As a young boy (way too many years ago) whenever I wanted something that was outrageously expensive my mother would say, “sure, I’ll go out back and pick some cash off of the money tree.” This was, of course, a variation of the adage that money doesn’t grow on trees. Ah, if only it did.
Unfortunately there are a whole lot of grown men and women who never outgrew that childhood misconception. Many of these irresponsible adults inhabit the various state capitols as well as that bastion of fiscal irresponsibility otherwise known as the United States Congress. Let’s not forget the shinning example of financial restraint residing at 1600 Pennsylvania Avenue. What were their mothers teaching them?
What conjured up these monetary thoughts from long ago? It was actually an article I was reading about the budget woes that California was facing. We all know that the economic downturn has affected all but a few state budgets. My own state, Nevada, is facing a shortfall of approximately $1 billion, which is nothing compared to California’s anticipated deficit of $15.4 billion. That number is already 18% of the budget and could grow to over $21 billion depending on the outcome of a special election on May 19th.
It was the following quote that caught my attention:
“Sacramento is not Washington – we cannot print our own money. We can only spend what we have.” – Arnold Schwarzenegger, California Governor
What a concept! Only spend what we have, hmmm. It seems to imply that if he could print money he would. I hope nobody tells him that the Constitution does allow states and municipalities to have their own currency.
States are learning some valuable lessons that the Caped Crusaders of the Washington Beltway don’t seem to understand, you can’t spend money like a drunken sailor with impunity. Creating social programs ad nauseum will lead to problems when the revenue dries up. California and most other states are now faced with the prospect of cutting programs, worker layoffs and raising taxes. Exactly the opposite of what should be done during a recession.
Unfortunately Washington can and does print money as needed. A recent report shows that the United States Government will borrow 46 cents for every dollar it spends in the next fiscal year. Imagine if your household did that, how long could you survive before you went bankrupt? At some point this house of cards has to come crashing down.
So how is this being handled? By spending more money of course. We’ve had the bank bailouts and the stimulus package. A budget deficit that was at one time projected to be an unprecedented $1 trillion is now expected to top $1.8 trillion. Obama’s proposed $3.6 trillion budget is using economic assumptions that call for the GDP to decline by 1.2% this year and actually grow by a fairly robust 3.2% next year. Most economists call these numbers pure fantasy. Now the President is pushing for a health care plan with an initial cost estimate of $1.5 trillion, any wagers on how much higher the actual bill will be?
But have no fear. Just as he promised during his campaign, President Obama has gone through the budget line-by-line in an effort to cut wasteful spending. He came up with a “whopping” $17 billion in cuts. That represents less than ½% of his proposed budget. To put it another way, it would be like having credit card debt of $10,000, reducing it by a “whopping” $46 and being ecstatic about the progress you’ve made.
Another fine mess you’re gotten me into. – Stan Laurel (Laurel & Hardy)