In my last blog I discussed the importance of budgeting. The simple skill can keep your costs and income levels in check, and can help you manage your finances with impeccable accuracy, and with as little guesswork as possible. Under this framework, you treat your finances like a business – as long as you come out positive after all costs and factored out of your income, there will be money left over.
However, one organization that is not confined to this framework is the federal government. No matter who is in control of Congress, be it Republicans or Democrats, most recent administrations have thrown the basic principle of fiscal responsibility out the window. The federal government is not run like a business, and is not confined to basic financial principles. As a result, Congresses have the ability to spend at will without short term fiscal consequences. There are many long term consequences, though, including the recent housing bubble.
Because Congress’ main source of income is directly from the American people, the country deserves better financial standards of its legislators. As other countries such as China benefit from America’s fiscal irresponsibility, America’s currency slowly gets devalued. A balanced budget should be backed up by the force of law in this country. Congress owes that to the American people.
Such a law has circulated throughout Congresses for decades, but has never come to fruition. If this kind of amendment were to pass, Congress would be forced to reign in spending on inefficient programs, and might even be forced to come to a solution on constant fiscal problems, such as Social Security and Medicare. Ultimately, it would force Congress to keep track of its spending, which in the end is a huge determining factor of the value of American dollars. Such a law might even make politicians be more careful about their campaign promises, but nobody’s holding their breath on that one.
The ability to budget should not be underestimated. The economy is a complicated system that cannot be predicted. To stay on its good side and avoid any other economic downturns, the best thing anyone can do is keep a close eye on their budgets – and that goes for our federal government too.