Talk about irony.
More than 60 organizations dedicated to teaching kids basic financial management skills descended on Washington, D.C. last Friday for "Financial Literacy Day." The event, hosted by several U.S. legislators, operated in the shadow of a just-struck federal budget deal that narrowly avoided a government shut down, but was so negative to the nation's financial outlook that debt rating agencies are now considering a downgrade of U.S. debt.
The first lesson of most financial literacy programs is about saving and budgeting -- a lesson that five-year-old Isaac Chaffee has mastered, according to his dad's delightful blog at Enemy of Debt.
Here's how I imagine a hypothetical conversation between Isaac (who knows how to budget) and Congress (which doesn't) would have gone on Financial Literacy Day. Just to be clear, the following conversation is fabricated but the numbers are real. If you want to get seriously queasy about the U.S. government's financial status, follow the links.
Congress: It's good you're learning about financial literacy, Isaac, because it's really important to learn to live within your means and save for big expenses that you might have in the future, like college.
Isaac: Yes I know it's important. My daddy has been teaching me all about budgetting. But he said you were arguing about yours. Is that because it's hard to get everybody to agree to live within their means?
Congress: Heh, heh. Just between us, Isaac, we're not even talking about living within our means. The budget deal that we worked out has us spending $3.70 for every $2.20 we earn. (To see the data from the Congressional Budget office, click on "Budget projections in xls" which provides a neat 10 year chart of what the U.S. government expects to collect and spend.)
Isaac: But I thought you were arguing because you had to cut expenses.
Congress: We were, but we're only cutting $38 billion -- that's about one penny out of every dollar we spend.
Isaac: You weren't talking about living within your means, like you're telling me to?
Congress: Not even on the table. We're talking about how much more than our income we can spend.
Isaac: Won't you run out of money?
Congress: Not until people stop lending us money. Then, we could have some serious problems. But, right now, lots of nice people like your dad buy U.S. Treasury bills and bonds, which are essentially I.O.U.s from my house to yours.
Isaac: Didn't anybody say that you ought to spend less than you make? My parents taught me that you've got to tighten your belt when times are tough and learn to live on less.
Congress: Yeah, right. Some goofball Congresswoman tried to talk us all into taking a tiny pay cut as a symbolic gesture to show that we could personally live within our means. We buried that bill so deep, it can't even come up for air....Look, kid, you don't know how hard it is to live within your means. If you only spend the amount you make, you can't buy all sorts of cool stuff that you want and that's no fun at all.
Isaac: I do too know what that's like! On the way here, my mom took me to FAO Schwartz and I wanted to buy everything in the store. But my mom said that would be irresponsible and I couldn't even spend my whole allowance.
Congress: Yeah, well, good for your mom. But this ain't toys, buddy. We're talking about important stuff. And difficult times. We're giving people money when they're out of work and we're fixing roads and providing money for education. This is spending on our future.
Isaac: Oh. So, you've got to spend more than you make for a little while -- like my parents might when they're paying for my college. But then you're going to get back on track and start paying down those loans, right?
Congress: Start paying off our debts? ...Uh, well, who knows? We only project out 10 years. But our 10-year projections show red ink for as far as the eye can see.
Isaac: Wow. My parents have told me they plan to pay off all their debts. They've even got a long-term plan to pay off their mortgage.
Congress: Ha! Good luck with that!...Oh wait, kid. Don't cry...Your parents probably will pay off their mortgage. They just don't realize that I'm building up debt faster than they can pay it off. And my debt is their debt.
Right now, according to the federal debt clock, I've built up a long-term debt that amounts to about $128,000 per taxpayer. That's like a second mortgage that your parents probably don't even realize that they have. And where the balance on your parent's home loan is going down, I'm still spending way more than I get, so the amount of my debt that you and your parents will need to pay off some day is rising pretty much every second. In fact, if you watch the debt clock for more than a few minutes, it'll probably make you sick to your stomach.
Isaac (crying): Well, are you at least being careful with my parent's money?
Congress: Careful? Look kid, we spend much too fast to be careful. Just last week, we found out that we'd given $513 million of your parents' money to people who were cheating on just one tax break for home buyers. We sometimes accidentally give money to prisoners too. And that's a drop in the bucket. Heck, the Department of Defense, which accounts for about 23% of our spending if you include the cost of ongoing wars, keeps telling us that we're buying jets and equipment that they don't want or need. But we buy them anyway, because the manufacturers of those unneeded jets are in some nice Congressman's district. And if we stop buying them, he might not get elected again.
That might not be bad for you, but that would be bad for him. So we give him the money to buy jets so he'll be friends with us and give us money when we need it to stay in office. We don't even think about whether we really need this stuff. We just buy it because it makes people happy.
Isaac: So you're buying people off to get votes?
Congress: Duh! Haven't you ever read "The Great American Tax Dodge," by Donald Barlett & James Steele? ...Oh, I guess you're a little young for that... Well, anyway, it's all about the back room deals that allow us to create loopholes for rich people while country-bumpkins like your parents pay their taxes and think they're going to get ahead by paying off their debts. These tax breaks are a type of federal spending that get us campaign contributions and allow us to stay in power, even when we do really stupid and dishonest things.
Look, kid, if you want to have friends that will go along with the bad things you do, you should do it too.
Isaac: You're saying I should give kids at school money, so that they'd like me and let me get away with bad stuff, like cheating?
Congress: Well, I don't know that 5-year-olds would really appreciate money. Give 'em candy. That's the ticket. You give people what they want, no matter what they need.
Isaac: That's wrong.
Congress: Maybe so, but we've been doing it a long time, and now all of our friends are hooked on candy. And when we stop giving it to them, they get mad. So we need to give them stuff. And we need your parents' money to do it.
Isaac: You're a jerk
Congress: Yeah, well, the jokes on you. You pay me, and pay me plenty, to do this job. So if you want a better answer, you better tell your parents to get out and vote and send all of us jerks home. Otherwise, we're going to catapult this country into bankruptcy. By the time you're old enough to vote, it'll be way too late.
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