Is Spending My Problem?

For this entry, I am going to provide a purely anecdotal example of what I have both observed and experienced since the summer of 2009.  For some people (many people?), this example may hold true and be closer to reality than it is to fiction.  Please bear with me as I ponder what is a point of contention in Washington, D.C., and that is the issue of spending and revenue.

Let’s say, for example, that in the summer of 2009, you were working in a job that you really loved, with people you enjoyed seeing daily, and for a company that you felt a “connection” with.  You lived within your means, meaning you had an affordable mortgage (you didn’t give in to the temptation that came with inflated home values associated with the now-burst housing bubble), no car payments, no credit card debt.  You did not spend money on needless items.  You were living comfortably.

In July 2009, according to the Bureau of Labor Statistics, the price for a gallon of milk averaged $2.992.  (source)  Not too bad.

Fast forward to present day.  You still really love your job, enjoy the people you work with, and still have that “connection” to your company, but over the past almost four years, you have not gotten a raise because the economic downturn impacted the ability of your company to give you a raise.  But, you have maintained your same salary, which when compared to being unemployed and making no salary, is a pretty sweet deal.  Nothing else has changed in your life; you still have your affordable mortgage, no car payment, and still no credit card debt.

Along with other items, however, the average cost for a gallon of milk has risen, to $3.48 last month. (source)

Because the price of one of your household staples has gone up, along with pretty much everything else at the grocery store, your checking account does not seem as healthy as it did in July 2009.

Given this scenario, which statement is more truthful about you?  That you have a spending problem, or that you have a revenue problem?

The answer, to me at least, is that you have a revenue problem.  It is almost inevitable that the price of goods is going to rise, which has been the case since July 2009.  Your problem in this scenario is not that you have increased your spending, it is that your income (revenue) has been stagnant.  Could you adjust what you purchase to reduce your overall grocery bill?  Of course you could.  But there is also a floor at which you need to spend in order to be able to adequately provide nourishment for your body, so it is untenable to think that you could reduce your bill to zero.  Wouldn’t your situation improve greater if you were to increase your income (revenue)?  Yes it would!

That is where the members of Congress, on both sides, become blind to the facts.  To ignore the spending problem that Congress does have (it’s unrealistic to blame any President for actual spending since Congress controls the proverbial checkbook) would be a futile effort.  Spending does have to come down, and I doubt that any reasonable person would be able to say otherwise while keeping a straight face.  But here is something else that is true: revenue also has to increase, if for no other reason than to keep up with an increase to the cost of goods purchased.  What is the primary source of revenue for the federal government?  If you said “taxes,” you are correct.  For anybody to bury their head in the sand and think that tax revenue can be reduced and spending cuts the only way out of the country’s budgetary issues is a disservice to those people who voted them into office.  That would be along the same lines as taking the scenario above and you telling your company that they can cut your pay by 25%, and you would be just fine with that.  You wouldn’t.

For Congress to truly make serious strides to get its budgetary house in order, both sides are going to have to be reasonable.  Democrats are going to have to be serious about cutting spending, and Republicans are going to have to be serious about increasing tax revenues.  The mandatory spending cuts implemented by the sequester are just a start, as is the slight tax increase to those in the upper-income brackets that occurred earlier this year.  More has to be done on both ends.  Until both sides come to the table in good faith, we, voting public, will be stuck wading through more of the same BS and political posturing.

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