An Irresponsible Budget

The House and the Senate have now passed slightly different versions of President Obama’s budget. Not one Republican voted for either of them. That’s a strong statement and really the only encouraging thing about this whole mess.

In all of the stories and reporting on the budget, there are a lot of terms thrown out that people may not understand. Sometimes I question whether the policy makers themselves really understand them. So lets just discuss a couple of the most important terms and how they impact the budget.

Deficit. The “deficit” is the difference between the money that the government is spending and the money they are bringing in. Think about it this way. You sit down to work on your own personal finances and you total up all of the money that you are going to make in a month. Then you start totally up your bills and include all of the things that you know you need or want to spend money on. When you compare your income to your expenses they almost never match up directly. Hopefully you have a little more income than expenses. If not, you pull back your expense to at least match your income. In the current budget the government expects to bring in about $1.9 TRILLION. They plan to spend… $3.6 TRILLION. Now think about that for a minute. Say you made $50,000 a year. You sit down with you family and you decide that you really WANT to spend $95,000. You can either cut back like any rational person would do, or you find someone willing to lend you $45,000. This is called “living beyond your means”. The deficit for each year is then added to the national DEBT.

Debt. This is something that most home owners are acutely aware of. This is how much you owe other people. This is the weight hanging over your head in the form of mortgages, car loans, credit cards, HELOCs, and the infamous student loans. Currently the national debt stands at about $11 TRILLION dollars. Ouch. Now think about all of your personal debt (if you have any). What does all debt have in common? If you don’t get rid of it, it grows. Like a beer belly on a redneck! Interest charges accumulate. The more debt you get, the worse risk you become. Your credit rating dips and any more debt you accumulate will cost you more money in the way of increased interest rates. It works exactly the same way for the government.

During the campaign, Senator Obama blasted Senator McCain for voting for President Bush’s budgets because of the deficits involved in them. I couldn’t agree more. President Bush’s budgets spent when they should have saved. They took the extra money and expanded government, when they should have cut back. Bravo Senator Obama. Unfortunately President Obama doesn’t remember the outrage that Senator Obama had about those reckless deficits.

Now I’m sure that you have heard President Obama state over and over that we are not going to follow the old failed policies of the past. He has said that by the end of his first term he wants to “cut the deficit in half”. Unfortunately before he cuts the deficit in half, he will more than QUADRUPLE it. In fact according to his planned budget, which is rosy by most accounts, we will not have one single year of surplus. He doesn’t ever plan to spend less than the government brings in. He plans to spend as much as 90% MORE than the government brings in. Just imagine if YOU budgeted that way!

This is what the Congressional Budget Office had to say about the budget.

- CBO now estimates that the deficit would total almost $1.7 trillion (11.9 percent of gross domestic product, or GDP) this year and $1.1 trillion (7.9 percent of GDP) next year—the largest deficits as a share of GDP since 1945.
- Debt held by the public would rise, from 41 percent of GDP in 2008 to 57 percent in 2009 and then to 82 percent of GDP by 2019 (compared with 56 percent of GDP in that year under baseline assumptions).

Don’t let terms and responsible SOUNDING language confuse you. This budget is irresponsible, reckless, and economically speaking, extremely dangerous.