Tuesday, July 26, 2011

Uncle Sam: You Need to Cut Up Your Credit Card!

Today I heard our great Senator Rand Paul on the radio being interviewed in regard to the current government budget and debt debate.  He reminded me of something I had forgotten.  In the proposals by both Democrat and Republican leadership, an ever-increasing baseline budget is the starting point for any supposed cuts.  I think the annual baseline increase is around 7%.

This means that, in the end, the proposal that is being worked out by the Speaker of the House does not actually cut government spending at all.  In fact, it allows it to increase significantly as time goes on, along with an ever-increasing government debt.

Suppose a friend with a “cash flow problem” (what a euphemism that is!) came to you for budgeting help.  The friend has an enormous balance on his credit card, and not only is the balance increasing, but it is increasing at an ever-increasing rate.  The friend wants to know what he can do other than declaring bankruptcy.

The friend is going to have to spend less.  That will mean that he will have to stop buying many of the things to which he has been accustomed.  He is necessarily going to have to trim his lifestyle significantly.

Surely any meaningful advice would also have to include this:  stop borrowing money immediately.  Do whatever you have to do to make sure you borrow no more!  Cut up your credit card.

Could good advice in such a situation ever be “just try to slow down the rate at which you are going into debt?”  Could good advice include the idea “assume you will spend and borrow more each year, and just cut down how much more you are going to go into debt”?

But this is exactly what even the Republican leadership is proposing for the United States government.  It sounds utterly idiotic when you put in terms of your hypothetical, over-spending friend.  And it sounds just as idiotic when it comes from the Speaker of the House.

Just like a person with a massive, continuing credit card balance, the United States needs to stop borrowing money.  We should have stopped it a long time ago.  But now it is now, and now is always good time to stop borrowing.

It would be a good thing, not some kind of tragedy, if the “debt ceiling” were never raised again.

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