Fiscal Fitness

Suppose you have a young child and you agree to give him or her (I’m going to take liberties and use “they” and similar pronouns to refer to this un-gendered “child”)… to give them an allowance in exchange for their doing some small, but important, household chores…

All goes well until one day your child asks for more money.

Why?

They have their eyes on a toy, or  (gasp!!) a video game… maybe a piece of music… whatever… and they need to have it now…

Before it’s “too late.”

Do you give them the money?  What do you ask in return?  Do you tell them to wait until their birthday or Christmas?  Do you consider their intended purchase to be a good use of the money entrusted them?

Fast forward.  Same child is in college.  You and child are in a financial partnership, sharing in responsibility and sacrifice to pay tuition, room, and board.  They are driving an older car, but one that is reasonably likely to get them to and from school.

Summer comes and with it a summer job.  One day, you arrive home from work, and in the driveway is an unfamiliar vehicle.  The front door opens and out bounds your child, smiling and waving a set of keys.

“I bought a new car!”

“Wonderful,” you say.  “How are you going to pay for it?”

“Well, I had a small refund from last year’s student loan, so I used that as a down payment.  And the used car dealer said he would take monthly payments.”

Conversation ensues.  That refund?  You know, the loan you co-signed.  Monthly payments during the school year?  You know, that campus job that’s supposed to cover incidentals and “mad money.”

Next school year, you receive the inevitable phone call.

“Can you send me a little money?”

That’s your kid on the other end of the line.  A good kid.  A misguided decision or two… like that car.  That’s youth.

Do you send the money?  Do you have it to spare?  Prices for food, fuel, and other essentials are rising faster than your salary.  You’re already committing a large portion of your income to pay for college.

Are you going to help your child through this mini-crisis?

How bad is their “crisis?”  Do they still have money to pay for the essentials?  Or do they need a little extra beer money?

Your pot of money is looking smaller and smaller all the time…

That’s your kid on the other end of the line.

Do you send the money?

More conversation ensues.

About responsibility.  About priorities.

About debt.

Same child.  Graduate student.  Living in the city.  Nice apartment.  In fact, maybe too nice.  Gotta furnish it.  Can’t have that same ol’ broken down junk from college.  Cost of living is higher in the city, too.  Got a nice fellowship to pay tuition, but the academic demands are greater.  Less time for outside employment.  Loans help, but not covering all the costs.

Phone call comes…

“I need money.”

Do you help?

Kid’s still got a car payment to make.  Just had to have this apartment.  Just had to have nicer furniture.

“I can’t just drop everything and get a job.  What about school?”

Hence the phone call to Mr. and Mrs. Moneybags.

If you and/or your spouse work for yourselves, you may have a chance… a chance, mind you… to make a little extra money… work a little harder, a little longer… to replace the income that prodigal child has chosen to spend and now requires of you.

If you are employees with fixed incomes, the decision becomes more difficult.

What else can you cut from your own budget?  What about your other children?  How does your decision impact them?

Are you going have to use the credit cards to pay for the family’s essentials?  Do you really want to put yourself deeper into debt?

What behavior shift can you expect from your graduate student?  Can you expect one?

Or will your decision further enable them?  To spend, spend, spend?

Tough choice.

The US economy is no different from your economy, just on a grander scale.  Consider our government.  We make decisions, or rather, we hire representatives to make decisions for us.  How are we going to spend money?  Where does the money come from?  What are our priorities?

We’ve made commitments.  We must live up to them.  At what point must we stem the tide of our overspending?  The current economic climate is forcing a plurality of Americans to rethink and revise our personal choices.  How we spend.

How we live.

Same has gotta hold true for our politicians.

But before you react with “That’s right!  Cut loopholes!  Tax the rich!  Make everyone pay their fair share!  Don’t play games with senior citizens and the military!”… consider who is doing what.

Government spending is at an all-time high, percentage-wise, compared to how much our economy produces.

How can we sustain that?  Take more from those who have more?

How much more can you afford to give before you have no more to give?

If you ask the credit card company for a credit limit increase, what do they want to know?

How you are going to repay the debt.  How much you are borrowing, percentage-wise, relative to your income.  Is the company going to consider how much your kids are going to make or whether your kids can help repay your debts?

Short answer is no.

Since taking office in 2009, the current occupant of the White House has implemented programs that added more than four trillion dollars to our national debt.  In two short years.  Not including the health care bill.  So far, in his conversations about “shared sacrifice,” he has offered up a mere two billion dollars in spending cuts.

That’s absurd.  A cruel joke.  Comical if it weren’t so deadly serious.

That’s spending $20 for every penny in savings.

How many of you would bother bending down to pick up a penny on the sidewalk?

How many of you would dive to be the first one to pick up a twenty?

Cut loopholes!

Read the essay “I, Pencil: My Family Tree as told to Leonard E. Read,” first published in 1958.  You can read this brief essay at http://www.econlib.org/library/Essays/rdPncl1.html.  A lead pencil tells the story of the complexity of its own creation.

Considering the work that goes into manufacture of a simple lead pencil, contemplate the work… and the workers… involved in building a private jet.  Do the workers care who buys the jet?  Or are they more concerned that there are as many people as possible out there who wanted, and could afford to buy, lots of jets so they could keep their jobs?

Instead of demonizing those of us who can afford to purchase and use a private jet, consider the families who will suffer if nobody’s buying those jets.  And on those same lines…

Tax the rich!  Shared sacrifice!

“The rich” already pay a disproportionate amount of tax revenue to the government.

At least one-third of all Americans pay no income taxes (some estimates are as high as 47 to 52%).  So, if we are to share in the burden, let’s say we increase taxes by $100 on every American.

You with me?

That would amount to an annual windfall of $10 billion to the Treasury.

Not much vs. a $15 trillion debt.

But I digress…

The top 1% of income earners collect 23% of the nation’s income (Adjusted Gross Income for you non-recovering CPA-types out there).  23 percent.  That same top 1% pays 40 percent of all income taxes.

That’s not shared sacrifice.  That’s “over and above” confiscation.

“So why won’t the government pay senior citizens and the military?”

Look at the details of every current conservative proposal for addressing the debt ceiling and meaningful spending reforms.  No cuts for current Social Security recipients.

The same people who ran up an extra four trillion dollars in debt are the same people attempting to scare senior citizens and military families into believing that there won’t be enough money to pay them come August 2.

Social Security is an obligation.  The U.S. Treasury collects sufficient revenue every month to pay interest on our debt, Social Security and Medicare recipients, military personnel, and any and all other existing obligations made by our federal government.  Even without a debt limit increase.

Don’t let them scare you!

Don’t allow the people who controlled the White House and Congress for two full years, during which time they ran up debt at a record pace, convince you that fanatical, hard-line House Republicans are suddenly the ones responsible for the collapse of the nation’s financial system.

Your hypothetical kid keeps making irresponsible and reckless decisions.

How long will you keep enabling them?

At what point do you exercise some tough love and tell them to grow up and make adult decisions?

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