Tuesday, May 25, 2010


Our Governments (US Congress, and State Legislatures) are spending more than they make. If that happens to you or your family, bankruptcy is inevitable. Our Politicians however, don't believe this basic law of Economics apples to them. But when you spend more than you earn, the result, which is guaranteed by this same basic law of Economics, is a concept that most Americans understand intuitively.

Today we are informed by "USA TODAY" in this article that the Government is growing and Private pay is shrinking. In other words, We Are Broke. Private pay shrinks to historic lows
Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.
That's not good news. We all took a pay cut. How about the Government?
At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.
Bottom line WE ARE SPENDING MORE THAN WE MAKE! Some in Government apparently failed the final (or never took the course) in Economics 101.

What are we spending so much money doing?
Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.
What's the future hold for the US?
The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. "This is really important," Grimes says. [Emphasis Mine]
The solution is simple, but not easy. The Stimulus is not working. The budget (which Congress has failed to pass) is not balanced. Government give-away programs will have to be cut. The Politicians who fail to heed this idea will find themselves out of work after November.

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