Wednesday, October 9, 2013

Budgeting for Adults

I want to make a few points about the current chaos from Washington, but before I do, we need to be on the same page. So this will be sort of an Economics 101 - no, it's much more remedial than that, let's call it Economics 001. This is simply how an adult sets a budget, and the basic principles apply from the personal to the multi-trillion dollar level. This is stuff everyone should know, the sort of thing anyone who wants to be considered a grownup should have down, but, well, look around.

Essentials first. If you only had $100 this month, what would you spend it on? I reckon you'd probably make sure you have food before you have the latest UFC pay-per-view. Food: essential. Entertainment: non-essential.

What do you need? Make sure you have funds allotted for those things first. If you can't afford food/shelter/clothing because you bought Legos, you're a moron, no matter how cool those Legos may be.

Add luxuries in order of importance. Once the vitals are taken care of, add on everything else (and yes, everything non-essential is a luxury). If you had another $100, what would you do with it? Another $100 after that? And so on, until all your income is accounted for. It may be adding a new item, like getting cable. It could be increasing a previous allocation - bumping the food budget so you can go to a nice restaurant. It could be something non-immediate, like savings. Whatever is next-most-important, set aside the money for that.

Note that some categories are purely luxury, but some are a mix of essential and luxury. Food, for instance. The cost of subsistence-level food is essential; everything above that is luxury. A very great luxury to have, mind you, and one you would be wise to invest in quickly. But it's still non-essential.

When all the money is allocated, there is no more. If you have $50k in income, and $65k in allocated spending, u r doin it rong. If you don't have the money, you don't have the money. Either re-prioritize so it's paid for (which will require eliminating or cutting funds to something else) or learn to live without it for now.

That's it. Really. No matter what plan or technique you find, they all come down to this. Prioritize your needs/wants, and allocate funds in order of importance.

Now, let's take this ultra-basic principle and look at the government quasi-shutdown. What can we observe?

They keep using the word 'essential'. I do not think it means what they think it means. It's hard to believe everything 'non-essential' has been shut down when it's running at about 83% capacity (which is still at deficit, by the way). Would you believe 5/6 of your household expenditures are so essential that you can't cut so much as a penny from them? Yet somehow we're supposed to believe this about the government - they can't cut even a penny from these areas for even a few weeks!

So what makes something essential for the federal government? I would suggest several qualifications. (1) It must be a necessary function of a nation; that is, any nation which lacks it is not a nation at all. Examples include the ability to make, execute, and adjudicate laws, and the ability to repel attacks. (2) It must be necessary that this function is performed at the federal level. If state or local governments (or private entities) can do it, it's not essential for the federal government.

Which means that a whole host of programs, departments, and agencies are non-essential luxuries. Some are nice to have, but not necessary for the survival of a nation. Some could just as easily be done at lower levels of government. Even some things we like, like Defense, are a blend of essential and luxury (we may be willing to pay for the luxury of everything above survival-level military, but let's at least be honest that it is a luxury). Some programs are so utterly non-essential, they don't just need a temporary partial shutdown, they need to go away entirely.

When money is short, you cut the least important things first. If you don't have enough one month, you don't buy the Eddie Rabbit tickets while your kids go without food. The most important things are the first to get funded and the last to get cut, and the first things to get cut are the least important. At least if you're an adult, anyway.

If you want to know what politicians value, look at what they threaten to cut first if they don't get more money. Locally it's always liberals threatening to cut police, firefighters, teachers, and hospitals, which I guess means they consider them almost completely unnecessary. Now look at what Obama and his cronies have decided to cut first vs what remains instact, and tell me what he values. Many 'cuts' have been to programs that actually provide some benefit to the public, and the 'cuts' have often cost more than full operation, which would seem odd for a shutdown except that a petulant child is in charge. Which brings me to the last point.

If you are in a financial crunch, and your instinct is to spend more money to antagonize the people who pay the bills, you are despicable. Not that anyone would ever stoop so low, of course.

1 comment:

Michael Coughlin said...

Agreed. Wouldn't you say the cuts are designed to incite people?

So libs may not necessarily devalue police, etc, but they know that those who value those things may be scared by the potential cuts, so they prey on that fact by proposing to cut those first.

So they don't really believe cutting those things is best...but they know if they do, taxpayers will pony up.