No responsible person can spend twice what it earns and remain solvent. In spite of what many believe, our government can’t do it either indefinitely. But the fact is our government has become dysfunctional. The monthly budget statement was just released last week, and in November the federal government took in $133.6 bln and spent $253.9 bln. This works out to $1.90 going out for every $1.00 coming in. Believe it or not, this is actually an improvement from October when the ratio was $2.3 going out for every $1 coming in! Over the last 12 months alone, the Federal government has racked up a deficit of $1.4 trillion. Needless to say, this pace of spending versus income can’t keep up forever, and last week’s lousy 30-year auction is an indication that investors aren’t too keen on locking up their funds in long-term IOUs from Uncle Sam right now.
If spending more and going into debt were the keys to prosperity, then why haven’t the banks handed everyone in the nation a batch of credit cards so that everyone can go into debt with money that was saved by absolutely no one, but instead lent into its very existence?
Oh, wait. That’s already happened. And guess what! Instead of everyone getting rich, everyone is losing all the items they bought on debt, including their homes and along with their jobs and their dignity.