Sunday, April 25, 2010

Zero Sum Game Trap

For many years, the U.S. was a country of abundance, more than enough to accomplish a lot of its programs, such as infrastructure development, public education and safety nets for those in need. However, the U.S. has become a country of limited resources, making it difficult to support every program fully. If one program gains, another program loses. It's a zero sum game. A great example is the fiscal crisis in California, where budgets can no longer support all their current programs.

  • University of California students protest 32 percent tuition increase reports how students are reacting to a recent increase in state school tuition, which have typically been the lowest in the country. While there are numerous excellent reasons against a tuition increase, there were no solutions offered on how to fund the school's budget gap.

  • California's College Dreamers reports one reason for the budget shortfall, unfunded pension and health care liabilities The California legislature has diverted $3 billion this year from other programs to fund government worker's pensions, including $800 million from the University of California system.
  • Yes, both of these programs are valuable when considered by themselves. No one can argue against their individual importance. However, the reality is there are not sufficient funds to support these programs at their previous levels. Supporting one program fully will mean cuts for another program.

    I fully expect more of these trade offs in the coming years as the government introduces more programs for the benefit of the citizens. For every program that maintains or gains benefits, there will be equal reductions in other existing programs, because government spending is grown faster than our economy. Also, as University of California students are discovering, the "tax increases" won't be just for the rich.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial, tax or policy advice. Please consult a professional advisor.

    Copyright © 2010 Achievement Catalyst, LLC

    No comments: