Budgets and the Mistakes Governments Make When Creating Them!
The average budget, whether created by the individual for their own use, by a business for the purposes of survival and/or increased profits, or by a local government, state government, or by the Federal Government, is usually created with one major element missing; a section for “savings-for-future-down-turns”.
There are many examples of this fatal flaw that can be seen throughout today’s world. The biggest group of examples includes our City and County governments; our own State of Nevada and of course our very own Federal Government. In defense of our Federal Government’s past which even the most Right-Wing side of this country has to admit to, is that slightly over eight years ago our Federal Government had a surplus of funds for the first time in decades. Then, for whatever reason, the powers that came into being decided that it wasn’t a good idea to run an economy that was “in the Black” so they repaired that problem with a deficit higher than this country has ever seen. When this current administration took office, last year, they were given the task of repairing those eight years of spending. The trouble is that people want immediate repair, which isn’t possible in anyone’s world. But it can’t be repaired immediately and any educated person, no matter what their political disposition knows that nothing is immediate. Since the discussion here is about budgeting, or in this case, not budgeting properly I will leave the last several sentences to be discussed at another time.
So I will write about budgeting, whether for businesses, governments , or personal.
Most Americans follow the same spending and savings course that their governments have followed; spend as fast as it can be made! The truth is that many families were barely making it on a day-to-day basis, but there were many more that were making excess that could have been “banked” as a cushion in case of bad times, they were making much more money than their normal expenses and could have put money aside. Most didn’t and when the collapse came, they lost everything that they had worked so hard to have. There were many who thought that placing their extra funds in the Stock Market was their road to salvation. Those people, as well as many corporations and government entities, didn’t realize that the Stock Market was a gamble, and when you gamble there are winners and there are losers. When the collapse came we had many more losers than winners and many people whose savings went away permanently.
Businesses that followed the same example as the average person went through the same downturn, with many loosing everything and having to close their doors forever. Even many businesses that did try to protect themselves through reserve savings and cost cutting were drawn into the vortex of the majority that didn’t and so all were swept away.
Many states are in financial troubles because their budgets didn’t take into account that the incomes that they have been depending on to run their state might decrease. The State of Nevada is our personal example. For many years the State of Nevada has been extremely prosperous, but our legislators, Republican as well as Democrat saw no need to add a reserve account to their budgeting requirements. They knew that the money would always overflow the State’s coffers, so felt that it was useless and maybe wasteful to save for that rare and impossible event when the entire Country could suffer a major downturn.
Our geniuses recently discovered that they were wrong; but as we listen to them ranting and raving about this problem, it is obvious that not one has any idea as to why we are in the trouble that we are in currently. So it is obvious that when this State recovers financially, these legislators and those that will follow them will continue to use the same budgeting techniques; forgetting to add a “reserve fund” into the budgeting process and setting this state toward another financial collapse in the future.
This lack of planning for the future is as old as mankind. Aesop, in his fables written over 2000 years ago, wrote a story of the Grass Hopper and the Ants. In that story, the Ants prepared for the future while the Grass Hopper played and lived only for that day and never thought about the future. That story is as true today as it ever was, and as it was in Aesop’s time, most people, most businesses and most governments don’t plan for the future.
We have seen a lot of comments from people complaining that our governments’, City, State, and Federal, can’t balance their budgets, but most of these same critics don’t, or even can’t balance their own personal budget’s either.
Either the average person is following the way their government runs its budget, or the governments, who are run by people, are following the same mentality as the average person, not planning for the future.
When a budget is being prepared, whether by a private person, or by a government entity, one of the priorities should be to include a saving’s plan for any unforeseeable future event.
Let us hope that when we pull out of this disaster that our various levels of government will realize what they need to add to their budgets and maybe this problem will not come back to haunt us again.
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