Free Markets, Free People

savings


You are just not relying on government enough

Or perhaps, you’re just not thankful enough for the nanny’s help and nanny feels a little put off.  Why?  You just don’t rank mommy government high enough (especially at election time) in your hierarchy of what helped you most through these difficult economic times:

“Given that only 15 percent of you turn to government assistance in tough times, we want to make sure you know about benefits that could help you,” USA.gov announced today. The ”government made easy’ website has created a “help for difficult financial times” page for people to learn more about the programs.

The government got that statistic from a poll asking Americans what helps them the most during tough times. Here are the results:

  • Savings 44%
  • Family 21%
  • Credit cards/loans 20%
  • Government assistance 15%
Oh my, you mean people are being too “self-reliant”?  Not enough reliance on government?  Why, if this sort of trend continues the people may not vote to expand government like certain parties would prefer.
So we get the “pitch”:
“Government assistance comes in different forms—from unemployment checks and food assistance to credit counseling and medical treatment,” USA.gov reminded readers.
Good to know, no?  Also good to know that self-reliance isn’t yet dead.  But the government sounds desperate that you don’t realize how important they are to you:

This leg of the financial assistance push has ended. “Although our campaign to highlight Help for Difficult Financial Times has ended, we know that your struggles may continue,” said USA.gov today. “We will keep updating the tools and information we provide to help you get back on your feet.”

“Because without us, well, you can’t even find your feet” … or something.

~McQ

Twitter: McQandO

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It is budget day in Washington DC

Today is the day President Obama’s budget is published.  It promises “cuts” and “savings”.  Before we venture too far in our analysis of the budget, let’s be clear on what those two words usually mean in Washington.  A “cut” in spending usually means that whoever is saying it is talking about not spending as much as originally planned.  And neither have a thing to do with debt reduction.   What they actually mean is they’re still going to spend buckets of money we don’t have – they’re just not going to spend “buckets and buckets” of it.

“Savings” is normally used in about the same way.  I call it wife math (my apologies to the ladies, but come on, admit it, you’ve used it).  Wife math announces, “I saw this scarf on sale for $75.  It is normally $100.  I "saved" $25.”   Of course what she really did was spend $75 that perhaps the family didn’t have or couldn’t afford.

So when you see or hear the words “cuts” and “savings” in discussions of the budget this year, please understand the context of the words when used in those discussions.  “Cuts” mean they don’t plan spending as much as they originally planned to spend.  In the case “cut”, not a single dollar has yet been spent, but they’re going to try to convince you that those “cuts” translate into “savings”.  For most of us “savings” means we have spent less money on necessities (by being frugal)  and the money we’ve saved (i.e. actual money in hand – not borrowed, but earned) can be applied to paying down something else– such as credit card debt or something.  Yeah, it’s real money we have in hand, not spending we “cut” from something we didn’t have the money for to begin with.

Not so with double talking Washington – “savings” in their jargon means not spending as much.  It is slightly different than “cut” in that “savings” are usually “realized” from a proposed program of spending while “cuts” usually come from an existing program of spending.   In the case of “savings” what is “saved” can’t be applied anywhere because we’re in a cycle of deficit spending.  It isn’t revenue they’re talking about that they can spend elsewhere to reduce the debt, it is borrowed money of which they don’t plan on borrowing as much.

This year alone we’re looking at a record deficit of 1.6 trillion dollars.  What they’re talking about “saving” over the next 10 years (1.1 trillion – or 110 billion a year – chicken feed in 3.x trillion dollar budgets) is simply proposed reductions on what they had planned to borrow.  Meanwhile the debt continues to climb.

Keep in mind that we’re looking a 4 years worth of budgets from the administration with over a trillion dollars in deficit spending.  What they’re trying to do is soften that with is 1.1 trillion in “cuts” and “savings” over 10 years that will help “reduce the deficit”.  I’m sure you’re able to do the math and realize total debt keeps climbing.  But also remember that “cuts” and “savings” are what are going to be trumpeted, not the truth:

An administration official, who spoke on condition of anonymity before the budget was released, said one-third of the $1.1 trillion in deficit reduction the administration is projecting over the next decade would come from additional revenue with the bulk of that reflecting the limitations on tax deductions by the wealthy.

So not only are they “cutting” money they don’t have or haven’t spent, they’re “saving” money that will trim the deficit (while the debt still goes up) by assuming revenue not in hand.

The point?  Well, when you see things like this from AP Economics Writer Martin Crutsinger …

“Two-thirds of [the budget's] savings [of $1.1 trillion over 10 years] would come from spending reductions including $400 billion in savings from a five year freeze on spending in many domestic government agencies. The other one-third of savings would come from tax increases. The biggest tax hike would come from a proposal to trim the deductions the wealthiest Americans can claim for charitable contributions, mortgage interest and state and local tax payments. The administration proposed this tax hike last year but it never advanced because of widespread congressional opposition."

… You’ll now know how to translate it. 

I mean where else would you find a line like “the other one-third of savings would come from tax increases” than in a Washington DC budget discussion?

Confused?

Well join the club … and it will get worse.

~McQ