Tag Archives: Debt Ceiling

Debt Ceilings and the Federal Budget

By Josh Loveless

It’s January 2013!  That means it is time for many of us as families, businesses, churches, and organizations to start enacting our financial plans for the next twelve months.   As individuals, or business owners, our financial plans likely include an assessment of our financial situation at the end of the previous year, and a strategy that will dictate our financial plans for this year.

The main vehicle in financial planning for a week, month, or year is a budget.  Budgets are critical in conducting any kind of financial transaction.  I wanted to write today about the purpose of a budget, and why it is so important, especially at a federal level.  I know this should be elementary finance, but hopefully you the reader will take a moment to follow along, because there is a larger point to be made about our nation’s current situation.

I would like to quote Wikipedia in order to establish a baseline definition of budgets upon which everyone can agree:

A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending.

A budget is an important concept … an organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.
2. Enable the actual financial operation of the business to be measured against the forecast.
3. Establish the cost constraint for a project, program, or operation.

From: http://en.wikipedia.org/wiki/Budget

In other words we use a budget as a blueprint by which we can conduct financial transactions, providing confidence that plan adherence will lead to goal achievement.  In examining that statement a little further we can draw some obvious conclusions:

1. In order to create a budget, we first need to know and understand our current financial situation, including a candid assessment of the success or failure of previous budgets.
2.  We must actually have quantifiable end goals established that we wish to reach with at least one ultimate date by which we want them achieved.  For families this might include saving for retirement or a vacation, or paying off debts.  For businesses, it might mean saving for a new computer system, targeting profits, or finding monies to provide a pay raise for employees.
3. Budgets are NOT for simply tracking what we spend.  A budget is the detailed plan not the game, like a playbook in sports.  As a coach we must however hold ourselves accountable to the playbook.
4. Budgets are not just random numbers and data points arbitrarily splashed on an excel spreadsheet, a budget provides information.

All of this seem obvious to everyone?  What does this have to do with our country?  Like many of our households the United States of America is in a state of financial disaster.  For example, I am guessing by now we’ve all seen the debt clock.  If you haven’t recently, check it out at www.usdebtclock.org.

This IS a government of the people, by the people, and for the people.  The picture that is painted by the U.S. debt clock is one that should deeply concern every single American citizen, even those who pay few taxes.  Thanks to information like this, many Americans are finally starting to ask the two most important questions about our financial situation:

1. How did we get here?
2. How do we get out of this mess and avoiding repeating our mistakes?

There are lots of proposed answers out there.  Some of them are very complex.  Republicans and Democrats alike have numerous recommendations, designs, and campaign pitches addressing both.  But it seems to me that neither side is telling America the simple, hard truth:

We are here because we’ve abandoned rudimentary financial principles, and the only way out is to reestablish them as requirements.

That means that the United States Government needs a financial plan that includes all of the basic points discussed above.  We need to establish quantifiable goals with reasonable time frames.  We need to have a plan for reducing our debts.  And MOST importantly we must pass a budget.

The news is all abuzz about the federal budget, and the debt ceiling.    The truth is that for at least the last 12 years (probably much longer) these two implements have been nothing more than political gimmicks.  In fact it is so much so that the debt ceiling has NEVER been decreased, and was raised 90 times in the last century.  That’s nearly once a year.

Your federal government has not passed a budget since April 29, 2009.  In fact the White House is now claiming that a budget is no longer necessary, and that the Congress should simply cede the debt ceiling power to the president.  These financial tools, once grounded in fiscal common sense, are now used as nothing more than talking points meant to deceive or divide the public.

From a financial perspective, every American household and business knows that not having goals, plans, or a budget is tantamount to economic suicide.  But this basic fact appears to escape the political class.  This makes the tax hikes we passed at the end of last year essentially meaningless.  It is unconscionable to demand an increase in borrowing before establishing how much is needed and why. It is time for this nonsense to come to an end.

We the people need to demand that our congress get serious about our financial situation.  We need to demand that our Congress and our President lay out a common sense financial plan with clear, attainable, quantifiable goals.   We need to demand that they pass, and adhere to a budget that is specifically designed to meet those goals.  We need to hold them accountable when they don’t follow the plan.  If our congress and our president cannot do this, they are not public servants; they are usurpers and abusers of power and should be replaced.  Let us not forget where the money they are entrusted with comes from: our time, labor, ingenuity, and prosperity; not theirs.