Pump Magazine On-Line






Article 68:

U.S. Federal Budget Deficit Solution by a Small Business Owner




Lev Nelik

President and Small Business Owner

Pumping Machinery, LLC


Atlanta, GA 30360


Day after day, year after year, we see politicians on TV profess an incredible amount of demagoguery and debate (hot air) void of any facts. The President, 100 members of the House of Representatives, 400 members of the US Senate, and their staff, waste an incredible amount of time and our money, covering over what any small business routinely does in a brief one hour meeting, that is – balancing, and keeping it balanced, a company budget. Any family knows the simple truth of reality – that is, you cannot spend more money than you earn, period. Yet, the big guys, elected and expected by us to apply same simple principles, either unwilling, or more likely totally incapable to solve anything.


As any business owner knows, when things get tough, you are not supposed to like it, and whether it is your fault or tough luck, - the reality is you either tighten the belt, cut the spending, or go broke. Cancelling a planned vacation is not pleasant. Laying off workers is not good. Working longer hours with fewer people is not easy. But that is not a matter of what we like, but the matter of what we got.


The first thing any business owner, or any family, does is making a list of revenues (sales) and a list of costs. The difference is (a good word) a profit. Everyone wants to see revenues high and costs low. And if the profit turns out to be a loss, you can either increase sales, or cut costs – a fourth grader understands that simple math. The politicians, however, do not.


Any business owner, or an accountant with any appreciation of details, knows how the budget control process works:

1.       List your overall sales

2.       List your overall costs

3.       Subtract the difference

4.       If the answer is plus – be happy. If the answer is minus – try to increase sales. If sales cannot be increased, cut costs.


If you are a family, your “sales” is your salary – and unless you sleep with your boss, there is not much you can do with that. If you are government, your “sales” is what your boss gives you. The boss of the government is people. The “sales revenues” in government case are the taxes from the people. And people are reluctant to give you, the government, their hard earned money in taxes, unless they know and understand how you are going to spend it. And if you, the government, continue to profess demagoguery, slick talk, with no details, then you, Mr. Government, is grounded or fired, as people deserve better caliber of accountants who handle their money.


And so, while we hear smooth political talk on the TV, or politicians consider a debate (i.e. talk with no facts or actual data), the question we need to ask: stop talking, just show us the numbers, and let us judge. The first step is to show a big picture numbers, and the next step, if these numbers do not add up, list the next level of numbers that make up the “big picture”, and see which of these numbers are waste. In the family budget balancing analogy, if a family runs a deficit, it fires a worker that trims the lawn, and the kids push the lawn mower. Or, you skip vacation to the Bahamas, and go to the movies. Or, you skip going to the movie, and take a second job. None is pleasant, no argument there, but that is what you do, and if things get better,  - then, not before, you take a vacation, or hire back a guy who used to cut your lawn. That is, if you get rich (a bad word in the Soviet  Union, and now increasingly becoming a bad word in America), or at least better off. But, again, if you don’t, so you don’t.


So, let’s get a City Hall Meeting going. Let’s open the meeting with a simple chart, a US Budget, as you can find in any government publication:



So, basically, the Government takes in $2.381 trillion and spends $3.552 trillion. Nice job, politicians. Spending our money wisely (after all, we elected them). The first math lesson is addition and subtraction:


2.281 -3.552 = (?) (minus, get it?) ----1.171 (deficit) – (politicians can get this figure out so far). And so, so far, we know our politicians can (hopefully) pass a 4th grader test of subtraction. But to get much further – not so sure.


OK, so how do they spend our $3.552 trillion? Basically, there are five buckets:

·         Social Security bucket (20%) = $0.710 (in trillions)

·         Medicare/Medicaid bucket (21%) = $0.746

·         Unemployment bucket (16%) = $0.568

·         Defense bucket (19%) = $0.675

·         “Other?” bucket, which contains various government “other” wonderful  Government programs (19%) and interest on (our) debt (5%)


If things went on smoothly, people usually do not care to understand such details, but, with unemployment rate over 10%, and tough economic times, people do begin asking – how did we elect these bozos?

And so, as a next step, what  does a small business do in times of trouble when costs are out of control? The first thing any small business owner asks his accounting is – do not give me these “other category” crap, tell me what is in it? And, if you cannot intelligibly explain, with facts and numbers, what sorts of things are you, the accountant (or the government) hiding in this “other” category – I, a business owner (people) ain’t paying for it! And so, the “other” category, is gone in my book: proposing Plan #2 from the present Plan (or lack of) #1:


(You can downloaded this excel spreadsheet and make your own version of the balance): YOUR VERSION - you can change the numbers in the yellowed areas (by entering your own proposed % reduction and see the news result.


Above tabulation is a 4-step Budget Balancing process. Start learning, Mr. Government, take a business class, run a small grocery store for experience (if you can, which unfortunately not likely). Plan #1 is the present mess  - just reflecting the numbers, that’s all.

Plan #2 (see tabulation above) is a “no-nonsense plan” – cutting out the obscure “other” category, one of the five buckets hits the dust, and all wonderful programs in it are gone as well.

But surely, there is disagreement. Usually from the government. Since they (Government) do not actually do much (have you been to any government office lately?) like the rest of us, they have plenty of time to talk and making disagreements and demagoguery their profession. So they argue: we cannot just arbitrary cut out all “other” programs! After all, for example, the entire department of labor budget is in the “other” category! How can we live without the folks working at this department (keep in mind that just 1% of a $trillion is still a hefty $10 Billion dollars for the parasites – not a small change!). But ok, let’s keep some of these programs, but reduced the 19% down to 1%. And if they come back with detailed list of their programs, we will talk  - then.

Plan #2 cuts the deficit from $1.271 trillion to $0.596 trillion – not bad, half a problem solved. But still a deficit. So the next plan (#3 option) – cutting the unemployment benefits in half, keeping it available to sick and direct disaster struck. For others though: sorry, no more full year unemployment, - three months is enough, then get off your ass (pardon the blunt), open the newspaper, and call McDonalds, and get to work. Plan #3 gets the deficit cut to $0.347 trillion.

Almost there. But still a bit in read. So if you really want to balance it, now everyone needs to chip in – not much, but somewhat: Plan #4 shows 13% additional cuts from social security and Medicare/Medicaid, as well as some more pinching on the unemployment benefits. Painful, yes, - but hopefully not destructive – 13% reduction – if all to pitch in, all must help. This is a category we want to make every effort not to affect – the elderly and retired. But if they want to help (a little), we ask their retirement social security check being reduced from, say, $1,000 per month, to $870 – not a good news for anyone in retirement, but – there are no other buckets left, and their help is needed as well. If we are willing to do it, deficit turns into – a surplus (a profit: trust me,  - a good word for everybody).

If, however, even a 13% reduction in social security and Medicare/Medicaid is not acceptable, there is only other remaining plan (#5) is keeping these intact, but reduce defense by 25%, and significantly reduce unemployment benefits, such as amount and time, keeping only those covered who are sick or disabled on the unemployed roll. Otherwise – there is simply no other buckets left.


Ok, folks, - the 1-hour company budget balance meeting is over. There 5 plans are on the table. Facts are here. Time to vote. Which plan do you vote? Pick any, but the only condition is – do not spend more than you make!

In summary, we have addressed the overall idea of balancing the budget but making the revenues match the spending. Once that is accomplished, the next step is to review the costs of each cost program, and take a next step in reducing the waste further, by analyzing how the individual components of the budget program manage themselves. That is the next important step, which is also the way any small business manages its money – and so should the Government.

Do not like it? You have two other options, Mr. Government: take more of my money and keep it wasting as you have done in the past, or – propose your plan, and if you do, type in your figures and show – be specific, show data, be businesslike, - do not preach. Or, by the way, Mr. Government – let me take your corporate jet off your hands – take Delta couch class. And the medical care you are so concern – from now on use the same dentist I do.

Otherwise, Mr. Government – You are Fired.


Published: Small Business Review Chronicle, New York, NY, July, 2011, Volume 2, Issue 5