We like blaming the government for a lot of things that go wrong in our life. From Obamacare to yearly tax law changes, many people start thinking that the government is out to get us. All they want is our hard earned money and those greedy bureaucrats will do anything to get it. While I do agree that greed is the name of the game in politics, I don’t think that every law the government makes is a cohesive concentrated effort to steal money from its citizens. That’s because the US government really has no idea what it’s doing.
After perusing any reliable financial books and/or blogs, you will come across certain themes. Spend less than you earn, cut your expenses and save for a rainy day. I really think the members of the Federal government need to start taking a look at the many great financial blogs out there because they are breaking every rule in the book. According to a recent report by the Congressional Budget Office (go ahead and read the whole thing here if you have a free 5 hours), it is almost inevitable that the US is heading towards a fiscal crisis. While the country’s deficit has gotten a little smaller since the recession in 2009, the report states that there is NO scenario that the debt will decrease in the next decade. That sounds pretty grim.
The Big 3 Expenses
What really shocked me was reading about how the expenses of the US government are divided. Every individual, family, company and government has expenses. There is no way around them. We just need to minimize them as much as we can. But according to the report, 85 percent of the governments expenses come from only three things: health care, Social Security and interest payments on loans. That means only 15% of the country’s money goes to little details like keeping roads maintained and national defense. This is mind boggling but it does remind me of a predicament that a lot of people find themselves in personally. There are a few expenses that can really dominate, and the big ones that come to mind are mortgages, transportation (car loans, gas and maintenance) and debt. If you’re not careful, these expenses can really bust your budget and affect how much money you really bring in.
The way to tackle this is to take a long and hard look at your biggest money suckers and find ways to decrease them. Bought a shiny new gas guzzler that’s taking a toll on your monthly budget? Sell it and get a more fuel efficient used model. Bought too much house and living in a high cost of living area? Try to downsize while moving to a lower cost of living area if possible. Can’t get a handle on your credit card debt? List all of your debts in order and attack the one with the highest interest rate. There are simple fixes to all of these personal finance issues that the members of Congress would do well to apply to our government’s expense problems. But there is a problem.
It will never work.
And that’s because the members of Congress would like to remain members of Congress. When you and I cut an expense that’s siphoning money from our accounts, there may be a little resistance just because old habits are hard to break but we know that it will be for the good of our financial future. It might even be unpopular with our spouse or children but we know it’s for the good of the long term financial health of the family. Congress doesn’t think like that because they are only making decisions based on the next election cycle. They want their constituents to vote them in office again, so proposing to make any major changes to any type of government program will result in a backlash, most likely losing them their seat in the next election. This can be seen with the passage of the Affordable Care Act as many people are calling for the President to be impeached!
The bottom line is, the only way to make your financial situation better is to make more and spend less. If Congress tries to make more (raise taxes) or spend less (cut Social Security), they will make millions of people angry. Instead, they enact short term fixes year after year and “kick the can” down the road. Unless a group of lawmakers buckle down and make the hard choices when it comes to the budget, the US is in for a tough few decades ahead. I will forward my blog to Congress and see if that can get things going.