Tuesday, February 3, 2015

Time to Party?

I would like for you, dear reader, to engage in a little thought experiment with me today. Let's assume for purposes of this experiment that you are married. You and your spouse are having a tough time living within your means. In fact, you are spending a lot more than you're making... a LOT more. Matter of fact, back 6 years ago you were spending roughly $13000 more each year than you earned. That's over a thousand a month, obviously unsustainable. So, you decide that something has to be done, after all, 6 years ago your reckless spending had managed to pile up $110,000 in debt.

 So, one night over coffee, you and the wife sit down and hammer out a plan to put your financial house in order. You decide that each of you are going to get second jobs because you obviously don't make enough money. In addition you pledge to stop spending money you don't have. But, old habits are hard to break and although you manage to make more money with the second jobs, and you do manage to put a dent in your profligate spending, you discover that it's harder than you thought to stop a runaway train. Six years after your austerity plan, you have made progress. Now you are making more money, and you have managed to cut that spending, but you are still spending $4500 more a year than you're making. While this amounts to an admirable 60% drop in spending, your total debt has continued to grow, now at $182,000 and climbing.

So, you both decide that to celebrate your 60% reduction in deficit spending, a trip to the Bahamas is called for, a no expense spared, all-inclusive blowout because...well, you've earned it!

Throw a boatload of zeros at the end of all my numbers above and that's exactly what has happened to the United States over the last 6 years. I don't have any problem with the President taking credit for  good economic news. God knows he would get blamed for bad news! But I find his conclusion that since now we are "only" spending 450 BILLION dollars more than we bring in each year, it's time to go on a spending spree...ludicrous.