How Ugly Is This?

Let's take an average police officer. He (or she) works a few overtime details, gets a few court hearings in, and as a result, makes about $57,000 a year. Some of you on the coasts or in major metropolitan areas may have just spit Coke all over your computer, but for many officers, that's a pretty fair salary... and it isn't too far off from what many cops make. (If you are from an area with high salaries, just double all the numbers to keep everything in perspective.)

Now, let's say this officer has some bad spending habits. He goes to casinos regularly; he takes three or four vacations a year to posh resorts. He eats out at fancy restaurants four or five times a week and he parties hard at the clubs and bars when he is off-duty. He has two cars, a boat, a motorcycle and just for fun, a pet tiger. This guy is living the true life of luxury!

There is a little problem, as you might imagine: an honest cop can't afford all of that stuff on $57,000 a year. You look at it and figure it probably costs at least $100,000 a year for him to play like he is a B-list celebrity. And you're right. How does he pay for all that extra stuff? He may not be smart, but he is honest. So the only solution is debt, of course... lots of debt.

Our high-flying patrolman who wants to live like a millionaire is taking out tons of loans. He’s got 8 or 10 credit cards, most of them near the limits. He has loans on his cars, boat and motorcycle... he has a double-mortgage on the house and is still paying for the tiger. He doesn't change his spending habits; they stay the same year after year, because he knows that eventually he'll get raises, and someday he'll be able to catch up. Of course, you know he never will. His spending habits will forever outpace his income. Over the years, he keeps taking out more and more debt to finance a lifestyle that he really can't afford.

That debt keeps piling up, reaching the point where he owes about 10 times his income. He has almost $600,000 of debt hanging over his head, waiting to come crashing back down on top of him. This guy's finances border on lunacy, right? Sad, huh? Pretty stupid, huh? This officer is one of those train wrecks we all want to avoid, yet can't help but stare. None of us would wish this on any of our coworkers; heck, we wouldn't even wish this nightmare on most of our regular customers. Here's the thing: you are already living this way.

The federal government, which in the end is you, me and every other citizen, currently operates under this exact scenario; only the dollar amounts are thousands of times larger. The federal government only took in (as taxes and fees) about 57% of what it actually spent last fiscal year. It also owes, in total, about 10 times what it had in revenue. It is in the exact same financial condition as that cop who was living well beyond his means. Sometimes, the numbers get so large it is hard to understand them. That is where the average cop above comes in handy; the numbers in his story are in the same ratio as our national numbers. If you want to know how scary the numbers are, consider what they could buy.

The national deficit last fiscal year was about $1.3 trillion. With that, you could:

  • Buy up 1/3 of all the gold ever mined in all of human history, or;
  • Buy all the private property in Boston and Chicago. Twice, or;
  • For you, your spouse and your child, you could buy a brand new Lamborghini, Maserati and Ferrari for each of you. You could do it every day... since the birth of Christ, or;
  • Buy every NFL team, every MLB team, every NBA team, and fund every NASCAR Sprint Cup and Nationwide team. Then buy all of the private property in Los Angeles County and still have about $100 million to retire on.

I know this is not an article about personal finance, but it is about finances that affect you personally. Just as the officer in the example cannot keep his spending pattern unchanged, neither can our nation. Someday, all those loans will come due. Since the federal government is us, it means that you and I, our children and our grand-children will be responsible for paying off those loans. Given the sheer size of the problem, neither tax increases nor spending decreases alone will address the issue.

There likely will be tax increases, which means you and I will have less money in our pockets for our everyday expenses. There likely will be funding cuts as well; this will mean fewer federal grants to help agencies buy equipment. It will probably mean fewer criminals in prison and fewer probation officers watching them. Combined, this means officers will be taking home less money, working with older equipment and seeing more convicts on the street. That is an ugly combination; one that does not inspire politicians or citizens to tackle the problem. The longer the problem festers, the worse it gets, and the more drastic the solutions will have to be.

Government deficits are not imaginary figures; they are real; they are yours and mine and they have a real impact on us and our job. Ignoring the deficit problem does not make the problem go away; it only makes it bigger and more difficult to solve. You would not let your beat partner continue to spend himself into oblivion. Certainly, our nation deserves the same concern.

Be safe.