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Balancing Your Budget vs The Federal Budget…

February 24, 2011

At GAI ( we often help clients create budgets for their daily lives. We are not trying to balance a budget, but create one they can live by… meaning live within their means. Now balancing the federal budget is another animal all together. It is a fantasy and likely to stay that way. That is, it will till lawmakers in both parties tackle entitlement spending. The numbers in Obama’s fiscal 2012 budget are massive: $3.73 trillion in outlays, down a bit from $3.8 trillion in outlays and a deficit of $1.5 trillion this year. Meanwhile, the federal debt, accumulated from year to year, will continue to grow.

 Cuts will help, but right now only discretionary programs are in play…funding for the military, homeland security, education, transportation, science, highway repairs, foreign aid and money for most federal agencies. The rub: that list makes up only about one-third of total spending. Remove defense from the total and the remainder adds up to only about 15%. Eliminating the whole list, including defense, balances the budget…but barely and it’s not a realistic solution, politically or economically. So the politicians will continue to wrestle with cuts around the edges, tussling over how to slice up the money pie. President Obama, for example, wants $8 billion more for high-speed rail in 2012. Republicans want funds cut. No matter which party’s in charge, the pie slices won’t change much. The Bush and Obama budgets have nearly the same shares for the top five items. But a massive shift has occurred over time: in 1968, at the height of the Vietnam War, defense hogged a whopping 46% share of the federal budget, while Medicare and Medicaid…in their infancy…occupied slim pieces of real estate. Now these two programs eat up 20.4%…about the same as the defense spending. And the share going to Social Security has grown by half in the past four decades.

A client the other day said he wants a budget that allows him to have 2 six-packs of bud-light each weekend while he watches the games; and of course, make sure all his bills are paid. I can do that but not sure if I could balance this nation’s budget anytime soon.  I’m not sure that our Government officials can either. Let’s keep our fingers crossed! Life is hard and Gunwel Tax & Bookkeeping is in your corner to help you with all of your financial needs. Call us at 212-979-6830 or stop by for a visit. You work hard for your money, let Gunwel work smart to help you keep it! See you soon.


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