1)When the money flowing out is greater than the money coming in, that's bad - Okay, I think this is a pretty basic idea. When your expenditures exceed your income, you have what is called a "Cash Flow Problem." In layman's terms, you are living beyond your means. In the real world, when this happens, the bank account becomes overdrawn. Your checks bounce. Spending must stop. If spending does not stop, then eventually a law enforcement agency shows up at your door. In government, when this happens, you engage in "deficit spending". "Deficit Spending" is code for "spending money that we don't have". In the business world, this will get you fired. In your personal life it leads to bankruptcy and possibly prison. In government it leads to re-election.
2)Carefully consider the consequences of buying on credit - In the real world, this means, simply, if you intend to make a purchase, consider how much debt you have already. If you cannot afford to take on another payment, do not purchase this item. Failing to meet that payment will result in your defaulting on the loan. If this happens, there will be collections, and the potential for foreclosure, repossession, wage garnishment and other un-pleasantries. In government, well, obviously if you have more debt than you can pay, then you just raise the debt ceiling, extend borrowing powers for an additional two years and engage in deficit spending to make up the difference. Net result? It is estimated that by the end of this year, our ration of Gross Public Debt to Gross Domestic Product will be 1:1. In other words we will owe every dollar that we make this year as a nation.
3) Borrowing money to deal with a financial crisis merely compounds the problem - Perhaps a visual aide is appropriate here:
A very wise man named Dave Ramsey has given advice to millions of Americans on how to get out of financial trouble without resorting to bankruptcy. His advice is often hard to take if you are in a bad situation, because he is honest. He tells you like it is. Sometimes his solution is sell your expensive car, but a $3000 clunker, eat beans and pay bills but the bottom line is, his way works. He encourages people to prepare a budget. At the beginning of the month, sit down and spend every penny of those paychecks "on paper, on purpose". Our government could benefit from this advice. Congress, you spend hours debating a budget every year. Stick to it! Spend every penny on paper, on purpose and when it's gone, it's gone. Stop spending when the money runs out. Slash spending to the point that it is below our GDP. Pay down the national public debt, and you won't have to worry about raising the debt ceiling. It's time for you to stop making Americans pay for your shopping spree. It's about time that America says, Congress, I'm sorry, but you're cut off.
