Americans make many resolutions at the start of a new year. The most common New Year's resolutions are about diet and exercise, but in 2010, many Americans pledged to focus on getting financially fit. The Boston Herald found that more than one-third of those polled were considering resolutions related to their finances. It's too bad the federal government and our elected representatives aren't doing the same.
Even before the start of 2010, Americans have been changing their spending habits. The Washington Post reports that the savings rate was 4.4 percent in October 2009—up from less than one percent in April 2008. Americans are doing what sensible people do in uncertain economic times. They are cutting back on luxuries they don't need, paying down debt, and trying to put away more money to prepare for the future.
Uncle Sam has embraced the opposite strategy. Tax revenue plummeted in 2009, but government spending soared. Some of the spending was necessary, but much of it was pure waste. The $787 billion stimulus bill, for example, was described as necessary to “jump start” the economy, yet at the end of the year, about two-thirds of the money appropriated remained unspent. Why has so much of this spending, approved under the guise of addressing an economic emergency, been put off for so long?
That question is all the more important since—while it's often easy to think otherwise—we are talking about real money. Those hundreds of billions of dollars that the federal government has promised to spend have created real debt that must be paid back by American taxpayers. Politicians need to recognize that their spending trends are unsustainable and that long-term growth depends on getting our fiscal house in order.