Living within our means.

We all run households, and we know that the first rule is to make sure that the money you spend each month is no more than the money you bring in each month.

There are of course times when all of us use credit cards, and there may be a few times when you don’t pay the full balance off at the end of the month. But if you find yourself using the credit card continually to run up debts that you have no way of paying you know you have an issue that must be solved.

So there are two very simple rules when running a household:

1. First do whenever you need to do to make sure that your bills are no more than your income (eg. noodles for dinner, drink water and not the fizzy stuff, hold off on the new telly or holiday, and cancel the cleaner and the gardener if you have to).

2. Don’t run up credit, and if you have due to a tough time, stop running up any new debt and work out how to pay of the credit card bills as soon as possible (never just pay the minimum balance, put the cards away and don’t use them if you can’t afford to pay for them)

We all know these ideas. It’s quite basic. So how come businesess and (even worse) the government don’t seem to be able to grasp these rules.

Were hearing a huge amount about reducing the deficit, and were hearing all kinds of stories about fiscal cliffs, but I’m not hearing anything that makes much sense.

There are a million great ways to reduce the amount of money being spent to do the critical things without actually cutting those critical things, but of course if you spend less on stuff then some businesses will get less income (or government departments will lose employees). So there are continual fights between factions over which bits to cut, and it comes down not to the most practical solutions, but which businesses fight best for their corner of the pot of government cash.

We hear a lot about funding for education (for example), but instead of getting the bureaucrats out of education, government comes up with even more regulation continually, and ideas such as “for-profit” education.

For-profit education doesn’t hire better teachers, actually most for-profit systems pay teachers less, and require less professional teacher training. So the end result will always be poorer.

Teachers get paid crap to be teachers, they do it because they really want to.

So how about this for an idea, keep schools not-for-profit and let the teachers teach, remove 90% of the regulation and the overhead that goes with it.

This will reduce costs and maximize the quality of education for the kids, and surely that’s the goal.

Across every government run or supported function there are simple, practical ways to reduce waste and at the same time increase value.

And there are some government functions that are no longer needed. Do you know that the US government still funds a department of rural electrification. 100% of the US has electricity, but there is still money put aside every year to do more.

There are ways of managing the budget, so that the cost does not exceed the income. Doing these things can balance the books.

And there are things that can be done to encourage companies to invest in America. Tax is a great way to incentivize businesses and people to do the right thing. If jobs are brought back to America and businesses actively invest their profits in creating new business, there can be reductions in tax to reward this behavior, and conversely when companies and people choose not to invest their profit in things that increase the economy then they can be made to feel a greater tax burden.

Taxation that is aligned to the strategic goals of job creation and capital investment can go a long way to improving the economy.

So firstly balance the books and stop borrowing money, and then secondly drive up the economy to increase the overall revenue (and hence the collected taxes) to pay down on the debt.

There are no easy options, but you will notice I haven’t mentioned massive tax cuts as a way of driving up the economy. Taxation needs to encourage the right behavior.

If people do the right things, create new businesses in their home country and actively reinvest wealth in innovation, manufacturing and distribution, then the economy will grow. Reward the right actions and punish the wrong actions, that’s when taxation works best.

This is not a partisan issue, everyone knows the rules, so government (all of you) wise up and act like sane members of the human household.


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