FUNDAMENTAL TRUTH #80: “A nation’s government spends too much when its spending increases at a rate greater than its population growth.” – Old Pithy

Posted by PITHOCRATES - August 23rd, 2011

Parents do what they can to Live within their Means 

People don’t have as many children as before.  Why?  Cost.  It’s expensive to have children.  And to raise a family.  Those who decide to raise children make serious changes in their lives.  Because of the costs.

Before kids these people may drive a new car.  Have nice toys.  A boat.  A motorcycle.  Electronic gadgets.  They may go out to eat a lot.  Eat steak at home a couple times a week.  Go to the movies.  Take some exotic vacations.  After kids?  Used car.  Fewer toys.  More hamburger-based dishes at home.  No more movies.  And vacations are closer to home and less exotic and more mundane.

Parents do what they can to live within their means.  And it’s not easy.  Because they typically start families when they are starting their careers.  So their incomes aren’t very large.  And kids are expensive.  Put the two together and you have some serious austerity living in these early years of starting a family.  But they do what they must do to raise their family.

Personal Responsibility is a very Effective System

So let’s take a look at these costs.  The Center of Nutrition Policy and Promotion’s 2010 annual report shows annual costs for different income groups for different ranges of children from babies up to age 17.  Let’s focus on the low set of income numbers (average annual income of $36,840).  To reflect a new family starting at the same time as the income-earner’s career.  And average the two groups of children that cover ages 0-5.  Crunching these numbers to see the impact of adding one additional child on remaining monthly income looks something like this:

(Source:  Center of Nutrition Policy and Promotion’s 2010 annual report, page 26.)

This is only a crude estimate.  But the numbers are telling.  Kids are expensive.  The more you have the less you have.  Money, that is.  That’s why married men raising a family are such better employees than single men with no kids.  That kind of financial responsibility keeps you in on a Friday night instead of drinking with the boys.  It makes you a punctual employee.  And a hard worker.  Eager to advance to higher pay levels.  Because if you don’t, things are going to get pretty difficult when that third child comes along.

It’s a very effective system.  Personal responsibility.  Especially when it’s your income paying your expenses.

We have Social Safety Nets to Help People in their Time of Need

Now suppose this worker doesn’t advance his or her income before having 4 children.  Which will leave only $141.67 a month to live on.  That won’t pay for much rent.  Or food.  In fact, this person will probably be evicted from their home.  And file personal bankruptcy.  Unless family and/or friends offer to help with their finances.  Or they become a ward of the state.

Sadly, things like this happen far too often.  A plant closes.  A husband has a debilitating injury.  There’s a catastrophic health crisis in the family.  So we have social safety nets in place for these people.  To help them in their time of need.  Due to circumstances beyond their control.

But what about those who willfully spend more than their income can support?  People who live on credit?  Refusing to ever live within their means?  Often blaming others for their insufficient income that won’t support the level of spending they want to maintain?  What about them and their irresponsible ways?  Should they force others to pay more to support their irresponsible spending?  Just because they have the power to tax.  And can run deficits?

The Social Safety Nets are becoming more like European Socialism

The federal government has the power to tax.  When they can’t tax anymore they can run deficits.  Financed by borrowing.  Or by simply printing money.  When spending beyond your means is that easy, you can see why the government continually spends beyond its means.

And they are spending ever more.  And the social safety nets have grown.  Social Security.  MedicareMedicaid.  And now Obamacare.  Which are no longer social safety nets.  But more like European socialism.  Like the social democracies of Europe.  That are currently imploding in the Eurozone financial crisis.

Why?  Because the Europeans are no longer treating their people as citizens.  But as children.  Children that never leave the nest.  Cared for from the cradle to the grave.  The responsible parent can understand the problem.  They are trying to raise more children than they can afford.  Just like a few extra children can bankrupt a family of modest income, this ever expanding social welfare will bankrupt the state.  It’s just a matter of time.

Government could take a Lesson from the Average American Family

The problem with generous benefits is that they cost.  And as populations grow so do these benefits.  So they have to pay these ever increasing costs with ever increasing revenue.  Which becomes a problem.  In the private sector.  As well as the public sector.

As GM lost market share, their health care costs increased greater than their sales growth.  They went bankrupt.  Social Security and Medicare costs are growing faster than the population growth.  Which means fewer taxpayers will be available to pay a growing number of benefit recipients.  Both programs are projected to go bankrupt.

Families have to live within their means.  That’s why a family with an annual income of $36,840 doesn’t raise a family of ten children.  They wait until they can afford to.  If that’s what they want.  They make sure they work hard to earn the income necessary to raise a large family.  Government could take a lesson from the average American family.

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