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THE NEED FOR A BALANCED BUDGET

Posted by Tim Bryce on December 5, 2010

I remember Ronald Reagan’s televised farewell address in 1989 as if it were yesterday. It was touching, it was encouraging, and it was patriotic. There was one thing missing as far as I was concerned: a final plea for enacting a balanced budget and line-item veto, or at least a warning of the consequences for failing to enact such a law. Alas, I was greatly disappointed when neither a plea or a warning was included in the address. I’m told every state except Vermont has a balanced budget amendment and all but a small handful of states provide for a line-item veto, Vermont included (it kind of makes you wonder what those Green Mountain boys are up to).

Now we find ourselves saddled with a federal budget with a massive deficit; something which, as of this writing, hasn’t been approved yet even though we are already into our third month of the operating year. This is the first time since 1974 we failed to approve a budget and I am at a loss as to why. I’ve been involved with lots of budgets over the years, both commercial and nonprofit. When you start talking about preparing a budget, I’ve noticed people tend to roll their eyes and hope it just goes away. It doesn’t and it shouldn’t. A budget is a vital part to running any enterprise and is actually not that hard to prepare, at least in terms of the mechanics of its preparation. I think this is why the good Lord invented spreadsheets. Admittedly, the federal budget is bigger in complexity than a lot of little local nonprofit groups but the principle is essentially the same.

The hard part, of course, is determining your planned or anticipated income and expenses and getting them to match. Sacrifices have to be made one way or another. Nonetheless, the budget dictates your game plan for the operating year. True, we have had to deal with a lot of emergencies over the last ten years, such as 9-11, numerous hurricanes (anyone remember Katrina?), the Gulf oil disaster, and of course Iraq and Afghanistan, but despite all of this, our government has done a pitiful job of preparing and adhering to an effective budget. Deficit spending has been the order of the day for far too long which has greatly contributed to the economic meltdown of this country and causes us to become beholden to foreign powers such as China.

Like any institution, our Congress and President have a fiduciary responsibility to the American people to manage financial resources wisely, but they have violated this charge far too many times. Frankly, our government cannot help themselves, it is an addiction and something they cannot be trusted to properly maintain. This is precisely why it is necessary to have a balanced budget amendment and line-item veto as our Congress doesn’t know how to say “No!” And this goes for both sides of the aisle.

Adhering to a budget requires determined discipline. If you haven’t got it, you can’t spend it. If an emergency arises, you find a way to pay for it. Hopefully, you’ve created a fund for just such a contingency. It’s called “planning.” It’s that simple. Now, in order to balance the federal budget will it be necessary to curtail certain projects? Undoubtedly. Will people feel the pinch? Absolutely. Can we afford NOT to do it? I’m afraid not. As we know all too well, if you run in the red too long, you will inevitably go out of business, and we don’t need an economist to tell us so. It’s just common sense.

“Okay Mr. Smarty-pants, where should we start cutting costs?” That’s easy, flatten the government by 25%. That’ll be a good start. If the government intends to squeeze the taxpayers and business community, it seems only natural that the government should lead by example and squeeze itself.

“Common sense told us that when you put a big tax on something, the people will produce less of it. So, we cut the people’s tax rates, and the people produced more than ever before. The economy bloomed like a plant that had been cut back and could now grow quicker and stronger. Our economic program brought about the longest peacetime expansion in our history: real family income up, the poverty rate down, entrepreneurship booming, and an explosion in research and new technology.”

President Reagan’s Farewell Speech
January 11, 1989

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is a writer and the Managing Director of M. Bryce & Associates (MBA) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim’s columns, see:
http://www.phmainstreet.com/timbryce.htm

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Copyright © 2010 by Tim Bryce. All rights reserved.

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One Response to “THE NEED FOR A BALANCED BUDGET”

  1. The war of indepedence (1776-1783), the war of 1812 (1812-1814), and the mexican war of 1848 (which increased the territory of the USA by 40% were all fought on credit. The federal government ran a balanced budget during most of the Great Depression of the 1930’s. Not all deficit spending is bad, if it is for a good purpose, like a revolution. Not all balanced budgest will take us into the promised land. Deficit spending and borrowing are tools, which must be used judiciously. Kentucky has a balanced budget amendment in their constitution, and Kentucky has bonded indebtedness. Accountants can use all kinds of tricks to get around this.

    Congress can balance the budget anytime they are in the mood to do so. All they have to do is “grow a pair”, and it will happen.

    Like

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