I was always taught to do the right things. Then someone advised me that it is not enough to do the right things; but rather you must do the right things right! In my opinion, this notion needs to be applied to our elected representatives who are responsible for the federal budget. I think they need to demonstrate some fiscal responsibility, hence doing the right things right.
A Basic Budgeting and Spending Model
In a basic budgeting and spending model, you plan your household budget around the amount of income you expect to receive, and the offsetting amount you expect to spend on your living expenses. The goal is to come out ahead at the end of the year. You allocate a monthly spending allowance for all your known expenses such as food, clothing, shelter and transportation. If you are really wise, you allot a certain amount to those unexpected events and their related expenses, as well (i.e. you receive a speeding ticket, the washer breaks down, the roof starts to leak, etc.). Then, if you are being a good steward of your own household, you carefully manage your spending making sure to get the “best buy” when you shop by comparing price and quality to be confident you are getting the best value for the dollars you spend.
For example, suppose that within your transportation budget, you set aside a certain amount for your car payment and another amount for fuel and yet another amount for maintenance. After some careful planning, you realize that if you adjusted your budget to put slightly more in the car payment bucket for a vehicle that obtains much better mileage, you could reduce your monthly fuel budget sufficiently to more than offset the amount of the increase in the car payment. Furthermore, you discover that your maintenance expenses also are reduced because most of your service work is covered under the warranty. Such a decision would be fiscally responsible, right?
Federal Budget Process Escapes Logic
The whole federal budget process escapes logic, in my opinion. It was no problem for Congressional policy-makers to justify raids on the Social Security surplus (when there was one because the baby boomers were feeding it, not drawing upon it) leaving I.O.U.’s. Was that considered fiscally responsible? Is that doing the right things, right?
Entitlements were created to spend the surplus with little regard for building incentives into the allocation process to insure that the best value would be attained for the dollar spent. There were no economic incentives to insure the quality of care that was delivered. In addition, projections of spending failed to consider the demands and needs of the baby-boomers who created the surplus when they would become the consumers. When the demand for the promised health care services began to exceed the supply of resources to pay for that promised care, who was held accountable?
The debate still hinges on doing the right things, right. It is well and good to spend money to care for those who need care when there is sufficient resources to meet that need, but just as in the household budget example, when times get tough you cut out some things you were able to enjoy when times were good. In this scenario, you are the one held accountable and the incentive is the money you have left at year-end.
Incentives for Accountability
Contrast that with the federal budget process. When spending for an entitlement created during a period of surplus creates a deficit, that entitlement may need to be adjusted, or income must be increased. In the short term, reduced spending is a quicker temporary fix than increasing income. Unfortunately, no elected official is going to get re-elected if he or she is perceived as voting to take something away, even if it is because a mistake was made in estimating the long term effects of the entitlement legislation. There is no incentive built into this model to reward the elected officials for doing the right things right. So we become saddled with an untenable situation in which spending exceeds income with no simple short term or long term resolution available.
Perhaps, my mind is oversimplifying the budgeting process. If you fail to manage your household budget, you are the one that gets hurt, along with any creditors who supported your spending beyond your means. But in the end, you and your creditors should pay the consequences for those decisions and no one else. Should the burden be placed on those who acted responsibly and did the right things, right? I think not.
I believe we need to hold our elected representatives to the same standard since they work for us. We need to instruct them to create incentives to get maximum value for the tax dollars spent for health care. We should demand that they not only do the right things, but that they should be done right!
