Does Our Favorite Uncle Have a Money-Out Issue or a Money-In Issue?

Dave Ramsey did another Neil Cavuto simulcast this a.m. — coupling his radio show with Cavuto’s TV show on Fox News. Dave and Neil talked about how Paul Ryan understands that we, as a country, have to cut spending. When your kid wants a new puppy and you don’t have the money, Dave said, you have to tell the kid no. No puppy for you! That’s the situation our country is in now. 

At the end of the show, Cavuto said, Good job, Dave, or something along those lines. To which I say, In what respect, Neil?

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When working with clients who are having a hard time aligning their Money-In with their Money-Out (or, in the more common, non-JFF parlance, when working with clients who are having a hard time aligning their spending with their income, or, even more so, when working with folks who are spending more than they’re bringing home), I’ve been known to say something like this:

Your savings rate is the key to your overall financial health. It’s a number, and it’s real: your Savings Rate equals your Money-In minus your Money-Out. To get your savings rate up, then, there are only two things you can do: you can increase your Money-In and/or you can decrease your Money-Out.

Now, as it happens, doing one of those things is more fun than doing the other, in the sense that doing one of those things is always about being more powerful in your financial world, while doing the other can be, but oftentimes is not.


On their simulcast today, Dave and Neil did not talk about Money-In; they only lamented how spending in Washington is out of control.

I think I am understanding their perspective much better now than in the past, because one of the good things about listening to Dave over the past many months is that I’ve become convinced that he pretty-much-literally cannot see Money-In in this context, because in this context Money-In is usually known as taxes, and even a ratio of 10-to-1 (i.e., increasing budgetary health through 10 dollars of spending cuts for every one dollar of tax increases) is a big fat no-go. Because, you see, at this point we’ve gone so far down this road, since 1978 I’d say, that, for many folks, their More-Money-In-for Uncle Sam visual receptors have atrophied completely away, to blindness.

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Uncle Sam, via the Federal Reserve Bank of St. Louis, serves up a wonderful website called FRED, which stands for Federal Reserve Economic Data. As you can guess from its name, FRED serves up a huge database of government data which most people would say are factual (I searched online for some naysayers and the closest thing I could find was a fellow from Kansas who thinks that the Fed’s money supply measures are misleading), so let’s posit that Uncle Sam can do a decent job of measuring how much money it has coming in and how much it has going out.

Per FRED, here is what the federal governments’s Money-In and Money-Out look like from 1947 through the most current data (I’m not including a link because I cannot figure out how to do a permalink to the actual graph) (FREDsters, am I missing it, or FREDsters, do you have a nice-to-have feature list to which you can add permalinking?):


FRED Graph


Now let’s chunk that picture up some, so we can zoom in, using 1978 as a cut-off point, with one graph showing the maximum amount of FRED data through 1978, and the other chunk showing the maximum amount of FRED data post-1978.

Here is 1947 through 1978:

FRED Graph


That gray vertical bar in the 70s and the jog-down of Money-In is all about the nasty recession in the early- to mid-1970s — you know, the one following the oil embargo.


And here is 1979 through the present:

FRED Graph


So now there’s another nasty gray vertical bar and jog-down — the one we are still in, and some other stuff as well.

This is yet another Rorschach test. So what’d’ya see? Does our dear Uncle have a Money-Out problem or a Money-In problem?

Or both?

Hmmm . . .


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