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Why Do Governments and People Spend More than They Have Available to Spend?

By Joseph McDaniel, Esq.

Well, with individuals, because it feels good, or because they simply miscalculated the stream of money that would be coming into them. Nobody expects the Spanish Inquisition, and nobody expects to be out of a job after working at the same job for thirty years. And nobody really expects their credit cards to leap from five per cent to forty per cent for no particularly good reason.

But things happen.

It's a little different with municipalities and with state and federal governments. They can calculate to a gnat's eyelash the amount of dough they have to work with, because they know what tax revenues will be, and in the last resort they can print money (either bonds, or, you know, money).

So if it's not a miscalculation, what would drive crazy high spending by a government? Well, that was addressed some time ago:

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."
? Alexis de Tocqueville (Democracy in America)

Obviously, that applies in Greece, the birthplace of democracy, as well as America.

Full post as published by Arizona Bankruptcy Attorney Blog on May 20, 2010 (boomark / email).