In the 58 years since 1954, the federal government has spent more money each and every single year.
Think about this. The last year our federal government spent less than the year before was the same year Ellis Island closed its doors and the U.S. Supreme Court declared segregated schools to be unconstitutional.
Since then, it hasn't mattered whether a Republican or Democrat was president, which party controlled Congress, whether the U.S. economy was booming or struggling, if deficits were mounting or what wars we were (or weren't) waging, federal-government expenses have increased every year. Most Americans alive today have never known a time that the federal government wasn't spending more money each year than the year before.
Even when federal receipts/revenues declined (only nine times since 1955), expenditures still increased. We keep collecting more and more money, under administrations led by both parties.
Many people talk about government spending as a percentage of GDP or attempt to use spurious metrics that confuse the main theme of the data. Look at it as a businessperson would and should. If a company can't pay bills because it is taking in $100 and spending $150, it doesn't matter what expenses are relative to anything else. The company must cut spending to at least $100, especially if it has a significant amount of debt.
Total federal government revenues, including some tied to Social Security trust funds, may total $2.44 trillion in 2012. Meanwhile, total government spending is estimated to be $3.56 trillion. That means that spending for this year alone is nearly 50 percent over and above revenues coming in – the same as in the example above. No economic entity can continue to operate this way.
Endless borrowing is not a possibility, since creditors will eventually wake up to basic economics and increase the cost at which they are willing to lend. Increased interest rates would have a devastating impact on our economy, especially now at this fragile time.
With $16 trillion in national debt, we can no longer afford to allow the government to view spending differently than the rest of America views spending. Nor can we put up with Congress' nonsensical definition of a cut. Every year, we hear politicians saying something like, "We projected spending would increase by 4 percent but we're only going to actually spend 3 percent more, so that's a 1 percent cut."
This is tantamount to someone spending $1,000 in a year on travel when they spent $900 last year but saying they cut expenses by $200 because they did not spend the $1,200 they budgeted. Eventually, we at least need Congress to be in the neighborhood of a logical approach on this issue. No household, nonprofit, business, or school could operate this way, yet this is exactly what is happening in Washington.
We—Republicans and Democrats – have to do something differently. Simply, there needs to be more spending discipline. And, using harsh-sounding labels like "austerity" to discuss spending discipline is silly and irresponsible given the dire state of our debt.
In the early 1970s, then-Georgia Gov. Jimmy Carter used zero-based budgeting as a way to focus on justifying every dollar spent in the state government, and he cut state administrative costs in half. We have to return to the idea that the federal government doesn't automatically get to increase spending every year. We must get closer to a system that assumes the budget starts at zero, and that every dollar spent must be justified. We can and need to turn this losing record around.
The opinions here are those of the writers and not those of ABC News.
Mary Ellen Biery, Research Specialist at Sageworks, contributed to this article.
Brian Hamilton is the co-founder and chief executive officer of Sageworks and a noted expert on privately held companies. He is an original architect of the company's artificial intelligence technology, FIND, which is used by approximately 700 financial institutions and 5,000 CPA firms to perform financial analysis of privately held companies. He is currently a guest columnist for Forbes and Inc.com. Brian also oversees Inmates to Entrepreneurs, a community outreach program focused on teaching ex-offenders to start low-capital businesses.