Of Budgets, Great and Small

My wife and I just went through the thoroughly unpleasant exercise of figuring out our household budget. We're expecting a new member of the family in the next few months, a baby is rumored to be very expensive upfront, and the new mom will be taking some unpaid leave to get the baby off to a good start. So we needed to take a look at what was coming into the house, and what was going out, and we needed to make some decisions about how to reconcile these numbers with our desire to somehow stay solvent, save for our retirement and our baby's education, pay our immediate expenses and pay down our debt -- all at the same time!

My wife and I are very lucky people: we've been pretty frugal, we've made some good decisions, we both have good jobs, we are in good health, and we're not deeply in debt. So, fortunately, the decisions weren't hard. Even so, the process was a little rough, because there's a lot of detail involved, and it literally entails generating and then analyzing several sheets covered in numbers, and not just any numbers, at that. These are numbers which have strong emotional resonance. Who wants to do that? Imagine how much harder it would have been if we had a number phobia, or if we knew we had a real money problem and didn't want to face up to it. In the end, though, we did the responsible thing. We balanced our budget, and now we're financially prepared for the baby's arrival. We think.

At the same time that my wife and I are wrestling with our budget, our town is also facing an issue with its own. The town is currently projecting a shortfall of between $1-2 million this year, and nobody seems to have a good idea around that uncomfortable fact. Cutting the budget will entail real pain: the biggest single line item in the budget is the school system, which would necessarily have to bear the brunt of any cuts. The town has been covering its shortfall with its savings, but this has been a stopgap and is clearly not a long-term option.

The town can ask us to pass a property-tax override, enabling them to raise our property taxes over the 2.5% per year maximum increase allowed under Massachusetts Proposition 2 1/2. Predictably, when word of this possibility spread around, the signs sprouted on the larger lawns in town: "NO OVERRIDE." No decision has been reached on whether to hold a vote on an override, though, so it might not happen. My wife and I aren't sure yet how we feel about the town budget. We don't mind paying our fair share of taxes, but we certainly want to make sure we're getting our money's worth for what we spend, especially since our daughter is going to be going to school here. (...or maybe not.)

Regardless of whether we're talking about our own household budget or that of the town, however, we're talking about operating under the same set of rules. No budget, no matter how large or small, must operate according to these rules: Income must be equal to or greater than expenses. The numbers must add up correctly. Nothing must be left out of the budget. (This was the sticking point in developing our household budget. Gathering all the receipts, adding them all together, categorizing them -- does this one go under "Groceries" or "Baby Supplies"? -- and ensuring that we hadn't forgotten whole categories of spending, was probably the hardest part.) And most critically, no matter how we feel about it, the numbers are the numbers. We must make the choices that make the numbers balance. The budget must be honest. Otherwise, it's worthless.

With those simple rules in mind, it's useful to take a look at the US Federal Government budget which has just been proposed by George W. Bush. This document is one of the most breathtakingly dishonest documents to ever come out of an already amazingly dishonest government.

The claim that caught my eye in this part of the document was that this budget actually contributes to reducing the budget deficit. Supposedly, by 2010, the deficit -- the annual amount that the government borrows, not the total debt, which is still spiraling out of control -- is to be cut in half. In order to get there, however, the budget also assumes that none of the three signature George W. Bush policies -- the War, the Permanent Tax Cuts, and Social Security Privatization -- exist or are enacted, even though they are Bush's own priorities in his second term.

The federal budget makes no provision -- none whatsoever -- for the wars in Iraq and Afghanistan. Not even a guess! These wars are officially budgeted at zero! See, instead of putting them in the real budget, they ask Congress for the money in "supplemental" requests (like this one); and they claim that since they don't know how much, exactly, the wars are going to cost, they can't put even an estimate in the budget. While the real cost of these wars is already about $300 billion, the official estimate of the cost is ZERO.

The budget assumes that Bush's signature tax cuts expire, as they are currently set to. It's really impossible to balance the US Budget with these tax cuts in place, so even though Bush is committed to making them permanent, his budget magically wishes them away, so that he can claim to be cutting the deficit.

Finally, the budget assumes that there is no Social Security privatization, even though, once again, Bush is committed to enacting his cherished private accounts this term. Here's the rub: in order to set up Bush's private accounts, the government will have to borrow enormous sums of money -- somewhere between $750 billion and $2 trillion. Clearly, there is no way to reduce the deficit by half, let alone balance the budget, and enact Bush's private accounts scheme, so it's not in the budget.

How easy would my life be if we could run our household budget by W Rules?

"Honey? We're doing great! All I have to do is take the mortgage payment out of our budget, and look! We're running a big surplus! While we're at it, let's borrow a whole bunch of money and go on a spending spree. And, yes, I am buying an SUV, but since I don't know whether I'm buying a Hummer or a Bad Boy, I'm estimating the cost as ... zero. But I promise -- ", with my fingers crossed behind my back, "-- I promise that in five years, we'll borrow less than we're borrowing this year. Wheeeeee!"

Well, you know how that ends. Sooner or later, a banker (Republican, naturally) will come around and take possession of my house, my car, and anything else I have of value. We would end up in a homeless shelter, assuming those were still being funded (they're being cut back, of course).

Because government budgets contain such enormous numbers and are difficult to read, and -- frankly -- because they're being lied to, people think that governments operate under different budget rules from their households, but it's just not true. Even the federal budget, with its dizzying heights of debt and its byzantine depth of detail, operates according to the same rules as our little household budget or our town budget: the numbers must add up, and the budget must be honest. (The biggest difference is the amount of say you get. I mean, hey, at home, I get one of two votes. In the federal budget, well, since I am not on the Bush Pioneer list of big-money donors, the Republicans let me have exactly zero votes.)

When it comes to government budgets, like our town's, there are only two choices. Either taxes must be raised, or expenses must be cut. (Our town doesn't sell T-Bills, and I'm betting yours doesn't, either.) Those are the only two choices, and neither one is easy. It takes honest and brave people to face up to these problems. By borrowing madly, shifting the burden of currenly liabilities on to future generations, and by pretending that other major liabilities simply don't exist, Bush is only demonstrating his dishonesty and his moral cowardice.

It is true that the US government has a better credit rating than you or I do, but that's because the government can always squeeze people for more money to pay off its debt. And believe me, it will. Bush is busy piling on a mountain of debt right now, and -- I'm assuming you're not a billionaire Republican friend of W here -- sooner or later, the government is going to come looking for you and me to pay it back, because whatever else a government can do, it can't borrow its way out of debt.

(By the way, remember back when balanced budgets were a Conservative issue? Now I'm a hippie for pointing out that you can't borrow forever. Proof that God has a sense of humor.)

"Freedom," wrote George Orwell, "is the freedom to say that two plus two equals four." This week, as we ponder the glorious steaming fetid lie that Bush will truck up to Congress and call his Budget Plan, that phrase resonates on more than one level.