A Sound Economy Starts with the Individual

In the wake of the President’s most recent State of the Union address that promoted several new federal programs, a few Utah citizens have responded with the creation of Financial Ready Utah—a non-profit organization headed by the Utah Association of Certified Public Accountants. As the Deseret News recently wrote, Financial Ready Utah has researched and endorsed four bills that specifically address a preparedness plan for Utah’s state budget in the following areas:

• Create a federal funds commission to identify ways to reduce dependency on federal spending.
• Establish a process to account for the potential loss of federal funds in Utah’s budgeting process.
• Provide transparency into all federal funds flowing into the state, including all political subdivisions.
• Establish the framework to build up additional “rainy day” funds to mitigate the risk of a sudden collapse in spending.

The Libertas Institute is very interested in seeing these bills move forward, and we support the general concepts they address.

However, there is something interesting to ponder concerning why these pieces of legislation even need to exist. As the same Deseret News editorial mentioned above also states:

States have ceded much of their authority and autonomy to the federal government over the last forty years. They have done so by following the siren song of easy money. For decades there seemed to be no end to the federal government’s generosity. States eagerly adopted new federal programs, applied for new federal grants, advocated for federal subsidies for health care, education, welfare, disaster relief and dozens of other things. Cities, counties and political subdivisions got in on the act, hiring their own lobbyists to get their fair share of the free money. Our mindset changed as people and we began to measure the success of our politicians based on their ability to “bring home the bacon.” Few stopped to count the cost. As states, we are now addicted to federal spending. Sometimes the only way to get your hand out of a trap is to let go of the cheese.

If Utahns are honest with themselves, this is a sobering critique of the prevailing “conservative” attitude towards government. The Deseret News editorial says that the “states have ceded,” and while the states are the political entities that have accepted the federal money, the truth is that it is the citizens of these states who have accepted this federal money and have ceded their own authority. It is not the State’s fault, it is the people’s fault. It is our fault.

Individual liberty encompasses a host of political issues that also include economic liberty. “Liberty” is defined in many ways, as both a positive and negative claim. For the purposes of this article, liberty is defined as our moral and just claim to pursuing our ultimate motivation to action—happiness. Man has an inherent right and is at liberty to express himself economically (i.e. to find happiness in economic prosperity), yet Utah has demonstrated that its citizens—by sucking from the federal teat—have actually decreased their individual political, civic, and economic liberty in the process.

Within the last few years, Utah has been recognized by Forbes Magazine as the “best in the nation for debt management,” but what most people do not realize is that none of these honors or awards are based on absolutes. In fact, while we do lead in some areas, we are actually rated on a curve.

While there is definitely an awakening and a return to the more fundamentally conservative ideal of saving, we are still a long ways off from our goal of reducing the government to its proper size and scope. For the government to become more financially principled, the people must first follow principles in their own individual lives. That is what makes another Deseret News article “Why people do not save more, and how to change that” particularly disturbing, as it shows that our society is still more interested in spending than it is in saving. It reads:

Spending does not beget wealth. Sixty percent of workers say the total value of their household savings and investments (not counting their home) is less than $25,000, according to a study by the Employee Benefit Research Institute…

People do not have enough in savings to weather the common emergencies that life throws them. A study by Doorways to Dreams of families with $20,000-$60,000 in annual income found that 62 percent of households experienced at least one financial shock in the last year and 51 percent of households lacked any emergency savings to help them cope.

This is quite an alarming statistic, as it shows that many families have a lack of financial foresight for their own future—let alone the foresight to help guide, steer, and hold our representatives’ feet to the fire. The fact is, sadly, that our people do not want to save. As the article continues,

Nobody out there really wants to save, truthfully,” Chilton says. “Your kids want you to spend. The government wants you to spend… Even your inner self wants you to spend your money. It is not a fair field of competition. Everyone wants you to spend and overcoming all that pressure is quite difficult.

“We are a spending society,” [says Jim Yih, a financial educator and author in Edmonton, Alberta, Canada]. “We’ve taken every major holiday and turned it into a big sales event.”

Daniel J. Mitchel, a senior fellow at the Cato Institute, has also included government itself as a social, political, and economic block to the individual’s ability to save—“Save and pay more taxes. Spend and pay less,” he says. With millions of Americans looking down the barrel of significant tax hikes, Mitchel’s observation is increasingly prophetic.

The top five most important issues to Utahns are reportedly (1) early childhood education, (2) college and career readiness, (3) economic development, (4) health care, and (5) intergenerational poverty. These are all issues that can be addressed by stronger free market forces, but, even now, Utahns continue to look to government for solutions. That said, it is interesting to note, aside from Financial Ready Utah, that there is a general silence when it comes to any opposition to the federal government’s involvement in funding and providing for solutions to these listed concerns. It appears that Utahns are generally accepting of the federal government’s involvement in Utah’s affairs—so long, of course, as they see some perceived benefit from the money. Who can blame them? After all, our legislators are merely “bringing home the bacon,” right?

The fact of the matter is that we have a self-defeating socio-economic vicious circle spurred on by both the people and their government. Sadly, in many ways, our citizens have wanted prosperity—now—at any cost, and have accepted the federal government’s money with its strings attached. This has encouraged the bad habits by state legislators of giving up state sovereignty for federal money. As government always grows in the vacuum of its citizens’ apathy, the federal and state governments have created a system that does not reward saving, but that encourages its citizens to spend, spend, spend. Caught up in this spending mentality, the people elect leaders who have also bought into the same spending mentality that is plaguing the nation. The cycle is perpetuated.

Is this problem correctable? Yes, but it will take some time! It’s not all doom and gloom. It is refreshing to see Utah’s state legislators taking a stand against the federal government’s money and the strings that are always attached. The Libertas Institute encourages all behavior that strengthens individual economic rights and state sovereignty. But we also need to see a change in spending behavior—especially at the individual level. So long as Utahns keep wanting to expand government programs (on both the state and federal levels), the government will continue to tax the individual for those programs and the individual will continue to have a disincentive to save. As Cato’s Daniel Mitchel said, “Save and pay more taxes. Spend and pay less.”

The spending mentality and behavior is not self-sustaining. It will implode, and we, as a society, will be left in dire straits. Until we curb our personal spending habits, we are in no place to curb our government’s spending habits. Political economic and financial mastery begins with personal economic and financial mastery. In a Representative Republic, the government’s behavior only mirrors individual behavior.

The Libertas Institute is very optimistic about Utah’s future. Financial Ready Utah is a sign that Utahns are waking up to the loss of individual liberty, loss of state sovereignty, and the strings attached to federal money.