What ever happened to individuals taking care of themselves? What ever happened to leadership and accountability in America? It seems to have gone away…
I’m a big proponent of personal accountability and leadership accountability. One of the things I live by is the 10 Steps of Accountability. It really defines what accountability is, and where it is missed, and can help you pinpoint gaps that could hinder results.
Our leaders have been extremely unaccountable in recent years, and it is no wonder they are not getting the results they want. It is even less surprising that their leadership and role-modelling has led to a lack of accountability at all levels of individual personal finance. Here are some prime examples of financial unaccountability and how it translates to individual personal finance.
What is a Balanced Budget?
If Congress can’t balance a budget, no wonder millions of individual households can’t either. Congress hasn’t balanced a budget in over a decade, and this spending is just out of control. How do they fund it, through borrowing, of course! However, Congress has the easy power to earn more, which most Americans don’t. Congress has the power to tax to cover the bill. At some point, if they don’t get things in order, they will have to do just that – raise taxes.
Unlike millions of Americans, Congress can’t simply claim bankruptcy and wipe its debts clean. There is a lot more at stake, and it has a lot of options available to repay them, they just aren’t politically pleasant. Americans should look at this and think “Hey, I shouldn’t do this”, but that is not how leadership works. Congress needs to be a role model for American citizens on responsible budgeting. It is pretty much their only job in Washington!
When Insurance Becomes a Hand-Out
Unemployment insurance was originally designed to be a stop-gap to help people quickly through the transition to the next job. However, it has since become a guaranteed hand-out, and it lasts for almost 2 years! Were you surprised the unemployment rate dropped last week? I wasn’t. We are just passing the 2 year mark of extended unemployment benefits, so people have an incentive to get back to work now. It may be in lower paying jobs or different industries, but they are going back.
As an individual, when did it become okay to just accept money for doing nothing? I mean, hey, its a great perk, and I think there are people who truly need assistance, but is it right and fair? Is it being accountable to yourself and your family? I know if I lost my job today, I would take it. It is there to take. However, I also have a solid emergency fund, have networked with others, and have multiple income streams to help me get through any downturns. Essentially, I am trying to be prepared for the unexpected. Why don’t most American’s take this approach?
You Are Imposing On Me
A lot of people are irritated at ObamaCare, especially the mandatory insurance or be taxed portion. However, every time an uninsured individual goes to the doctor, they don’t pay, and I end up covering the cost in my bill. It makes my prices higher! I understand that people get sick and they can’t afford care. This may sound harsh, but should they be liable, and not me?
There are a lot of examples of this occurring – not just health care. Take Occupy Wall Street – it is costing millions, maybe even a billion dollars nationwide, to police, clean-up, and monitor their protests and rallies across the country. Who pays for that? The taxpayers! Since I’m a taxpayer, these individuals are imposing on me, and my personal finances. I like free speech, and they should voice their opinions, but they should also pay for their own security and clean-up costs. Not the cities they are protesting in. Once again, financial accountability.
Incentivizing Debt
Along with never balancing a budget, Congress loves Americans to spend more than they can afford. They do this by offering breaks to take out debt – mortgage interest deduction, student loan interest deduction, government-backed mortgages and student loans. All of these are areas where our country is getting into trouble on a personal finance level, but the government creates incentives to do it! We are having a mortgage meltdown, and we may have a student loan meltdown in the near future.
Why do people get into these things? Better yet, why do companies take the risk on letting people get into these things? Because there is no risk – the government backs it. It is a great business to be in because the people, and the banks; nobody has to be accountable to the end result. The government set up this unaccountable system!
Readers, what are your thoughts on personal finance and accountability? Should the users pay? If you can’t pay, what about debtors prison, like in the 1800s? Would that change the culture?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
Could you imagine the political fallout if a congressman sponsored a bill supporting a debtors prison! Their political career would be over in a heartbeat!
Then again, that’s part of the problem. Representatives consider the political implications of every decision. They vote based on if it will help them get re-elected. Who cares if the decision puts our country in the toilet?
I completely agree. Nobody will make tough decisions because it is all about getting re-elected. However, as a result, there is no accountability to the decisions people make and the outcomes they cause.
After reading this I decided to crunch some numbers and make these numbers more realistic to the average American. Understand these numbers are rough but they are close enough to get the point across. For every trillion the government spends I am comparing it to 10 thousand dollars the average American would spend. I will refer to the government from here on out as an American debtor.
The American debtor currently has $150,884.41 in debt. The debtor earns only $21,700 per year but, they spend $33,800 each year. If we split the $33,800 up into two categories current payments and leisure spending, (mandatory spending and discretionary spending) the American spends $20,100 and $13,700 respectively.
But imagine the American debtor actually being in debt 15.08 trillion dollars. Our nation is spending out of control. How long will it take for our government to realize that they also must be held financially accountable?
Actual numbers used to make calculations:in debt 15,088,441,787,408, income in FY 2010: 2.17 trillion mandatory spending: 2.01 trillion, discretionary spending: 1.37 trillion
Great call out with the numbers! Thanks for doing the math!
Total cost of the TARP and other “economic bailout” programs was recently pegged at $7 Trillion dollars. The FED was forced to release this information even though they publicly were stating total costs were closer to $2 Trillion. This is by far the largest taxpayer ripoff of all time. The roots of this problem go back to Glass-Steagall which was repealed in 1999 allowing commercial banks to affiliate with Investment Banks. Couple this with a Congress that continues to stifle regulation and enforcement (Congress ensures an ineffective SEC by limiting the ability to assess appropriate fines) and you have unchecked greed of epic proportions. Until you have real limits on campaign finance, you will continue to see political campaigns financed by big money in exchange for favorable legislative and regulatory environment. Wall Street Investment Bankers are very happy with the return on their campaign investments!
Remember that the $7 trillion figure is not the cost, but rather the total amount borrowed at the discount window. That number is very skewed because it is a sum, and not a measure of the daily outstanding total. The discount window exists to provide liquidity to banks to avoid a run like in the Great Depression. It ensures that banks always have capital to conduct business, and it is framed as a short term loan. You should also note that the interest charged on that $7 trillion was 0.01% average, which still equates to a gain of $70 million in interest payments to the government. The Fed has been profitable and has returned this interest to the government each year since TARP. So when judging the total loan program, you should include the gain/loss as well. I admit it may take a few more years before the total cost of any losses are fully realized since many parts of the programs were “loan guarantees” that may not realize gains/losses for a few more years.
I think you’ve got the right idea in this article, but sadly, your examples are really missing the point. I get frustrated when people play the “let’s blame the lazy poor people” game. Healthcare in the US is controlled by direct profit motivations. That is unfortunate for everyone involved, except C-level execs. Also, you’re mad that Occupy Wall Street is ruining the grass in front of City Hall and taxpayers have to pay for it? Well, protestors are taxpayers too and America is built on the foundation that the PEOPLE have a right to voice their concerns and bring about change in their government. I can’t remember the quote exactly, but they say a real democracy is always evidenced by how loudly its citizens complained about it. So let’s not all get complacent at once and accept the corporate fodder replicated here as true independent thought. Let’s hold ourselves accountable, yes, but let’s not pretend this country would be perfect if all those lazy bums would stop feeding at the trough of unemployment, hogging up the space in our hospitals, and occupying wall street.
You have a valid point that healthcare costs are probably inflated by profit motivation – to some extent. However, I will argue the point about OWS and it’s costs. I’m a firm believer in the First Amendment and the right to protest. And if grass was the only cost – who cares! However, the OWS cause has racked up a bill in excess of $5 million here in San Diego where I’m from, and I’m sure it is 10x that in New York, let alone all of the other cities that are dealing with it. Even if we assume every taxpayer foots the bill, based on population, I’m paying roughly $2.50 now for their cause which I completely don’t agree with. They could just as easily protest without continuing to erect structures that must be torn down, they could clean up after themselves and not live like a homeless encampment, and they could cover their own costs. Let’s see how long their protest would last if they had to pay for it like a convention would have to pay for their own event, or other protest events had to cover their costs. Think back to the Million Man March on Washington for Civil Rights. Those costs for speakers, broadcasting, etc, were covered by donations. Yes, the grass got messed up, but they got their point across loud and clear, and were accountable financially.
I would take issue that health care is controlled by profit. Health care is highly socialized, we don’t know what a fully private market for health care looks like because government controls 50% of the market, and strongly influences and regulates the other part. You could make a case perhaps that profit doesn’t belong in the current system if you wanted to socialize the rest of it. (I think that’s where we are headed).
Regarding poor people, the issue isn’t laziness but the problem is that their productivity isn’t high enough to fund the costs of education, health care, etc they consume. They should be accountable to pay more for health care and other services because it’s important. That’s what any normal thinking person would do, pay for the things that are important yourself before you ask others to pay for for them.
I really like that last line – pay for the things that are important for yourself before you ask others to pay for them. So true!
Robert, I think I get a little more where you are coming from on OWS. I support the cause more than you do, but I agree that if it wants to move forward, it will have to be more organized, and it will have to be funded with donations.
sfi, I think everyone in this country is held accountable for their medical costs that they incur–I guess you are referring to the amount which we reimburse the poor and elderly via programs like Medicare and Medicaid. The US gov’t has reduced the rates and amounts which are available to these programs, so the poor will pay more. But there is a problem- when those people don’t have the money to pay, the hospitals and private insurers incur even more losses, and then the people who have health insurance through their employers will witness what we have witnessed in 2000-2009, the steadily rising cost of health insurance (in California it was about 11% growth rate in costs per year in that period). So asking people to just keep paying more and more doesn’t make sense to me. And reducing programs instead of trying to fix them, reduce overhead, improve services also doesn’t make sense to me.
I know it’s not that simple but I also don’t believe in “starving the Beast” because education, social services and public works are what government should provide in a nation as strong as ours (economically, politically).
Your right in providing basic services. One of the problems with the government is that they are horrible in management – the incentives program management don’t line up with the goal (and it happens in both directions too!).
For example, many social programs are so budget constrained, that they provide no incentives for compliance checks. Section 8 Housing Assistance, for example, use to require mandatory check-ins yearly to verify program qualifications. Now, there is no budget for this, and the only qualification checks occur for complaints. I bet there are a lot of free-riders.
On the opposite site, when compliance is such a huge focus, the program doesn’t work successfully. Think mortgage modification. With so much oversight and detail required, the program didn’t help all the affected borrowers. There wasn’t enough incentive to do the program because the bureaucracy was too much.
There needs to be a strong balance between oversight and execution – honestly, there needs to be better program management and execution overall. Healthcare and education both fall into this. Pay for performance, allowing competition, both should reduce costs while enhancing quality.
I have paid my own way through most of my life, moved out of home at 16 and have travelled the world on my own dime. I got in big debt and I get myself straightened out. I am very happy with myself. However…… I am completely happy to cover peoples health who can’t afford it and grew up in UK where we are proud people can live without worry of getting treatment for their health. Provide a good base healthcare and it will promote entrepreneaurs to give it a go, will keep the poorer parts of society more fit to find jobs and work and a million other benefits… That is my take on the healthcare aspect.
I believe providing safety nets with incentive systems to make people be the best they can be is the best option. I also believe that Occupy has every right to be protected by the police and state for airing their grievances….
I think the gov needs some serious belt tightening, seriously half of congress are millionaires that does not represent the average person.
I know in USA I would be called a socialist but it’s quite a normal way of thinking where I come from in London, UK.
I think the USA suffers from a serious ideals clash, for example a republican claiming to be a liberal and getting upset about gov imposing on their lives and then at the same time trying to say people shouldn’t worship at a mosque because it’s too close to the 9/11 site…. A serious ideal clash.
I wish Obama would buck up and just push the republicans away OR Ron Paul gets in and makes some serious changes (I wouldn’t agree with those but I think a serious shake up would wake the country up again).
That’s my 5 cents :).
It’s a tough call – Republican’s have historically prided themselves on limited government, yet they have regulated individual social norms like no other. Democrats, on the other hand, have tried to help the “greater good” through social programs, but have made them entitlements versus help when in need.
I agree that providing a baseline could be helpful to society as a whole, but our government does such a poor job at managing programs it would inevitably end badly.