TUPPER: Daugaard’s comparison has valuable, and unintended, lessonsThe federal government is like a $24,000 wage earner who is spending $35,000 per year and has $163,000 on a credit card.
By: Seth Tupper, The Daily Republic
We tend to think our federal government’s budget, debt and deficit problems are beyond our grasp. The numbers seem so big and the solutions so difficult that it’s like pondering the infinite nature of the universe. Spending even a few moments thinking about it is a frustrating exercise in futility.
That sense of frustration has led many of us to relinquish hope that our country will ever get its fiscal house in order. We’ve lost faith in our politicians and our process.
Enter South Dakota Gov. Dennis Daugaard.
He hasn’t solved the problem, but he has described it in understandable terms. And although he apparently meant to shock us, his words should give us hope.
Daugaard’s take on the federal fiscal crisis was buried within the 13,000-word budget address that he spent an hour and a half delivering to the Legislature on Dec. 4 at the Capitol in Pierre. I’m one of the few who makes it my business to listen to the budget address every year, and even I couldn’t hang with him for the whole thing. But I kept the telecast on while I worked, and my ears perked up when Daugaard started speaking in plain English about the federal government’s revenue, spending, deficit and debt.
Near the end of his address, Daugaard showed a bar chart. It summarized the federal government’s 2012 financial situation by displaying $2.4 trillion in revenue and $3.5 trillion in spending, which resulted in a deficit of $1.1 trillion.
Still with me? If not, don’t worry. It’s about to get easier.
“Now, let’s put this in some numbers, because when we talk about millions and billions and trillions, my head spins with the zeros,” Daugaard said. “I have to think and count. Let’s see: A billion is nine zeros, a trillion is 12 zeros. It’s hard to keep track. Let’s just cut off eight zeros and pretend it’s your family.”
If we cut eight zeroes from federal revenue of $2.4 trillion ($2,400,000,000,000), we end up with $24,000. Daugaard asked his audience to pretend that’s the starting salary their son or daughter is earning at a first job after college (that’s easy for me, because that’s pretty darn close to what I was paid at my first journalism gig when I left college in 2001).
“Then you talk to them,” Daugaard continued, “and they say, ‘I’ve got a new apartment, I bought some health insurance, I bought a new car, and the car payment.’ ”
“ ‘What are you spending, honey?’ ” you say.
“ ‘Well, I’m spending $35,000 a year.’ ”
Got that? If we cut eight zeroes from federal spending of $3.5 trillion ($3,500,000,000,000), we end up with $35,000. That’s what our hypothetical son or daughter is spending annually (if it’s a son, hopefully you don’t call him “honey” like Daugaard did).
The governor, like any good father, said he’d respond to this information with concern and would offer advice like this: “Oh my gosh, you’ve got to cut your expenses, or you’ve got to get another job. You’ve got to do something. You can’t spend $11,000 more than you’re making. Now, probably you’re going to have to put some of that money on your credit card until you get this straightened around. What is your credit card balance?”
Here’s where Daugaard dropped the hammer. Take eight zeroes off the federal debt of $16.3 trillion ($16,300,000,000,000) — remember: this is actual money owed, and is therefore different from the deficit, which is just the shortfall between revenue and expenses — and you get $163,000. That’s what our imaginary child owes on a credit card.
“We really have to worry about this,” Daugaard said. “If this were your own personal budget, you would be very alarmed.”
Alarmed, yes. Hopeless? No. The governor may have meant to scare us, but he unwittingly painted a much rosier picture of our nation’s predicament than most of us probably carry around in our head.
Think of it: The federal government is like a $24,000 wage earner who is spending $35,000 per year and has $163,000 on a credit card.
That would be a challenging and unfortunate situation for a young worker to face, but it would not be insurmountable. As the parent of an adult child in that kind of financial pickle, I would show my child that with a plan and a lot of discipline and patience, it would be possible to dig out of the hole someday.
As I said, that’s probably not the reaction the governor had in mind. He also probably didn’t mean for his comparison to be carried further, but I think there is value in doing so.
Remember what Daugaard said he’d tell his son or daughter? “You’ve got to cut your expenses, or you’ve got to get another job.” Getting another job is a way of raising income. He was describing the options we all face when we start falling behind on our finances: cut expenses, raise income or both.
Imagine if this hypothetical son or daughter reacted to Daugaard’s advice immaturely. Imagine if the child got defensive and said, “No. I’m not going to get another job. Not ever. That’s off the table.”
That would be a silly thing to do, wouldn’t it? It’s patently obvious that the best approach is a comprehensive one: raise income, cut expenses and pay down as much debt as possible. Outright rejection of any option would be a serious mistake.
Yet that’s exactly what so many ultraconservative politicians who dominate the national wing of Daugaard’s Republican Party are doing. They’re refusing to even consider raising taxes on anybody.
Some moderate Democrats and Republicans, meanwhile, propose raising taxes on those who can afford to pay. They’re open to other revenue-increasing ideas like the elimination of some tax credits and deductions. They’re willing to accept some difficult cuts to spending and are hopeful that the combination of increased revenue and decreased spending will be used to reduce the debt.
If we apply Daugaard’s analogy, it’s clear one side is behaving like a parent and the other is acting like a child.