When contemplating the way life goes, it often occurs to one that life is a constant process of choices: choosing a lifestyle, a partner, a place to live, a menu at a restaurant, new clothes, a new car, etc., is essential and inevitable for a conscious existence. People’s choices are often determined not only by personal preferences, but also by the amount of resources available to satisfy one’s needs or desires. Not necessarily does one choose the best and most preferable, but one often fixes upon an alternative which is more affordable, even if other choices may seem to be more attractive and advantageous.
As human beings possess an insatiable thirst for knowledge, which would explain the reasons standing behind everyday choices and the consequences of the latter, a science has been created, which focuses inter alia on the way people could make most rational choices under circumstances provided. Economics attempts to evaluate and analyze a given situation and data relating to it carefully and meticulously, so that the best possible choice can be performed. However, the obstacle often standing in one’s way to efficient choice-making decisions is the fact that the means available for realizing one’s choice are not enough —they are scarce. Scarcity is the factor that frequently results in economically unreasonable choices, as under the conditions of modern society — which is increasingly becoming more and more consuming and exploitative — people, businesses and even states are forced to take rapid and hasty decisions which are far from being optional and lead to erratic and erroneous policy.
It is beyond doubt that a successful financial situation is in the course of time determined by the skillful planning of one’s expenses, that is, by budget planning. Budget controlling is performed by any conscious being in this world: plants in the desert reserve water in their cells for the drought period; animals make food and fat supplies for cold winters; and even little children take pains to calculate the ways they should spend their weekly pocket money. Exactly the same process is observed on multiple levels of economic society: starting from individual or a household economy system, which are the simplest ones, and up to the highest forms of economic organizations like national economy or global concerns and corporations.
Planning a national budget is not the easiest task to fulfill. Annually, governments all over the world undertake a meticulous projecting of their countries’ expenses, basing on the data of the current financial status and the forecasted financial events of the nearest future. Even though planning is conducted by top-level specialists, at the end of each financial year budgets often end up with a deficit, which is nearly inevitable due to overall complexity of economy and a bunch of unpredictable factors like natural disasters, wars and economic uncertainties.
Unfortunately, the U.S. federal budget is no exception to this, and the reason for it may be seen, inter alia, in the fact that for years the U.S. government has been driven by a desire to reduce taxes while the overall expenditures were increasing as a result of natural disasters and wars. In terms of social wellbeing of the state this has had as consequences, firstly, the inability to perform adequate funding of such major social programs as Medicare, Medicaid and Social Security, and secondly —resulting from the first — the obvious slant of national spending towards spheres of military character.
The economic success of the United States during the 1990s converted into financial decline of the early 21st century, which can be explained inter alia by such events as the terrorist attack of September 11, 2001, the wars in Afghanistan and Iraq and August 2005 Hurricane Katrina. To a certain extent, the aforementioned events (especially the wars of elements) were unpredictable and thus it was quite impossible to avoid the expenditures connected with response to their aftermath. However, those unforeseen circumstances are not the only ones to be proclaimed accountable for the instability and deficit of the US federal budget. Economic scarcity and the necessity of choice when managing the budget constitute another stumbling block on the way to successful budget planning. With the needs of the nation constantly increasing and the necessity of a higher state income mounting, the citizens are still unwilling to recognize the simple truth that such a state of affairs also requires an advance in taxes. Therefore, to satisfy public opinion, politicians are forced to take populist decisions based on the present-day needs and bearing grave consequences for the future.
The difficulties encountered nowadays by President Obama’s administration have been incurred by the situation of the world economic crisis and require careful and balanced action for their resolution. Whatever the current policy may be, the US federal budget still remains in deficit due to the effects of scarcity and choice, and that is caused by several factors, two of which appear sensible to be discussed. Firstly, under the crisis circumstances a vast amount of enterprises are obtaining national aid for their businesses to keep them going, which is not always financially reasonable and often leads to mere waste of public money. This can be illustrated by the situation with American International Group, an insurance company which obtained governmental aid four times within half a year, consequently voicing a report where the actual financial state of business was became public and claims were made as for the reasonableness of governmental funding: “The program was designed to retain employees for an ongoing business operation with no knowledge of the financial situation we’re in today” (Globe Wire Services 2009). The governmental choice to support the scarce senior corporate staff in order to keep AIG going has turned out to be erroneous, as the so much relied-on personnel has nearly brought the company to a bankruptcy. This is not the only example: the majority of companies suffering crisis have been offering high financial rewards to their senior staff members, and from here stems the scarcity-and-choice situation which leads to budget deficit: a wise governmental choice when distributing national subsidies to companies is hampered by conditions of scarcity of the senior corporate staff unwilling to give up their multiple financial privileges even during a crisis period.
Another overbalance in the US budget appears to be in the sphere of military spending, which is defined by specialists as an “area where substantial budget reductions would have the doubly beneficial effect of cutting the deficit and diminishing expenditures that often do more harm than good” as it would help to close the gaps in the budget without substantially lowering the level of defense against an enemy which is not clearly defined (Frank 2009). Calling the military sphere an “area where our spending has been the most irresponsible and has produced the least good for the dollars expended”, Frank (2009) urges to reduce the military budget in order to improve the quality of life for citizens of the United States.
Reflecting upon all the aforementioned, one arrives at the conclusion that in each specific situation budget prognostication and planning constitutes a laborious task, which is complicated by the unpredictability of domestic and international financial situations. Scarcity of resources and often scarcity of decision-making time push politicians to hasty choices which may seem advantageous on a short-term scheme, but in the long run bear the threat of getting the state into financial trouble.
References
Frank, B. (2009). Cut the military budget—II. The Nation, Web.
Globe Wire Services. (2009). AIG staff called to explain bonus. The Boston Globe. Web.