The Federal Government has operated without a formally approved annual budget for the last fourteen years.  Let that sink in.  While households and businesses across America create budgets and operate within them, the biggest spending machine in the history of the world does not even have the courage or the discipline to establish an annual budget, much less to operate within one.

So how does a massive central government operate without a formal budget?  Simple.  When it runs out of money to spend, it passes “continuing resolutions”, which are short-term authorizations to continue funding ongoing operations or to fund new programs.  These short-term authorizations are without reference to any approved budget, and they frequently require additional borrowing to execute.

Is that bad?  Is it wrong for a powerful entity that spends trillions of our dollars every year to operate without a firm financial plan, or to operate without being constrained by any budget?

Here are a few reasons why it’s bad.

Since the last formal annual budget was approved by the Federal Government in 2008, the total federal debt has grown by $20 trillion dollars (from $12T to $32T).  This is partly because when there is no budget, there is no discipline or accountability.  Putting put this into perspective, the average household size in America is 2.5 persons.  With a total Federal debt of $32 trillion dollars, that means each household in America owes $250,000 thanks to the Feds.  What a wonderful legacy to leave your offspring or heirs!

Okay, so we’re dumping this problem onto the next generation for them to solve.  But it is still bad for everyone in the country today.  That’s because when the Federal Government runs a deficit, it must borrow the money to cover the shortfall.  Sometimes it borrows money by issuing treasury bills that people buy as a personal loan to the government.  When it can’t sell enough of those, it borrows the money from the Federal Reserve who prints it out of thin air.  By now, it should be obvious to everyone what happens then:  inflation.  The prices of everything go up because more money is sloshing around in the economy.  But that’s only a problem if you must buy something.

Okay, so you’ve dumped the federal debt on your kids, and you’ve decided not to buy anything to avoid the inflation problem.  Are you in the clear from this disaster now?  Not if you plan on retiring.  One of the other ways that the Federal Government covers its deficits is to borrow money from the Social Security Trust Fund.   Currently, it has borrowed almost $3 trillion from our Social Security kitty.  This means that the Trust Fund has very little money at its disposal because most of its “savings” have been loaned to the general fund of the Federal Government.  As the Baby Boomers retire, the Trust Fund will need to get its money back from the Federal Government.  But wait a minute!  The Federal Government spent it!   What’s going to happen when the Trust Fund really needs its money?  Is the Federal Government going to print more money and cause more inflation?  Is it going to raise taxes so that you can be taxed twice for the retirement savings you thought you were already taxed once for?   Is it going to cut Social Security benefits for everyone? 

Okay, so you’ve dumped the national debt on your kids, you’ve stopped buying things, and you’ve decided not to retire.  Are you in the clear from this disaster now?  Not yet, because you must consider what the Federal Government is actually spending its money on.  If they were spending it making cars, growing food, and pumping oil, you might not notice a problem.  But that’s not what most of the money is spent on.  It often spends its money on things that are useless to average consumers but probably very helpful to the Elites.  Why is that a problem?  Perhaps you have noticed empty shelves in the stores, or long waits for service everywhere, or “help wanted” signs in front of every business, or frazzled workers who are desperately tired trying to fulfill everyone’s needs while every business is shorthanded.   These things happen because the Federal Government and the Elites who orbit around it are sucking up increasing amounts of workers and resources, leaving the private sector that common people live in high and dry.

So, if you’re comfortable dumping this mess on your kids, and if you can get by without buying any high-priced items (like a house), and if you don’t need to retire, and if you can survive without everyday goods and services that are in short supply, then there’s nothing to worry about regarding how the Federal Government manages its finances.

But for the rest of us (which I’m pretty sure is every man, woman, and child who are not among the Elites of the country), this elephant in the room is a massive problem. 

The good news is that what can’t go on forever won’t go on forever.  The bad news is that this disaster may end very badly.  For all of us.