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A Business Perspective on Federal Government Spending: We Can Do Better

We have to return to the idea that the federal government doesn’t automatically get to increase spending every year. Look at it as a businessperson would and should.

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In the 58 years since 1954, the federal government has spent more money each and every single year.

Think about this. The last year our federal government spent less than the year before was the same year Ellis Island closed its doors and the U.S. Supreme Court declared segregated schools to be unconstitutional.

Since then, it hasn’t mattered whether a Republican or Democrat was president, which party controlled Congress, whether the U.S. economy was booming or struggling, if deficits were mounting or what wars we were (or weren’t) waging, federal-government expenses have increased every year.

Most Americans alive today have never known a time that the federal government wasn’t spending more money each year than the year before.

Even when federal receipts/revenues declined (only nine times since 1955), expenditures increased. We keep collecting more and more money, under administrations led by both parties. But none of that matters when we lack spending discipline.

Business Perspectives on Federal Spending

Many people talk about government spending as a percentage of GDP or attempt to use spurious metrics that confuse the main theme of the data. Look at it as a businessperson would and should.

If a company can’t pay bills because it is taking in $100 and spending $150, it doesn’t matter what expenses are relative to anything else. The company must cut spending to at least $100, especially if it has a significant amount of debt.

Total federal government revenues, including some tied to Social Security trust funds, may total $2.44 trillion in 2012. Meanwhile, total government spending is estimated to be $3.56 trillion. That means that spending for this year alone is nearly 50 percent over and above revenues coming in – the same as in the example above.

No economic entity can continue to operate this way.

Endless borrowing is not a possibility, since creditors will eventually wake up to basic economics and increase the cost at which they are willing to lend. Increased interest rates would have a devastating impact on our economy, especially now at this fragile time.

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