Many times, the problems in life that seem most complex are quite the opposite: They are simple issues that have been complicated and muddled by factors such as emotion, obstinacy, greed, and dishonesty. Such is often the case with budgets. Whether you are managing a household, a state, or a country, the basics of budgeting are the same. First, you need to know how much money is coming in. Then, you need to prioritize spending, distinguishing between needs and wants. And finally, you shouldn't spend more money than you take in.
Ask anyone who has ever struggled to dig themselves out of debt and they will tell you that these fundamentals are absolutely essential for achieving and maintaining freedom from debt. Fail to attend to any of the three, and you're going to have problems.
Houston, we have a problem – a $14 trillion-and-counting problem. It is estimated that, by the end of 2011, the US national debt will exceed our gross domestic product for the first time in history. Not only is this an unsustainable course with dire implications for economic and homeland security, it is grossly irresponsible behavior for a nation that purports to be a political and economic role model for the rest of the world. Year after year, our elected representatives refuse to do the hard work required to distinguish between budgetary wants and needs, and year after year the government takes on debt to finance programs it can't afford.
Last November, the American people sent a clear message to Washington that they've had enough. Whether fueled by Tea Party patriotism or simple frustration over the stagnating economy and job market, the prevailing sentiment is that our country is on the wrong economic course. Common sense dictates that a move back towards fiscal solvency must be part of the solution to revitalizing America's economy. Without this vital step, we will continue limping along, bogged down by crushing debt and unable to muster any true economic momentum. Businesses will continue to struggle and Main Street will continue to feel the pinch.
There are basically only two ways for the American government to escape the bondage of debt: Cut spending or increase taxes – or resort to a combination of both.