Budget Woes and Belt Tightening - Coming Soon to a Town Near You!

Many people all across the country have been discussing all the budgetary cuts happening currently at the local and state level; and I expect soon to happen at the federal level.

Why are we seeing all these deep budget cuts?  Well, frankly, the United States is in serious fiscal trouble.  States, Counties, Cities and Towns must have balanced budgets.  These municipalities can not run deficits like the Federal Government.  In the past few years, the Federal Government was handing out stimulus money like, well...like drunken sailors.  This helped prop up municipal budgets which otherwise would have been carefully and cautiously trimming along the way. Now that the cuts have to be made all in one year, these adjustments seem very draconian.  The piper has come to demand payment. 

As an example of the irresponsible spending I refer to, I will share an episode from the Lewisville Independent School District (LISD) that simply stymied me in its example of short-sightedness. 

In 2009, the LISD was 'awarded' stimulus funds.  Those funds had some strings attached - specifically, they could not be spent on capital expenditures, but had to go to teacher salaries.  (personally, I think teachers deserve more money, but there were better ways to do this) These were funds for 2 years only - 2009 and 2010.  In 2011, at a School Board meeting, members and parents were up in arms over spending cuts and teacher layoffs. 

When asked why the deep cuts were needed, it came out that instead of giving teachers 'bonuses' with the stimulus funds - that is to say 1 or 2 year bonus checks, the ISD had given raises in annual salary.  Not only did they give permanent salary increases to the teachers, they also gave across the board raises to all the Administrative Staff (non-teachers - like the school secretaries, teacher aides, custodians, etc) and now, the budget was short that amount of money.  This (in their minds) necessitated teacher and staff layoffs.  Why didn't the ISD simply return salaries to pre-stimulus levels? 

Sadly, the belt tightening is going to accelerate in the near future.  One of the primary bond funds in the US - the Pimco Select Fund last month sold all its US Bonds.  That is not a good sign.  China is not buying US debt at the rate they have in the past.  Many countries are calling for another 'reserve currency' than the dollar.  All these signs point to fiscally tough times ahead for the US.  What does that mean for individuals and families?

First, municipal and federal budgets are going to see deep, painful cuts.   Increases in fees and charges for all manner of public services will also happen.  Taxes will likely increase starting with local sales taxes.  These actions will take more money out of the pockets of families and working people.  Next, inflation will be rearing its ugly head.  We can see that by looking at grocery prices and fuel/energy costs.  The numbers reported monthly by Washington are manipulated by not including items like food and gas - they say those items are too volatile but, no one can go without food or gas, no matter the cost.  So, less money in your pockets. 

As Washington sees the world stepping further back from US debt, we will see Income Tax increases.  There is no other way that the Federal Government brings in revenue - they don't create anything, make any goods or sell services.  They are totally funded by taxes, fees and penalties.  They will also have to cut their employee rolls.  More lay offs, more cuts and more unemployment.

Those of us who still remember hyper-inflation from the 1970's will be very sad to see a return to those days - and SPAM burgers may make a come back in kitchen tables around the US.  The next 2 - 3 decades will be very tight and many people and programs that are important and worthwhile, will sadly and necessarily see cuts or eliminations.  Hopefully, our children will learn from the mistakes of the past years and not repeat this cycle of living beyond our means.