BY RUSSELL TURNER
THE EMPTY ENVELOPE
Recently I talked to a man about how to manage money and how to make sure that all of the necessities we have in life are paid for. While we were talking he came up with a novel approach on how he managed his finances. He said that he would cash his pay check and put all of the money in an envelope. Then he would take out money for such things as the electric bill, groceries, rent etc... After all of the major expenses were met, the money left would be what he could spend on items that he might want instead of what he needed. His system is a very good one; it insures that all of the core needs that he has will be met, and it keeps his budget in balance. This system requires common sense and discipline for it to work; sadly many people in our government don’t understand this simple concept.
Our federal government budget is divided into three parts; mandatory spending, discretionary spending, and finally the interest on the national debt. Mandatory spending includes Social Security, Medicare and VA benefits. Along with the interest payments, these expenses are required by law and they are pulled out of the tax revenues first. The discretionary spending includes everything else associated with government. I will try to explain how our government is not able to cover the mandatory spending.
In Fiscal Year 2011, the federal government collected $2.303 trillion in tax revenue. Interest on the debt that year totaled $454.4 billion, and mandatory spending totaled $2,025 billion. In sum, mandatory spending plus debt interest totaled $2.479 trillion... exceeding total revenue by $176.4 billion.
To put this into perspective, if our government cut out all grants, military, transportation spending etc. our government is not able to collect enough revenues to cover the mandatory spending. This problem is only going to get worse. More and more baby boomers are retiring and joining the Social Security roles, the interest rate has been kept at a ridiculously low rate, and when that rate increases it will only compound the problem. Right now our government is riding upon the backs of the seniors and others who have saved their money and were relying upon the interest revenues to help in their retirement years.
Our election cycle has just ended and far too many of our people have listened to all of the shallow promises and hype. The problems are mathematical and they are not going to get any better with vague promises and good intentions. It is sad that many Americans don’t understand simple mathematics. For a very long time our national envelope has been empty; until we Americans begin to understand the concept of envelope math we will continue down the path towards complete national bankruptcy.
THE EMPTY ENVELOPE
Recently I talked to a man about how to manage money and how to make sure that all of the necessities we have in life are paid for. While we were talking he came up with a novel approach on how he managed his finances. He said that he would cash his pay check and put all of the money in an envelope. Then he would take out money for such things as the electric bill, groceries, rent etc... After all of the major expenses were met, the money left would be what he could spend on items that he might want instead of what he needed. His system is a very good one; it insures that all of the core needs that he has will be met, and it keeps his budget in balance. This system requires common sense and discipline for it to work; sadly many people in our government don’t understand this simple concept.
Our federal government budget is divided into three parts; mandatory spending, discretionary spending, and finally the interest on the national debt. Mandatory spending includes Social Security, Medicare and VA benefits. Along with the interest payments, these expenses are required by law and they are pulled out of the tax revenues first. The discretionary spending includes everything else associated with government. I will try to explain how our government is not able to cover the mandatory spending.
In Fiscal Year 2011, the federal government collected $2.303 trillion in tax revenue. Interest on the debt that year totaled $454.4 billion, and mandatory spending totaled $2,025 billion. In sum, mandatory spending plus debt interest totaled $2.479 trillion... exceeding total revenue by $176.4 billion.
To put this into perspective, if our government cut out all grants, military, transportation spending etc. our government is not able to collect enough revenues to cover the mandatory spending. This problem is only going to get worse. More and more baby boomers are retiring and joining the Social Security roles, the interest rate has been kept at a ridiculously low rate, and when that rate increases it will only compound the problem. Right now our government is riding upon the backs of the seniors and others who have saved their money and were relying upon the interest revenues to help in their retirement years.
Our election cycle has just ended and far too many of our people have listened to all of the shallow promises and hype. The problems are mathematical and they are not going to get any better with vague promises and good intentions. It is sad that many Americans don’t understand simple mathematics. For a very long time our national envelope has been empty; until we Americans begin to understand the concept of envelope math we will continue down the path towards complete national bankruptcy.
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