Looking Back!

By: Curtis Roe, Director of Finance, Purcell Murray Company, croe@purcellmurray.com

In December, I reported that our national debt was $21.7 trillion which equated to about $66,000 per citizen. At of the time of this writing, we are up to $68,318. The state debt has gone up from $10,711 per citizen to $11,808. I don’t know how they calculate the citizen quantity given the sensitivity around that question.
Let’s say you have friend or a family member who needs some help. So you cut back on your personal spending so you can help this person out and you loan them money. Typically one might do this sort of thing for one of two reasons; to help someone out or to make some money on the interest for yourself. If your friend had a history of spending more money than what they earned, how would you feel about that person? Would you say they were not acting responsibly and that they were becoming a greater risk to you? You might stop loaning them money. You might just increase the interest rate you charge them.
If a company spends more money than they make, they typically lose money. Now if the additional spending is towards investing in the future of the company on things like the purchase of a building, that might be okay. But if the operational costs exceed the revenues, then there is a loss and that can not go on forever. Eventually the company will run out of money and have to close. The same reasoning works when thinking of our friend we are helping out.
Governments are not businesses in that a business exists to make a profit. A deficit is essentially a loss however. Break even is really the target for a non- profit or governmental agency. According the US Debt Clock, our federal budget deficit is $1,169,324,426,650. (One trillion, one hundred sixty nine billion, three hundred twenty four million, four hundred twenty six thousand, six hundred fifty dollars) Shocking. At the same time, I hear repeated promises from political candidates that if elected, they will provide more free services like health care and college to all people regardless of citizenship. That makes me very nervous.
On another note, I read an article in the San Francisco Chronicle that there is a movement to drain the Hetch Hetchy Resevoir. The first time I read this was many months ago. It did get the front page but the issue was kind of scoffed at in the article. Then a couple of weeks ago, another similar article was released. A week later, another smaller article was printed. Each time, the over all tone was that this not really very likely. If it is such a remote possibility, I can’t figure out why I keep hearing about it. Water. Who needs it?