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Blog Posted in avatar   Michael F. van Breda's Blog

Balancing the budget? Get real!

By Michael F. van Breda
Posted Aug 26, 2011 in Politics
Why is so much hot air expended on the subject of balancing the “budget”? Doesn't every family know that a budget is just that: a budget? They are guidelines only, reflecting our best beliefs at the point that we draw them up of what we hope to earn and what we hope to spend. Circumstances change. We all buy that longed-for outfit that comes on sale; we all fall for that special deal on a must-have gadget. More importantly, when the children fall ill, we don't refuse medical assistance because we did not budget for illness this month. Do we refrain from boarding up the house against a hurricane because a year ago when we were drawing up the budget, we were not expecting a major storm? When 9/11 occurs do we fail to protect ourselves because we didn't budget for this attack on the homeland? Yes, we need to get our financial house in order but that means getting our actual spending under control.
Controlling spending takes time. It is simply not possible to balance actual spending in any one period. Whatever our budget, in some years we spend less than expected; in other years we spend more than expected. The challenge is to get our actual spending balanced against our actual income over a period of years.
Calling for a balanced “budget” does nothing for actual spending. In fact, as I will argue in my next blog, it can actually hurt spending. Balancing “spending” in any given year is impossible. The goal, therefore, must be to balance spending against expenditure over a period of several years. What does not get spent this year gets put into a rainy day fund. What gets overspent this year gets paid for from that fund — or by cutting back on non-essentials. The key is that over time we have to balance our actual spending — not some mythical budget.

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