Wednesday, January 26, 2011

How I Would Balance The Budget

"If you would be wealthy, think of saving as well as getting." ~ Benjamin Franklin
I just read a snippet of Obama's state of the union address over at AOW's place this morning.

I didn't watch the speech. There is much more believable fiction on other channels.

As I've said countless times, I am not an economist. These billion and trillion dollar proposals, stimuli, tax increases and cuts boggle my mind. I don't understand how cutting this and raising that will reduce the national deficit very significantly.

I can only compare the national budget to my own personal finances. It is the only way I can relate.

I make far less money than I need with which to balance my budget. And, I can't manage my bank account by speculating that some future windfall is going to drop into my lap. I can only base my accounting on what I physically have in my possession.

I, unlike the government, cannot simply print more money. And, truthfully, because the government can print more money, this is where the comparison between my budgetary concerns diverge from the government's.

I could just stop here, and that would pretty much make my point.

But, I digress. Since I am not, in any way, some kind of economical genius, I devised a way, years ago, of balancing my budget. This is what I do:

When I receive my paycheck, after first depositing a small amount of it into my savings account (for emergencies), the first thing I do is determine what bills are most pressing. Then, I calculate how much of my money I can afford to pay on those bills. If I don't have enough to cover all the most immediate bills, I do one of two things:

1. I call my creditors and make payment arrangements. I negotiate (if they'll let me) a future time and amount that I feel reasonably (barring some unforeseen catastrophe)sure I can pay, and/or...

2. I sometimes have to let a bill or two slide until the next paycheck. This is undoubtedly the worst choice, because once in a while something gets turned off. Unfortunately, that can't be helped. If I don't have the money to pay it, it can't be paid.

Next, I pay the bills I have determined I can pay without going completely broke.

With the remaining money, I calculate how much I can spend per day until the next paycheck. Then I try to stay under my self imposed spending limit every day, thereby increasing the amount I can spend per day until the next paycheck. Hopefully, if I did my calculations correctly, and some unforeseen financial emergency doesn't come up, I will have something left before my next paycheck, which I can add to the paycheck, with which I pay the next round of bills.

I check my bank balance every day, religiously. (By the way, because I check my balance everyday, I have stopped attempts of identity fraud on more than one occasion. You see, what they do is invade your bank account and withdraw a very small amount of money at first to see if you discover it. If you don't catch it, they withdraw huge amounts.)

This system works for me, provided I don't overspend my daily allotment on whims. If I do overspend one day, I have to necessarily adjust my per diem spending limit.

This cycle will continue until I either start getting paid enough to pay my bills and have funds left over, or I receive an unexpected windfall such as win a lottery, or a rich uncle dies and leaves me his entire fortune.

Neither is likely to happen. I don't play the lottery and as far as I know, I have no rich uncle.

Now, the way I see balancing the federal budget is much the same, except on a much grander scale.

Just like myself, unless the Federal government has a trillionaire uncle somewhere who dies and leaves his entire fortune to the U.S. Government, or the federal government wins a trillion dollar plus lottery, the way it's currently budgeting it's money is not working.

The federal government has to first determine how much money it actually has.

Then, it has to pare down it's spending to the point where it can only spend what it has, and no more. If it has to be done daily, the way I do it, then do it that way. If something has to be cut off temporarily, let it be cut off.

Make some arrangements, if necessary. The government should always be aware of exactly how much money it can spend without going over the limit. In other words, the government should be checking it's bank balance every day and making adjustments.

It needs to stop printing up monopoly money. All that does is create a false sense of security that our children and grandchildren will have to pay dearly for later.

Then, don't go over the limit.

Too simple, you ask? Perhaps. But, as I say, I'm not an economist.

Cross posted at American Descent

11 comments:

Always On Watch said...

Mark,
I find your comparison between a personal budget and our national budget a valid one.

Let me comment a bit more on that analogy....

Now, how can we account for the fact that politicians on both sides of the aisle write checks on our nation's treasury and then expect some kind of overdraft protection to kick in when they don't have a savings account providing that overdraft protection? Except -- these politicians are counting on a sort of savings account: tax revenues and, as you mentioned, printing extra checks.

BHO's speech last night was smoke and mirrors -- and I'm being generous with that statement.

Z said...

you and AOW are right.....especially about the speech.

I like your comparison, too (tho you make me nervous about checking the bank account frequently...I heard they'll try to float even only $5 and then swoop down if you let it go)... Our problem today is CHINA, don't you think?
Donald Trump had the right idea...tax them to death on exports then get RID of their help ASAP, but I don't think that can happen.

That 'savings account' AOW alludes to is OUR SOCIAL SECURITY they're raping!

tugboatcapn said...

Mark, imagine if you could sit down every year and decide how much money you would LIKE to spend on housing, food, clothing, transportation, utilities and so forth line by line, add it all together, and go to your employer and demand THAT MUCH, and your employer was forced to give it to you.
Then if there was a shortfall in one area or another, you could just write bad checks to cover it, and figure it into next years budget.

How fiscally responsible would YOU be in that scenario?

That is the way the Federal Budget is handled.

Craig said...

Mark,

One slight adjustment. Instead of the federal government figuring out how much is has available to spend, the starting place should be exactly what should the federal government be spending money on and how much should those things cost. Then they should set tax rates at a level that will accomplish those things with potentially some extra for unforeseen events.

ELAshley said...

What I heard last night was more of the same. Last nights SOTU wasn't any different than any other speech he's given over the last year and a half.

I also heard a lot of out-right lies and repeated, previously failed, Obama promises.

And that's being fair.

My analysis of the SOTU?

Hyperbole. Platitudes. "Investment = Stimulus/Spending." Masterful Obfuscation... in short: same ole, same old. The whole thing rang hollow. Last night wasn't AMERICA's Sputnik moment. It was Obama's. It was his graceless fall to earth. Even last night's CNN panel (with the exception of one) questioned the content of the president's speech.

For the most part I sat incredulous that the president, basically, rehashed last year's speech, and any number of speeches in between.

As to balancing the budget, Ryan clearly delineated the problem facing the changes that need to be made, namely, it's either going to hurt now, or it's going to hurt far worse later. It's not a Republican deal, it's not a Democrat deal. BOTH parties will have to address the issues of our debt and spending, including the cuts that will save this country from bankruptcy....... Forget about your careers, gentlemen. Choose to love America greater than yourselves ,or your party. It's going to hurt either way, so just do it.

There should be no sacred cows... on EITHER side. Especially Obamacare, which a majority of people want repealed, which I'll remind you, Obama admitted to in last night's SOTU! Entitlements, Defense, GOVERNMENT, defunct agencies, everything needs to be on the table.

His liberal approach to spending, government, stimulus, thus far, has failed. It's time to move in a different direction. Obama doesn't have the luxury of making demands of anyone, whatever he thinks of his presidential authority. He's not a king... he is just one branch of government.

Jim said...

I'll bet when you do your budget you don't decide to give some of your pay back to your employer so he can buy another vacation home and commit to doing that for 10 years or more.

EL said "My analysis...Hyperbole. Platitudes. "Investment = Stimulus/Spending.""

That wasn't your analysis. That was the talking points of everyone on FOX for the past 24 hours.

"a majority of people want repealed"

This is false.

"I'll remind you, Obama admitted to in last night's SOTU!"

This is false, also.

"His liberal approach to spending, government, stimulus, thus far, has failed."

This is false.

"Obama doesn't have the luxury of making demands of anyone"

He did not.

"He's not a king"

Really?

Lone Ranger said...

Time to school a liberal again.

The latest Rasmussen Reports national telephone survey shows that 53% of Likely U.S. Voters favor repeal of the health care law, including 41% who Strongly Favor repeal. Forty-three percent (43%) oppose repeal of the law, with 32% who are Strongly Opposed.

The Democratic firm Public Policy Polling has a new poll which shows voters favor repealing the health care bill passed last month by a 53% to 40% margin, with 8% of voters not sure.

Even a CNN poll showed 50% of Americans want it repealed -- with 8% just voting present. So, that's a majority too.

So, the majority of Americans DO want Obamacare repealed. That's info you don't get watching MSNBC.

Jim said...

LR copy and pasted:

"The Democratic firm Public Policy Polling has a new poll which shows voters favor repealing the health care bill passed last month by a 53% to 40% margin, with 8% of voters not sure."

LR apparently forgot that PPACA was passed in March of 2010, not "last month".

Yeah Rasmussen says a majority of "likely voters" favors repeal. I'll give you that one. CNN, well within the margin of error.

I stand by the rest of my post though.

Lone Ranger said...

Of COURSE I copied and pasted. You expect me to put more effort into addressing your ridiculous posts?

Apparently, you think that saying "This is false," is a devastating rebuttal. This is false.

Jim said...

I expect you to offer current information when you are claiming it to BE current information. We all copy and paste, but don't use 10 month-old information and make believe it applies to today.

Sofia Britts said...

Most of us, I think, make less money than what we need. The prices of the commodities are high, plus our wants are so tempting, and at the same time we have to save. Oh, even just the thought of it is a burden already! But hey, that's life! And we have to work harder to satisfy our needs. Oh, how I wish the government would just print more money to fill every hole. But it just can't, because the money would lose its value.