My week began with an unexpected email inbox battle between Nobel Prize-winning, Princeton-professing New York Times columnist Paul Krugman and my Uncle Dan. Krugman’s latest article explained that Greece, despite decades of fiscal irresponsibility, financial fraud and profligate spending (of other people’s money), is actually the victim of German austerity, rather than the cause of the fast-approaching collapse of the euro and the dissolution of the European Union. Krugman’s solution to the crisis is more government spending.
Next in my inbox was an untitled email from my father’s best friend since boyhood. My Uncle Dan has never won an award for his thinking. He didn’t go to an Ivy League college. After enlisting in the Navy in the ’70s, he paid his way through Florida State University and has had a pretty successful career as a banker in Texas. He is a cautious, kind man, a politically inactive, self-described independent who generally has something nice to say about everyone.
Below is the text of his email:
Please see the chart below. I do not care what side of the aisle a person is on, we have got to take seriously this budget deficit or we are in big trouble!!! What is it going to take to get both sides working together!!! The information below tells a sad, sad story!!
Snapshot of the U.S. Treasury
Total Receipts (2011): $2,303,466,000,000
Total Outlays (2011): $3,603,061,000,000
Deficit – New Debt (Annually): $1,299,595,000,000
National Debt (3/31/2012): $15,538,685,000,000
Recent Budget Cuts: $38,500,000,000
Source: Office of Management and Budget, TreasuryDirect.gov
To help you comprehend the magnitude of the debt and budget situation and the feeble efforts that have been made by both sides of the aisle to address the fiscal imbalance, I removed eight digits from the numbers above and imagine that this is a household budget:
Annual Family Income: $23,035
Money the family actually spent: $36,031
New debt added to their credit card: $12,996
Outstanding balance on credit card: $155,387
Budget cuts for the upcoming year: $385
That’s it. As a political appraisal, it’s so simple, it’s almost quaint. Uncle Dan’s email didn’t end with a prescription for societal renewal. It ended with math. He presumed the recipients would recognize the obvious solution. The one inference my wise uncle failed to draw is that the people in power who facilitated that balance sheet cannot possibly be the ones to fix it. With that said, Uncle Dan is right. A budget must be balanced. It’s a law of physics and nature as much as it is a sound financial practice. Unbalanced equations do not last. If they go unaddressed, physics, Mother Nature or the Gods of the Copybook Headings will step in and restore order. And they’re about to do so on an historic scale.