Viewing national debt as a family budget

Why is the America’s national debt so high? A recent article presented an excellent graphic using a family budget to show the national debt as “credit card” debt, something we all can relate to. This visual explanation makes it easy to understand that as a county we overspend with little attempt to manage our money and reduce our spending

Anyone with a credit card can easily spend more than they can pay off each month. As the debt increases, paying the balance gets more and more difficult. Consumers cry, “It’s those evil credit card companies.”

However, the problem is not the credit card. The problem is not keeping track of all the different forms of spending available to us today.

What happens when people spend the same dollar using a credit card, a check, a debit card, or through electronic fund transfer? That one dollar purchase spent using four different cashless methods quickly becomes a four-dollar expenditure that must be subtracted from the account balance.

Now imagine that scheme on a national level. We know that political agendas influence much of our government spending, but the core of the problem is spending without accountability.

Spending each dollar only once is a lesson entirely lost on the most determined non-cash spender of all–our government. Not only does Uncle Sam spend money without the left hand knowing what the right hand is doing, Uncle Sam conveniently forgets to balance the checkbook.

This is not new behavior. Our benevolent uncle discovered the power of distributing invisible money to its citizens more than 70 years ago, long before the first Baby Boomer was born!

The first Social Security payment was not cash; it was a check dated January 31, 1940, check number 00-000-001. Given that unemployment insurance started around the same time, it’s a good bet that Uncle Sam pulled out the checkbook again. Medicare and Medicaid started in the mid-1960s, sending even more checks flying out of the U.S. Treasury.

As individuals, we spend less and less cash, yet are deeper and deeper in debt. As a government we spend without any constrains at all. Is there a correlation?

In my opinion, our collective mental money skills haven’t kept pace with the new cashless methods to spend (and receive) money. We continue think of money in terms of cash spending when in fact technology has drastically changed the look and behavior of money.

As individuals, we’re too far down the road with computer and electronic money technology to reverse our increasing trend to more cashless transactions. What we need is a time out where we sit down and start to manage money as a number.

As the author of, The No-Cash Allowance, I’ve spent more than 40 years observing how money has changed over the years. My parents started their marriage cash-only. My household now uses less than 1% cash. Yet for many, the convenience of being able to spend money without using cash is truly a double-edged sword.

As a society, we can learn new money management skills. As parents, we can help our kids learn new money management skills. As citizens, we can pressure our government to do the same. And sincerely hope they do.

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