We Don’t Have A Revenue Problem: We Have A Spending Problem!!!
We Don’t Have A Revenue Problem: We Have A Spending Problem!!!
By
Ken Eliasberg
In former vocational incarnations I was charged at first with the task of advising folks on how to plan for the disposition of their estates, and later how to build them in the first place. That is I spent about 25 years as a tax, estate, and retirement planning attorney, during the course of which I represented a number of clients engaged in financial planning, a field that I was close to and one that I really enjoyed. During the course of practicing law, some close friends and good clients who ran a large insurance and pension administration firm asked me to join their operation to head up a newly created financial planning department; it was an offer that was too good to refuse. And, as a consequence, I spent close to a decade as a financial planner. And the simple wisdom I acquired during these vocational stints I passed along to my sons when one of them queried me as to how to conduct his personal financial planning. My advice was simple — just adhere to the following 2 wealth-building principles: (1) Make believe you make 80% of what you actually make (and live on it), and (2) spend last year’s money, not next year’s. These are the foundational steps you take to launch your financial planning journey, the destination of which is the attainment of your goals — which are typically your family’s security and well being, the education of your children, your retirement, and your family’s continued well being on your demise. Now the first 2 foundational steps may seem like fairly simple and fundamental financial rules to live by, but let me assure you that most of our citizens have not been following them for about six and a half decades, i.e. since the end of WWII. And, unfortunately, neither has our government — at any level, county, State or National!
Prior to that time we — the American citizenry — or at least most of us, were a cash and carry society. Credit was a relatively rare thing, credit cards being a fairly recent innovation in terms of their broad application. Ergo, people had to, more or less, live within their means. And this was a practice that found substantial support in those who lived through the Depression. I know in my home — the home I grew up in (I guess that would be my parent’s home) we were definitely a cash and carry operation — if you didn’t have it you didn’t spend it (indeed, if you didn’t have it, there was no way you could spend it). My father and most of his peers were hard working folks who thought about saving and building, and spending only after you had made adequate provision for the former 2 endeavors.
That mentality ended with the post-war prosperity, and the prospects of an America that appeared destined to experience continuing vital and dynamic growth. Borrowing against that future growth became an acceptable course of conduct. And this tendency, containable at first, mushroomed exponentially with the birth of the “baby boomers,” a group committed to instant gratification on an almost boundless basis. Granted there were down periods, but none that were existentially threatening (at least until now) — at none that appeared to be pregnant with a threat that seemed likely to occur in the immediate future.
And nowhere is that attitude both more apparent and prevalent than in our various governmental undertakings. And why should that be a surprise; all that has happened is that we have transferred our need for instant gratification to our representatives. Only it gets much worse with government, not just because the amounts are so much larger, but, more to the point, they’re not working with their money — they’re working with ours. Consequently, the pain of an error is not as directly visited on them; it is visited on us!! Government bought into this “buy now and pay later mentality” lock, stock, and barrel. We’re going to look at many of these government programs in the not-too-distant future, but, for present purposes, it is important to first look at the mentality that spawned these conditions, outgrowths of the approach followed by the boomers, i.e. the “me” generation or the “if-it-feels-good-do-it” generation.
While left-wing know-nothings can try to blame this on the “greed” of the private sector (and, make no mistake, the private sector must shoulder its share of the blame), the bulk of our problems are, have been, and always will be properly laid at the door of government — an institution that creates no wealth; at best, it is a wealth consumer and at worst, a wealth destroyer.
Our “entitlement” programs have become little more than extravagant ponzi schemes — and make no mistake, these are “entitlement” programs, notwithstanding the feeble and idiotic effort on the part of our local left-wing scholar to characterize them as something else. We are going to look at these very soon (i.e. social security, medicare, etc.)
Actually, we don’t have to look as far as various undertakings of our Federal Government, closer to home our State is teetering on the brink of bankruptcy, a fact that may, judging from our recent election, finally be striking a responsive note with voters. Much to my delight, all but one of the propositions were defeated. Our legislators, with the active support of our Governors, have spent us into a hole that we just may not be able to climb out of. California is becoming increasingly inhospitable to business. Indeed, if our climate was less inviting, I don’t think you could get a business to open up in California. By the way, while this spending crosses political lines (and that is why Republicans have been losing elections; if we don’t stand for fiscal restraint — i.e. if we are nothing but Democrat lite — what do we stand for, and why should any one vote for us?) it is interesting to observe that the States in the deepest fiscal hot water are Blue States.
The bottom line is that, as the left likes to inaccurately and inappropriately describe other situations, “our chickens are indeed coming home to roost.” As noted in the title to this column: We don’t have a revenue problem; we have a spending problem. We have been living beyond our means for decades. We have been allowed to do so in part because of great prosperity, with the rich, while getting richer, paying huge amounts of taxes to keep our boat afloat. You may remember Gray Davis’s problem: when recession hit in the late ‘80s, the significant revenue production attributable to stock options was no more. California was particularly hard hit, leading to the Recall of Davis (which I thought at the time was an effort that would come home to hurt the Republicans; my preference was to let Davis twist in the wind, with so much damage being done and attributable to Davis that the electorate would have to turn to a real fiscal conservative, such as Tom McClintock). Alas that did not happen — the bad news that I feared, materialized, and we are now in worse shape than ever. The good news, Schwarzenegger is no Republican, so the Party won’t suffer all that much because of his being at the helm — all of California will (which is small consolation).
By the way, opinion columns are about opinions. But opinions are, or at least should be, about facts, logic, common sense, and some sort of connection with reality and human nature if they are to be accorded any weight — you know, the things that are routinely overlooked in any column by our resident left-wingers. In the world of ideas, it’s not enough that you’re talking; it helps if you know what you’re talking about. That’s not just my opinion; that’s the way it is — check it out!