Again, I’m no political science fanatic, and I know that I come into this whole issue with the bias of self-sufficiency being a good thing. But here we go.
We don’t need to raise the minimum wage. I talked about the definition of the living wage being a problem in my last post, and the same principle applies on a much broader scale. Budgeting is key to keeping money where you want it, and I’ll explain how a better national budget could help us solve the minimum wage “crisis”.
Part 1: John and his credit card debt
John (names have been changed to protect the innocent) had a spending problem. But he didn’t see that. He had a credit card to pay off his credit card that he used to pay off his house and auto payments. He was behind in his payments and was incurring fines and deeper debt. He wasn’t worried at first, because as long as he had a card to pay off the other card, he had no deficit. He was about to miss a payment one month because he’d maxed his spending on both cards, so he decided to get another credit card to pay off the card that he was using to pay off the card that he used to pay his bills. John’s mind was on the deficit, not the debt. That’s why he didn’t realize that he was actually $250,000 in debt. This is how people end up with 5 cards and a financial intervention.
Part 2: Alice and her credit card debt
Alice had a spending problem like John did. She had a credit card to pay off two cards that were being used to pay for a house, food, cars, etc. Alice decided that debt was a bad thing, and drew up a plan to get out of debt. (Bear in mind, I’m not saying that debt is a bad thing. This was Alice.) She got her family together and explained the plan to get out of debt, and that it would require a bit of sacrifice. Her son was in marching band, which was expensive. She told him that she could only pay for half of it now, and that he would have to pay for the other half. He got a job at McDonald’s to compensate (oooh classy). Her daughter was fashion savvy and always needed the newest pants, shoes, and jewelry. Alice explained that she would buy birthday and Christmas gifts for the kids, but any other spending needed to come out of the kids’ budgets. And the kids needed to get a job to make money. No more allowance unless you’re under 15 and can’t get a job. She stopped buying name brand foods and clothing. Alice was able to cut 400 dollars of spending out of her monthly budget! She took those 400 dollars that she normally would have spent and set them aside. Provided no emergencies came up, she used that $400 to pay off an extra month of her credit card bill. Over time, one card had a total of zero spending debt, so she got rid of it and managed to drop a few fees and interest payments. She kept up the extra payments and within a few years, she was no longer using her credit cards. She could put that 400 dollars towards her home and car payments! Within a few more years, her car was paid off and she was setting aside another $200 monthly. Her house was totally paid off within 10 years. With money that she had the whole time.
Part 3: America and her credit card debt
The United States of America had a spending problem, like John and Alice. America made 2.774 trillion dollars in 2012 and spent 3.454 trillion in 2013. Let’s break this down into numbers that make more sense. America spends 20% more than she makes. So if she earns $30,000 a year, she spends $36,000 a year. Where’s that extra 20% coming from? Where did she get those $6,000? That’s right, the credit card. She just calls it a debt ceiling instead. She does have a portion of her budget set aside to pay off the debt, though. Unfortunately, it’s only 6% of the budget.
So out of the “30k” that she makes, she spends “$1,800” on the debt. That still leaves her with $4,200 of unpaid, accumulating, not-going-away-on-its-own debt if we follow the spending trend. It’s like paying 6 dollars on a 20 dollar bill…and then getting a credit card to pay for the rest. But with 17 trillion dollars in debt, America has roughly 3.5 billion credit cards at a rough estimate of a $5,000 spending limit on each card. And she keeps getting new cards every year! WE VOTE FOR THAT.
The real spending problem stems from two basic issues. America doesn’t understand the difference between debt and deficit. She believes that if she can get another credit card to pay off the debts, that the deficit goes away. This is true, because she can keep using the borrowed money to keep the deficit low. This was John’s problem. Using your credit cards to pay off your credit cards does make the deficit go away, but it doesn’t make the debt go away. The real lack of money continues to grow worse every day.
The other problem is that America doesn’t want to stop spending. She believes that it’s necessary to have PBS, paid workers at every park and monument, and a Panda Cam. She has 500 billion dollars in discretionary spending and is unwilling to drop any of her metaphorical 2,000 channels, whether or not she watches them. Don’t get me wrong, I’m glad the government builds roads and helps old people and schools. I’m not saying that spending is bad. I’m just saying that if you consistently spend 20% more than you make, you either need to make more money (by taxing the people more) or cut your spending by about 20%, hopefully more.
So what does this have to do with the minimum wage?
If the government can get to the point where it only spends the money it has, then America’s money will be worth more. Alice got out of debt, and suddenly, her paycheck was not divided between 3 credit cards. She paid off her bills, and suddenly had spending money. When the government has spending money (and I mean real money, not credit card money), they can afford to sell things to the people at a lower price. The cost of living goes down, the standard of living goes up. The minimum wage becomes enough.
If your landlord is in debt, your apartment will cost more. If he has extra money floating around, he can come fix the oven, the sink, the bathtub, etc. and it won’t cost you a dime.
Don’t #RaiseTheWage, lower the debt.