Tuesday, January 26, 2010

U.S. Debt


Obama is set to propose a discretionary spending freeze. The problem is that discretionary spending is far and away a smaller section of the federal budget than most people realize.

Think of it this way, Medicare, Social Security, Debt servicing and other mandatory spending are like your mortgage, insurance, utilities, loan/credit card bills, and grocery bill, you simply cannot live without those expenditures nor can you simply stop spending on those items without serious consequences.

Thus, these are not discretionary--they are mandatory spending. Your discretionary spending might be entertainment, dining out, clothing, etc. You can freeze those things and either decrease or stop that spending all together.

For the U.S., the problem is a bit more difficult, because a spending freeze means--at the very least--a pay freeze for most government workers. That also means possible layoffs by the government--adding to the unemployment problem.

Interesting, huh.

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