Wise and prudent individuals and families set aside some portion of their assets just in case some unexpected event—e.g., medical expenses, car or appliance problems, home repairs, etc.—needs to be addressed. And even those who live paycheck to paycheck may try to limit their current expenses so they can borrow money or use a credit card when needed.
Most states do the same thing, but not Congress and the White House. Washington spends every cent it takes in and borrows the rest.
According to the U.S. Treasury Department, the federal government spent $5.5 trillion in FY2023 (the government’s fiscal year runs from Oct. 1-Sept. 30). That’s down slightly from the $6.27 trillion it spent in FY2022.
The problem is the federal government only took in $3.97 trillion in 2023, leaving a $1.53 trillion deficit. In other words, Washington spent 40 percent more than it received.
We wish we could say that only Democrats were behind the spending spree. But while Republicans talk fiscal responsibility, most of them don’t vote that way, even when they have controlled the White House and both houses of Congress. President Trump proved to be nearly as big a spender as President Obama.
Most states are different. Forty-eight states have created a “rainy day fund.” (Note: Colorado and Illinois do not have a rainy day fund as defined by the Pew Charitable Trusts, even though surveys by the National Association of State Budget Officers claim the two states have rainy day balances.)
The Tax Policy Center reported last month that state rainy day fund balances have reached an all-time high. Even so, several states have very low balances, and you likely won’t be surprised at the slackers—New York, New Jersey, Illinois, Washington, Hawaii and Montana.
On average, state rainy day fund balances equal 15.4 percent of state spending, but the six slakers’ balances equal less than 5 percent. Twelve states have rainy day funds between 15 percent and 25 percent of state spending. And five have rainy day funds over 25 percent of spending.
Even though many of the states with a rainy day fund cannot be considered “wise and prudent” in their spending, they still have at least some funds to fall back on in case of emergencies.
Not so in Washington. When emergencies arise—e.g., damaging weather events, the need to come to the aid of our allies, etc.—Congress’s only option is to borrow even more money.
The fact that states can balance their budgets—even though they sometimes use accounting gimmicks to do it—and can still set money aside says something about them. The fact that Washington can’t do it, says something about it too.
October 10, 2023