For this post, I’d like to ask readers to put themselves in the position of an LDS family with the following circumstances.
–The husband and wife are in their late-30s. They have four kids.
–The husband and wife have decided that it is better for the husband to stay at home and watch the kids these days because the wife has a law degree and she wants to go back to work. The husband is working on a book but has not yet found a publisher.
–The wife has just been fired by her law firm which is going out of business. She was making $120k a year before. The only job she can find is one making $90k to start.
–The family has $120k of combined student loan debt. It is paying faithfully. There is about $20k of credit card debt, which is being paid down every month. There is a mortgage on the house, but the house is under water (they bought it five years ago for $250k and they have a $220k mortgage, but the house was recently valued at $170k).
–The husband and wife sit down and go over their debts and their income. They see they have a $1000 hole between their new income and their current expenses. They have some difficult choices to make. Let’s look at what responses would be smart and credible and what choices wouldn’t fly.
Remember, there is a $1000 hole that needs to be taken care of every month.
Credible and smart approaches:
1)Change the paradigm. The husband goes back to work. They don’t want to do this because the don’t believe in day care for the kids, but this is a possible solution.
2)Make a lot of cuts. Use less electricity. Sell one of the cars. Cut cell phone usage in half. Cut the HBO and Showtime channels on the cable. Start a garden and can tomatoes and beans for the winter. Cut significantly from the food budget. The wife could take the bus to work rather than drive.
3)Rent out a room in the house.
4)The husband starts working part-time.
5)Responsibly try to renegotiate some of the debt.
All of these are credible, workable solutions. I’m sure if you were in this situation you would come up with other solutions (and I’d bet nearly everybody reading this has faced similar budgeting problems).
Here are some that are not.
1)Pretend the problem doesn’t exist and plan your European tour for the whole family.
2)Stop paying the mortgage because the government will figure out some way to bail you out.
3)Yell and scream that your cell phone can’t be cut because it’s your cell phone and you won’t give it up (without offering something else that can be cut).
4)Run around the neighborhood saying, “they’re hurting the working poor!” (not sure who “they” are, but you get the idea).
This coming week will be crucial for those of us who are interested in the whole budgeting dilemma. There are two federal budgets under discussion. There is the 2011 budget, which has still not been approved yet. The usual procedure is that this budget is approved by September the year before. So, we are six months late in approving the 2011 budget. This is the one Democrats and Republicans have been fighting over the last few months. Remember, the Republicans talked about a $100 billion cut, and then dropped it to $61 billion. The Democrats want a much smaller cut.
To keep things in perspective, even with the draconian, extreme $100 billion cut, the budget would still be $1.5 trillion in deficit. You read that correctly. $1.5 trillion — even with the bigger cut. This is why there is a very, very small group of congressmen who have proposed much bigger cuts, in the range of $500 billion. And keep in mind that even with a $500 billion cut the deficit would still be $1.1 trillion.
The other issue, which you will be hearing a lot about this week, is the Republican proposal for the 2012 budget. As of this writing, the details are not yet available, but the Republicans are proposing much bigger cuts, in the area of hundreds of billions a year.
The interesting thing in all of this is that practically nobody is proposing to actually balance the budget anytime soon. There is only one proposal I know of, and that is by Republican Sen. Rand Paul. Sen. Paul says he can balance the budget in five years. I highly recommend you go to the preceding link and check it out. It is a workable, credible plan.
So, we have a very small group of congressmen who are proposing workable, credible plans with large cuts. The rest of Congress is like the family that faces its $1000 monthly deficit with a new trip to Europe.
So, commenters, here is your chance to show which side you fall on. Do you favor credible, workable plans, or do you favor a solution that involves you pretending the problem doesn’t exist?
It is time to be serious. Balancing the budget means lots of things will be cut. You cannot saying that one program can’t be cut because it is “essential” without proposing another program to be cut that is less essential.
A serious response would be: we cannot cut the NIH but we should cut an additional $50 billion out of the Defense department by immediately pulling troops out of Germany.
Let me address another canard out there. Remember, the budget deficit is $1.6 trillion. What many often say is: well, we need to raise taxes on the rich. Alright, let’s look at the numbers. If you end the Bush tax cuts for the wealthy, you get $70 billion a year. So, if you’re going to raise taxes, how are you going to come up with the other $1.53 trillion?
Let me address another canard out there. We don’t need to act. I hope there is not anybody reading this who believes that. In case you don’t, please see this link (and watch the interview with Veronique de Rugy, which explains thing pretty well). Bottom line: we must act now.
Now’s your time. Bring it on. Let’s see some responsible budget-balancing plans. Or are you going to be the guy who, when his family is facing a $1000 monthly hole, screams and yells that he is not giving up his cell phone?