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Lost in the stupid, yes stupid, handwringing about the sequester is a simple bit of personal perspective. No, this is not an analytic point, but it should nonetheless appeal to the folks who are fueled by narrative and emotion.

Think of the following. Can you even tell me how much you spent, yourself or your entire family, over the entire course of the previous 12 months? I doubt you can. In fact I am sure you cannot since you have no idea how much in taxes you actually paid, and probably not even after you file your tax return do you “really” know. But suppose I grant you that you do know that, perhaps, you spent a total of $50,000.

Could you tell anyone how much you spent on each category of expenditure last year? Break it out by major expenditures if you wish. Food, medical, clothing, housing, transportation, entertainment, illegal activities, etc. Can you? Could you get within 5% of the correct amount you spent last year on particular items (so that in aggregate you are off by no more than $2500)? I would be the ranch that you could not come close.

I, for example, cannot even get within 10% of telling you what I spent my money on last week. If you cannot do this, then on what grounds are you claiming that the end of the world will result if spending fell by 5%? And remember folks this ain’t a 5% “cut” as you think of a cut. And remember, we are prodded by the behavioralists that we all don’t save enough, so wipe that lesson out for today too.

2 Responses to “Lost in the Sequester”

  1. Harry says:

    When you run your own business, writing the checks that affect your own income, you know what the overhead is, including the tax deposit amount for FICA and Medicare, plus the phone bill and the heating bill, within fifty dollars each month. I could do that in my head, and did it all the time.

    Manage two businesses simultaneously, and you can keep it all straight, your attention on what goes in, and what goes out. This necessitates paying attention to cash in the bank, and perhaps, if you have credit, not sending three hundred billion to California state employees, which the King did, for the benefit of his subjects.

    Because I was blessed with a good education, not necessarily from the state, I can do math in my head, rounding and using times tables. This skill helps me read financial statements easily, without benefit of a calculator.

    Every month, for not just the past six months, our government has been creating eighty billion dollars per month, in the hope that they will drive up demand for houses. Thus the dollar , which once was tied to gold, is now a dollar tied to the employment of construction workers, and to an index of employment in general. So, unless we see a decline in the unemployment rate, a lagging indicator, we are going to keep on printing money by a trillion per year.

    I can do that calculation in my head, too.

  2. Michael says:

    I’m a bit confused on this one. I keep fairly close track of gross and net income, (although we can discuss wether or not not employer’s portion of SSI and the like are part of my income not even seen on the gross), so I know that ~20% is gone from each paycheck before I see it (I do have more precise numbers for last year, although waiting for things to settle in from the tax increase this year). But because things are tight for us, I follow the spending fairly closely at different levels (what I spend, what the bank sees going in and out including interest, retirement and health savings accounts, etc.). It was kind of scary how close my actual numbers were when I was trying to determine a budget off of gross numbers for a job I hadn’t started yet (I think I predicted my half-month net income within $10). I will admit that when I was single, I had a much rougher budget that wouldn’t track pennies, but am I missing something?

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