Washington, We Have a Problem

My grandpa used to say, “It ain’t what you make that matters, it’s what you spend.” I wish our representatives in Washington would heed that advice.

To be fair, both what you make and what you spend matter. But grandpa’s point was that most people have more immediate control over their spending than their income.

It’s actually not so different for Congress, either.

To be clear, my firm belief is that our U.S. government does not have an income problem; it has a spending problem.

While falling short of actual proof that my presumption is valid, there are two financial figures that make my case. Both are growth rates.

The growth rate of the federal government’s income over the last 10 years has been 65%. The growth rate of the federal government’s spending over the last 10 years has been 92%.

The result? Our country now spends about $7.4 trillion a year while collecting income of only $5.4 trillion. The difference of $2 trillion is called a deficit. And it piles onto deficits from all prior years to create a current debt load of $40 trillion for our nation.

This debt isn’t a partisan issue. Everyone in Washington apparently loves to spend, spend, spend. Our country’s debt has increased under every president in the past 45 years.

Some increase in debt is natural. I’m not saying the United States needs to eliminate its debt or never carry an annual deficit. But the rate of growth in spending should be in line with the rate of growth in income. And remember, when we’re talking about the government, income is the less offensive word for taxes.

So, either we need to rein in spending, or we need to increase our taxes – or do a bit of both.

On the surface, most people would likely say, “Yes, cut spending! Don’t raise my taxes!”

While I would agree with that sentiment, please consider that spending isn’t a cinch to cut. Every dollar spent by the government is some Congressperson’s pet project that they will kick and scream to retain – for their constituents or donors or lobbyists.

Let’s look at the five biggest areas of U.S. government spending and you can decide which should be cut.

Social Security -- $1.7 trillion

Medicare -- $1.1 trillion

Net Interest -- $1.1 trillion

Medicaid & Health -- $1.0 trillion

Defense -- $1.0 trillion

Unfortunately, you really only have four choices because Net Interest isn’t under the government’s control. It’s whatever the bond market decides rates should be based on the risk bondholders will be paid back over time without inflation getting carried away.

Outside the top five areas, there are still plenty of ways to cut spending, but you can see why the debt solution for our country isn’t readily agreed upon by every U.S. citizen, let alone Congressperson.

Also, there’s unquestionably fraud and abuse in the system, but I hope there’s not enough waste to right our country’s financial ship by addressing that alone.

Until we demand that our representatives solve our financial issues, I fear the can will simply be kicked down the road.

At some point, though, it may get kicked into a gutter.