RCF Liberty Review

Year End Reflection
Merry Christmas and Happy New Year. The holiday season is busy for all of us, and it is one of the best seasons to see Liberty in action and used in ways that uplift us all. The choices we make as to where we will do our holiday shopping, which charities we will contribute dollars to and what we do with our time seem to all center on the idea that Christmas is for everyone. We reach out to those in need and those who are downtrodden. We want to provide a lift to those with low spirits. We want God to “bless us, everyone.”
The coming New Year has many of us thinking of changes we can make in our lives to make things better. Maybe we look to eating better, getting healthier, helping more charities, mentoring children or any number of other choices. It underscores the goodness in the souls of most of us. I’ve never heard anyone make a resolution to gain weight or to get in more arguments with their neighbor. We seem to feel a keener definition on what a society should look like.

If All Else Fails, Raise Debt!
Let me explain this as simply as I can. See if you can follow this tiny government example.
Your government receives $1000 in taxes each year and has $1000 in expenses. Taxes are predictable and stable. Then, your governing board decides that an item is needed that is outside the budget. Rules prevent them from raising taxes. They could “tighten their belt” and find areas to cut to accommodate the new expense. But instead, they decide it would be easier to borrow $100 for 10 years at a 5% interest rate. Even at simple interest rates, this means that the cost of the money borrowed is $5.00 that first year. The government must increase their expenses by $5.00 that year to cover the interest.
With principal repayment, the government has now created a deficit of $15. They can either hope the rules allow them to raise taxes to balance the budget, or they may have to borrow again to cover the difference.
This example can be expanded by moving the decimal point. A $10,000,000 budget and $1,000,000 in borrowing in the same example brings a burden of $150,000 per year.