Excessive Spending Cuts - Island of Sanity

Island of Sanity

Taxes & Spending

Excessive Spending Cuts

Suppose you have a friend who comes to you for some advice. He tells you that he makes $50,000 a year, but he has been spending $80,000 a year. He's been doing this for a long time and has racked up a huge debt. Now he's working on a plan to get his finances back in shape. He's put together a list of ways that he can economize on his spending. His list of cuts totals $1,400. His question for you is: Do you think this is too drastic? Is he going overboard? He needs to cut spending, but hey, he's got to eat. Like, he can't cut to the point where he's starving to death. $1,400 is a huge cut. Right?

How would you reply? Would you point out that if he's overspending by $30,000, cutting $1,400 doesn't begin to go far enough? Or would you agree that this is drastic and he should try more moderate spending cuts of, perhaps, a few hundred per year?

In 2010, our government took in $2.2 trillion but spent $3.5 trillion. They are spending 60% more than they take in. The House Republicans proposed $60 billion in spending cuts. That is 1.7% of total spending, or 4.6% of the overspending. The Democrats replied by describing this as "deap budget cuts", "mean-spirited", and "draconian".

The percentages are the same as my over-spending friend example above.

May I humbly suggest that when you are spending 60% more than you take in, you need to get serious about your spending cuts. Cutting out one stick of chewing gum per month is not going to do it.

Why not cut back spending to where it was, say, when Bill Clinton was president? We actually had a surplus then. And it did not appear that the lack of government spending was causing untold suffering.

© 2011 by Jay Johansen


J. G. Oct 3, 2012

I just wanted to say that your articles on this site are pure gold of economic truth.

Please don't give up.

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