Thursday, November 11, 2010

Cut debts by cutting spending

Responsible individuals do not borrow unnecessarily. They live within their means. If their income is small, then they also have modest spending. When their income increase, spending also increase but not so much on the same magniture or percentage, there is always allowance to save for the rainy days, or for investments. Only in cases of unexpected emergencies like a member of a family is seriously ill, or for some projected good business investments, will they turn to borrowing money from other people.

Irresponsible individuals do not behave this way. They live beyond their means, they spend and spend, eat and eat, borrow and borrow to keep up with their high spending relative to their income. Often they do not pay their debt to other people, they simply lose their integrity, something that they do not care anyway.

Irresponsible governments behave similarly like irresponsible individuals. They spend and spend, borrow and borrow. But unlike individeuals though, governments have huge coercive powers, especially the power of taxation. Thus, governments have endless source of regular revenues even if some of them are among the most corrupt governments in the world.

But irresponsible governments also irritate their citizens. Coercion and plenty of taxation begets dissatisfaction. The dissatisfied people wish that their governments would cut spending to reduce the ever-rising public debt, which affects the citizens in the form of rising interest payment and lower budget for productive programs like maintaining peace and order in society.

In a BBC-sposored survey of 22,000+ people from 22 countries, from June to September 2010, respondents were asked what kind of policy measures governments should do to reduce their budget deficit and public debt.

Majority of the respondents favored "cut public services", especially those from France, Spain, Germany, Brazil, US, Pakistan and China. Graph source is The Economist. Click on the graph to see a larger image.

The welfare system looks cute and attractive. But the taxes, fees and borrowings to maintain the system is not cute and not attractive to many citizens. Hence, that result.

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