The Tax Cut Deal and Our Personal Finances

Pennies arranged to spell the word "debt"Suppose you and I managed our personal finances the way our political leaders handle the nation’s finances. President Obama recently signed the much debated tax bill into law. Democrats and Republicans are in bed together on this one. Republicans get the tax cut deal they wanted, at least for the next two years. President Obama gets the unemployment benefits extension he wanted, a payroll tax cut, and some tax credits.
The total package has the effect of adding an estimated 858 billion dollars to the already staggering national debt over the next ten years. This deal is being touted as a means to stimulate our economy. I get that but, hello, at a price tag of 858 billion dollars. We certainly could not handle our personal finances like that. If we were in dire financial straits, wisdom would dictate that we make some very painful adjustments. That’s because we understand that there is a limit to how much we can or should continue to borrow money aimed at solving our debt problem.
Sooner rather than later, our congressional bodies must realize this as well. Of course, there is one big difference between us and our leaders in Washington. When it comes to our personal finances, we have to pay for the decisions we make, however costly. But Congress and the President don’t have to personally pay the bill for their economic policies. They simply pass those costs to you and me. People always tend to be slacker with the money of others than they are with their own.
That the existing tax cuts would have expired the end of this year was a big deal. A large tax increase on taxpayers would not be welcome during this sluggish economy. On the other hand, the tax cut deal that has passed, given our staggering debt to date and void of strategies to address the spending side of the equation, should not have been welcome either. But to Washington it was. The lesson we learn from our personal finances is that the longer one fails to address his mounting debt problem, the more serious it becomes, and the less options he will have in the future.
Copyright © 2010 by Frank King. All rights reserved.