Government Shutdown Hardships

A week ago CBS reported on IRS workers' problems that came from the shutdown. “After a month with no pay, real hardship does exist for IRS employees including not having the money needed to get back and forth to work or to pay for the child care necessary to return to work right now.” Even some cities have been struggling as spending and the related sales tax revenues decreased. There were many other reports from around the country about similar hardships: food, utility bills, transportation, credit card payments, rent, etc.

It’s sad to see about 800,000 Federal workers furloughed with no pay. Many were required to continue coming to work not knowing when they would next be paid. They would struggle until the dispute was settled and back pay arrived. I have no solution to propose to avoid shutdowns, but I know what should happen immediately upon the workers' return. All government workers should be given a class in personal finance.

Suze Orman is not the only one who has been advocating for many years that everyone have an emergency fund, but she gives familiar advice. Here from a 2015 article is a typical example. “Your long-term goal is to have eight months of living expenses set aside in your emergency fund. I know that’s a lot, but I want you and your loved ones to be okay if you were ever laid off, or sick for an extended period of time.” Other experts are more conservative, recommending 3 to 6 months. But still, that’s more than a few weeks.

Of course, no one has been listening. Unfortunately, government workers thrown into a panic, resorting to food banks after missing a single paycheck does not strike the public as unusual. An emergency fund of only $1000 would be a good start, but a Bankrate survey from 2018 showed “only 39 percent of survey respondents said they would be able to cover a $1,000 setback using their savings.” That leaves 61 percent of the entire population out in the cold – or going to a food bank – soon after losing a job.

Admittedly, losing their job is not usually on the minds of government workers. Their job security is enviable. However, there have been four shutdowns in the last six years, each with the potential to cause similar problems. Between that and the same chances of personal emergencies that they share with the rest of the population – auto accidents, illnesses, personal injuries, etc. – their lives overall are not that much different or more secure than the rest of us.

Critical thinking dictates a need to build an emergency fund. Discipline is required to stop living paycheck to paycheck in order to do that. Responsibility implies that hardships after only a month without pay gives them no right to play the victim. That status, however, is too convenient for politicians trying to shame the other side, trying to shift the focus away from their own inability to act like competent leaders or even like adults.

This is yet another crisis that can be laid at the feet of individual behavior. The news media has this same information, but don't expect them to report it that way. They are too busy pushing sob stories and manipulating our emotions to keep the ratings up, to ask what personal choices could have allowed those crises to be averted.

A Closer Look at Spending

Back in June I posted some graphs that I created based on data from the Federal Reserve Bank of St. Louis.  The point was that the government seems to have the same problems with discipline as many citizens. Their appetite exceeds their resources. They spend for today often without distinguishing between wants and needs while pushing the consequences to the future - sometimes referred to as kicking the can down the road. 

A close look at the numbers shows that moderate austerity should have been fairly easy and that following a more conservative pace would have left the country in a much better position. 

Last time I posted this message on a Friday, and it ran over a weekend.  I thought the information was important enough to show again.

   

My source was the Federal Reserve Bank of St. Louis website: quarterly government expenditures and receipts, seasonally adjusted from 1^st Quarter 1990 to 1^st Quarter 2018.

The first graph shows government expenditures.  There is an apparent acceleration in spending shortly after 2001. The slope changes noticeably. 

The next graph shows that the increased spending was real and sustained.  By taking the average quarterly increase for the 1990 to 2000 and applying it to the rest of the data, I showed (in red) what would happen if the spending had increased at only the same percentage rate.  It's still an increase but not nearly as steep. (The blue shows actual spending from the above graph, so the apparent increase was real!)

That's the spending story.  Now see what happens when we add government receipts (overlaid in green). There was a budget surplus in the late 1990s and even with the tax cuts of 2001, there would have been another from 2006 to mid-2008, had the spending not gotten out of hand.  And again around the 2013 - 2015 time frame any deficit would have been minimal.

Just like that new car or vacation we can't really afford, the new government programs seem to be too tempting to pass up. It seems painless because borrowed money today doesn't have to be paid back until later. But as we know from our personal experience the consequences are just around the corner. Unfortunately the decision makers may be long gone when any government consequences arrive. It will be our children and grandchildren left to pay the bill.  This shows a lack of discipline, perspective and responsibility 

Compassion and Quality

The problem with typical news stories is that they present a problem without any attempt to analyze or question underlying causes.  They introduce a problem, e.g., the government shutdown.  Then they try to make it personal by telling the story of one or two people who are affected by it.  Later they talk about how no one is working to solve the problem, leaving us feeling sad for the victim and personally helpless.  In the case of the government shutdown, an underlying intention seemed to be to get us even angrier at whomever we blamed for the situation.  This approach never solves anything.  The only way to get to a workable solution is to apply critical thinking, but reporters let us down, instead getting us emotionally involved, playing on our pity, our fear, or our morbid curiosity,  just to sell us their news along with their personal biases.

Sometimes we are expected to feel compassion for a victim based on a brief description of the situation.  We then feel duty-bound to demand action that relieves the victim of the pain, sorrow or inconvenience.  Compassion is defined as a “feeling of deep sympathy and sorrow for another who is stricken by misfortune, accompanied by a strong desire to alleviate the suffering” (Dictionary.com).  The focus on merely bailing out victims is what I referred to last time as dealing with the symptoms; without analysis problems don’t get fixed.

An example of such analysis would be the five whys technique used in industrial quality programs.  The process involves asking why multiple times instead of accepting the problem at face value.  Asking why “helps you to get to the root of a problem quickly. Made popular in the 1970s by the Toyota Production System, the 5 Whys strategy involves looking at any problem and asking: 'Why?' and 'What caused this problem?'"  In society we must also ask questions before reacting.

During the government shutdown, no one asked the furloughed workers, why they were not prepared, given the recent track record of the government and the doom-and-gloom news coverage leading up to it.  Haven’t we been badgered by self-help books and financial planners for years about the need to have six-months savings for just such emergencies?  Yet news articles portrayed them as being one step away from financial ruin when a single check was delayed.  In a related story we hear of a young mother, whose access to baby formula for a 4-month-old may be cut off.  They don’t ask why she is not breastfeeding her baby.  Later we find out that she is an unemployed single mother of three.  This leads to a whole host of other “whys” having nothing to do with government funding, but with individual choices.  One is more of a “where,” as in, where is the father’s financial contribution?

In another story unrelated to the shutdown but similarly lacking details, we learn that Chase Bank is discontinuing their Payment Protector plan.  One of the people affected will be a 95-year-old woman who signed up for the plan “around 2007 and paid less than one percent of her credit card balance as a monthly fee.”  The program provides a benefit similar to term life insurance that would pay up to $25,000 of her $38,000 credit card debt upon her death.  She is portrayed as a victim because when the plan expires at the end of May 2014 (after a 12-month notice), she and her estate will become responsible for her debt.  Is there something wrong with a person of any age accumulating a debt and then being responsible for the payment of that debt?  Has she become a victim because a program she freely signed up for is being (legally) discontinued leaving her once again responsible for her full debt?  Why do she and her son think she should not have to pay her credit card debts?  It seems the LA Times and ABC chose this most extreme example purely to stir up an emotional response, to muster sympathy for yet another victim without ever asking these simple questions.  But why consider personal responsibility, when we can blame the big, bad bank for victimizing a 95-year-old?

When called upon to show knee-jerk compassion, I think we must step back and wonder about circumstances.  Were the so-called victims “stricken by misfortune,” as the definition says, or are they experiencing the consequences of earlier, unwise behavior?  Don’t ask me to walk a mile in your shoes, if you have spent your time filling them with pebbles.  In other words, is it compassionate to temporarily alleviate the suffering of others if the suffering was caused by their own bad habits or poor decisions?  Does that ever fix the problem?  How long will we allow ourselves to be emotionally manipulated by the media and politicians in the name of compassion? 

 In some cases the real motive may not be compassion at all, but a disguised sense of superiority, a feeling that we are OK and can take care of ourselves while others can’t make it without our assistance.  We are urged to consider the plight of the weak, the poor, the elderly, without analysis, then expected to demand that someone step in to relieve their symptoms while the underlying problems continue to worsen.