an extra job?
The truth is, most American households do not run a deficit in their budget on a regular basis. At least, that’s my speculation. I know that we do have an overall negative savings rate, but at the same time, I doubt many of us our spending more than we make on a consistent basis. I know I am not.
You see, personal finance is not all that complicated. You make money and you plan on where every dollar you earn goes. If you find that there is something you can’t pay for, then you put it off and pay for it when you can. You make the necessities a priority, which are food, clothing, shelter, transportation, and utilities. And if you need more money for one item and your income hasn’t risen, then you simply shift money from one area to another.
There is good reason for this. By balancing a budget, you ensure that any shortfalls can be met without too much discomfort or wallet busting efforts. I recently had to replace my entire computer (I may blog about that harrowing experience later) and because I budget properly, I still had a surplus at the end of the month. And I am by no means anywhere close to being rich myself. But replacing the computer, which runs a few hundred dollars, wasn’t something that broke my financial situation because I plan things out ahead of time.
Now think of a rich kid. I’m not talking about a person who works 12-14 hours a day, 6-7 days a week and makes more than I’ll probably ever make in my lifetime. I’m talking about some rich kid who inherited a ton of wealth and does nothing but parties all the time. There are a few of those kind of people out there, rare as they are. I admit that I do envy them a bit, but at the same time I find it is amazing how they are able to spend their parents’ wealth like there’s no tomorrow.
It has been said that politicians spend like drunken sailors but I argue that politicians spend like spoiled rich brats because at least drunken sailors have their own money to spend. Now across this country, moderately fiscally responsible people have been elected and they are looking to cut spending and reign in the shopping sprees that their predecessors have racked up. This is not a criticism of any party because both parties spent the money they took from us like the prodigal sons they were.
So now, most state and local governments have to roll up their sleeves and either cut spending or raise taxes. Unfortunately, raising taxes is only a short-term solution as the people who will most likely be taxed, the working rich, have the means to leave. So the only option is to cut spending. Anything else is entirely implausible and will only serve to ruin things for everyone, rather than a few people.
This is why I am disgusted with the government unions who are demanding to keep money the government doesn’t have. There’s no more money. The economy is contracting and isn’t recovering in the areas that count (I’ll give you a hint: it’s isn’t government spending that counts). So when your employers, the mayors and governors, say that they can’t pay you, they aren’t being greedy. They are exhibiting common sense and trying to bring some sanity back to the government’s spending habits. And you know, it may not hurt to have to spend your own money for your own retirement and medical insurance like the rest of us plebes.