Living in Budget Deficit Conditions - What does it mean?

I remember late July 2011 - many unanswered questions on what was going to happen to our US economy.  Many words on raising the debt ceiling...threats to shutdown the federal government... 

Throughout the remainder of summer and early fall did it seem that we made it through those times and all is right with our US economy? Do you remember what happened then? Are you clear on our current national financial situation?

Let me recall and paint a "wide brushstroke" picture of what's going on today on this subject.

Managing Finances 101: Income vs Expenditures

Individually you and I have wages, tips and/or a salary as our source of income. For those of us that are blessed to be past the season of vocational labor have retirements or pension income. For those of us entitled, Social Security benefit payments serve as the source of income. Some of us have more than one of these income sources to cover our daily living expenses.

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We have payment obligations monthly that cover the cost of living which include, food, clothing and shelter costs, transportation and recreation costs, medicine and medical costs and payment on any debts that we may have. We all strive to maintain a position where our payment obligations are not more than the amount of money that we bring in monthly. As we prosper, we save and invest the extra income that we have after paying our bills and obligations. If these are not goals that you have, I speak these prophetically for you right now! Amen.

DEFINITION (a)

Deficit - 1. the property of being an amount by which something is less than expected or required 2. A deficiency in amount or quality

A budget deficit is the amount of money by which the spending is higher than the amount coming in for a selected period of time. Here's an example of a personal budget deficit.

If I earn $100 a week in wages and my bills and obligations are $150 a week, I'm operating in a $50 per week deficit in my personal finances. If this continues for an entire year with no additional income being generated nor any obligations being eliminated, I will more than likely have to borrow to meet my obligations or just not pay my bills. If I borrow, it would have to be on a credit card or some credit source that I currently have. In this financial situation other reputable loan options are scarce. I choose to pay my bills and obligations and use my credit card to make up the difference of what I owe and my income.

Here I am, using my credit card weekly to make up the difference between what I owe and what I have as income. I start with a credit card with a zero balance. I'm charging $50 weekly for a year (52 weeks) so my credit card has a balance of $2,650 at the end of the year. $2,650 is my budget deficit for the year. Since I don't have a way to begin paying off this amount it continues to grow weekly. There is also interest added to this because we know that credit card companies are not in the welfare business. Unless I do something different, this credit card balance will continue to grow.

To share more with you in this situation, throughout the year I made more obligations - some were needed car repairs, damage to a tree in my yard, traveling to unexpected family funerals) and some were because I wanted to (bought a new TV, went on a last minute trip with my friends, picked up a few of the "must have" fashions for the season). I also got an increase in my income (Thank you Lord!). The bottom line - my payment obligations are now $75 more than my weekly income so my credit card charges continue to go up. This is mentally exhausting... I just want to ignore it and act as if this is not happening. In this example, I do.

After continuing to charge on my credit card and not paying off the balance, eventually the card reached my agreed-upon credit limit. I cannot charge additional daily living items on my credit cardwithout going to the establishment that issued the card and asking them to increase my credit limit. To do this, I'd call the bank that issued the credit card and humbly request an increase to my credit limit. Increasing this limit is up to the bank. If they find me credit worth they will grant my request. If I'm considered one that may not be able to pay back the balance, they will not make the requested credit limit increase.

Let's use the principles in this scenario to outline what's happening in our federal government.

As a nation we also operate using income and expenditure principles. Our main federal government income sources are:

Federal income taxes from our paychecks

Social Security taxes from our paychecks

Corporate income taxes

Sales and property taxes that we pay

Excise Taxes (US Customs fees, gasoline taxes...)

Unemployment Insurance

Various business charges and fees

As we do individually, our nation also has payment obligations. Our governmental payments and expenditure categories include the following:

Government pensions and retirement benefits,

Health care programs including medicare and medicaid,

Education at all levels including all local public education programs

Defense including all departments of defense and veterans affairs

Welfare programs including family and children's services, unemployment, workman's compensation, housing and public welfare programs.

Our fiscal year (financial year) for our Federal Government is October 1 through September 30th. We ended our fiscal year 2011 on September 30th and we are now operating in fiscal year 2012.

To sum up fiscal year 2011, our federal income for the year was 2.6 trillion US dollars. Our payments and expenditures for fiscal 2011 were 3.8 trillion US dollars(b). From the time our 2011 federal budget was created, we expected to have an income shortfall and we did - in the amount of approximately 1.3 trillion US dollars for the year. To cover this shortfall, we are "borrowing" on a regular basis - just like the in my earlier credit card scenario.

Well, to go back, we've been operating our nation with a income shortfall when compared to the expenditures for many years. As a result, we've maxed out the amount of money that our United States Treasury can borrow. Our crisis in July was centered around the process of requesting an increase to our US debt ceiling - the maximum amount of debt that the US can carry. What transpired was that the US debt ceiling was raised and the Budget Control Act of 2011 was implemented. This act includes a plan for reducing the budget deficit (by increasing revenue or lowering payments) and allowing for additional debt ceiling increases in the near term.

Since March 1962, we've initiatied acts of Congress that has resulted in our US debt ceiling being raised a total of 74 times. This was not a new situation for the US. I describe it as a continuation of what can be considered a flawed normal operational procedure.

Take Away...

I pray that this information is helpful to you in understanding what is going on today in our world finances. As we operate in this world we are called to be salt of the earth and light of the world.

13 “You are the salt of the earth. But if the salt loses its saltiness, how can it be made salty again? It is no longer good for anything, except to be thrown out and trampled underfoot.
14 “You are the light of the world. A town built on a hill cannot be hidden. Matthew 5:13-14 NIV

As Christian believers, we are to be like salt, that can do many things including healing wounds. Our existing worldly ways of managing finances has caused wounds in our economy and no one seems to have a convincing plan of what we should do to make things better.

I am convinced that as we follow Christian biblical principles for managing money and possessions, each of us will be a witness to the world in the area of finances and to God be the glory! My future posts will include specifics on some key biblical principles and offer practical steps that we can take to begin to make a positive difference for us individually in the mist of the national financial turmoil that is going on around us.

If you personally are operating in a budget deficit in your finances, this is a call to recognize that situation and take the courage to begin making changes to eradicate this condition. Please know that there is is a way to turn this around. It won't be instant or easy but the result will be so liberating that you'll look back and appreciate the struggle. You will be so excited to be out of bondage that you will proudly stand up and reflect as you tel others about the situation you are in right now where today you are too ashamed to admit your current situation to yourself. I pray that the Lord speaks to you today and stirs up a passion in you to seek His word on this subject and begin operating in it. Let me know if that is you. I want to help in any way that I can!

Did this high level explanation help you in your understanding?
I'd love to get comments from you. Please take a moment to respond by posting a comment in the comment section that is directly below this reading.

Be blessed and stay tuned!

References
(a) 1. Dictionary Free by YouLoft Tech. Co., Ltd
2. Merriam-Webster.com
(b) Budget of the US Government FY 2011; www.gpoaccess.gov