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Friday, August 19, 2011

Economics Is Economics Is Economics

Math has rules and they don’t change for your convenience.  Yet for some reason there are so-called experts saying that it’s different for a large economy like America than for a smaller budget that a business or a family would have.  Really?  Would someone tell me at what point 2 + 2 no longer equals 4?  Would someone tell me what it takes to get to the point where going into debt gets you out of debt? Do I have to have so much debt that there is absolutely no way me, my children or their children could never pay it off?  Is that when the rules of math change?  Is that the “other dimension” where what we learned in grade school changes to some special formula that only the “experts” understand?

This is what the media and the politicians in Washington want us to believe.  I don’t care what degree you have.  I don’t care what award you won.  I don’t care what your pedigree is.  The fact is that no credentials matter when you’re promoting a stupid agenda.  And these people really are stuck on stupid!

I have often been asked what it takes to make a business successful. I tell people that to make a business successful you simply have to spend less than you bring in.  Now actually doing that is not easy, but the principle is very simple.

This is the same principle an individual or family must use to handle their own finances.  When I have expenses higher than my income I have two choices.  I can either increase my income or decrease my expenses.  Or I could do a little of each.  But the bottom line is that I have to get my expenses cut to a level below my income to survive.

Businesses are no different. If their income is not higher than their expenses they will not survive. 

I remember a friend years ago who worked for a company and got news they were filing bankruptcy.  They did $300 million per year in business and she couldn’t understand how a company with that much income could possibly fail.  It was simple, I told her, they were spending more than they were making.  When I compared it to her personal budget it made sense to her.

It is a simple principle that most people should be able to understand.  But for some reason when we talk about our nation we find people thinking it’s different.  Even these so-called “educated” experts talk about why it is good to go into debt and that the nation needs to go further into debt to get out of debt. 

So let me get this straight.  The nation needs to go further into debt to get out of debt?  That’s what they’re telling us. If that were true then we should all be going into debt as far as we can.  Then we’d all prosper, at least according to those promoting this idea.

I don’t know about you, but I think it’s time to tell them we don’t need their kind of logic.  In fact, they were in charge when we got into this mess so why would we trust them to get us out?

It’s a little like riding home with a drunk after a party and he drives off the road and into a ditch.  Is it logical to think he’s the guy to get you out of the ditch and get you home safely?  I don’t think so.  In fact, if you don’t have someone qualified to get you out of the ditch and get you home safely, then it’s time to go find someone who is qualified to do just that.

Albert Einstein said, "We can't solve our problems by using the same kind of thinking we used when we created them."  And yet we still turn to the same people who have proven themselves unable to solve the problems we have.  What’s wrong with us?

When the “debt crisis” was debated a few weeks ago and the “solution” was arrived at by Congress we all should have been screaming and running out of the room pulling our hair out.  Our nation spends far more each year than we bring in and Congress has agreed to increase that spending every year.  Add to that that we are in debt beyond what we can pay and we’re really in a pickle.  (The fact is that any pickle is actually in much better shape than we are as a nation.)

So what does Congress do to fix it?  They say, “We won’t increase the amount of spending next year as much as we had planned to.  We’ll still spend more than we did this year, but we just won’t increase spending as much as we planned.”

What kind of solution is that?  Let’s put this in a more manageable perspective so people can understand it since for some reason people quit thinking when numbers become millions, billions, and trillions. 
(The following numbers are not exactly proportionate to the national budget and debt, but they’re close enough to make the point.) 

Let’s say your family brings in $60,000 a year and you spend $80,000 a year and add to that you have $400,000 in credit card debt that you aren’t paying off.  Every year you automatically increase your spending by 8% (that means that next year you’ll spend $86,400 instead of the $80,000 you spent this year).  Now if you use Congress’ method of fixing things they’d say they’d cut the 8% increase to 7% and that would put you on a path to solve your problem. That means that you’d spend $85,600 instead of the planned $86,400.  Are you fixing anything?  Absolutely not.  Not only  are you continuing to fall short of income compared to expenses, you’re not even making a payment on your credit card debt of $400,000 that keeps growing due to interest.  It won’t take long before you’re in so deep that you can’t get out.

That’s where America is at and that’s the “solution” Congress gave us a few weeks ago with their brilliant actions.  These are the drunk guys who drove us into the ditch.  Why are we trusting them to get us back out of the ditch?  These are not successful people at running budgets for the country, companies, or probably even for themselves. These are people who specialize in spending our money!

The only way to fix the problem is to change the people who are driving the car and get people who understand that you can’t get out of debt by going into debt.

America has hard choices to make.  We can no longer just keep saying we want change but then say we don’t want our lives affected by it.  It’s too late.  It’s time to put our narcissism aside and start to focus on what’s best for the future of our children, grandchildren and every generation to follow. 

We have allowed politicians, with the support of the media who are singing their praises, to control the security of our future.  It’s time to get people in the drivers seat who know what they’re doing and get ourselves on a harsh diet of sacrifice.  It’s the only way to save the country and the future.  Are you willing to pay the price or do you prefer to make your children and grandchildren live lives of poverty on a level worse than that of the Great Depression to pay for your selfishness?

It’s time to decide.  It’s time to quit blaming others and make hard choices.