Everything governments tell you may be true but it is intended to mislead. When I hear that the government has instituted some plan to reduce spending by $800 billion over 10 years, the government hopes my first impression will be, “Wow! $800 billion is a lot.” When I trusted them, it likely would have been my first impression. Now sadly, skeptic me treats all of this fluff in context.
Notice that it is 10 years. Why 10? I don’t know. 100 years of saving would have been truly astounding. Perhaps they are not completely shameless. 10 years saving in context of a one year budget. Misleading.
Their second hope is that even the skeptics will say, “800 over 10 years, that’s 80 a year. That’s good.” Again wrong. It is more likely about 10 this year and 150 in year 10. It is so much easier to overestimate savings that are well over the predictable horizon. Even the 10 this year is likely covered in qualifications and double speak.
Last and most important, the 10 is inconsequential in the big scheme. During Fiscal year 2012, the US federal government spent $3,540 billion. (Does $3.54 trillion sound less?) A $10 billion saving is 1/354th of their spending.
Suppose you are a family with income of $45,000 per year after taxes, with debt of $140,000 and you overspend this year’s income by $16,000. I will bet that the bank will not be happy because you have cut your spending by $14,238 over 10 years and $178 (maybe) this year. That immediate $15 per month spending reduction will not save you, even if you expect a raise next year.
It is time to pay attention. Just grow up Government. Most of the people would prefer governments were smarter rather than more generous with money that is not their own.
There is a solution. Term limits. As it is, people are personally incentivized to do wrong things that will help them be elected again.
Stop the madness.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. email@example.com
Follow on Twitter @DonShaughnessy