The 'Latte Principle'

There has been much ado about the costs of earmarks, discretionary spending, and entitlement spending in our state and federal budgets. Everyone has their own idea of what should be cut, when, how, why, and to what extent. Democrats and the collectivist Left are wailing and crying about how tackling this budget explosion will hurt the economy and the nation. People on the right are arguing about what priorities are best tackled and which ones are unimportant. Everyone agrees this budget is out of whack. Nobody is really serious about how to approach cuts and shrinkage. I propose the use of a simple instrument for cutting waste and spending. I will call this ‘the Latte Principle.’ It attempts to take the budget cutting principles of the individual and use it to address the budget woes of the nation.

When an individual or family has money worries, they have to figure out how to balance their budget. This isn’t easy. It involves either increasing the income of the unit or cutting the spending. Financial counselors give people certain ideas of how to cut spending if income is fixed. One such tool involves creating the impetus to actually start the process.

So, let’s begin with the morning latte. Every morning you start with a three dollar latte at your local coffee shop. You get your friendly banter with a barista. You may see friends and neighbors there also getting a milky delight. It is part of your daily habit and it really doesn’t cost that much. Just a little treat to get the day started right. Correct?

Wrong. It’s an overall expensive habit that adds up in the end. If you skip the latte, you can save over $750 a year. That is two car payments or more than half a mortgage payment for a month. That is groceries for two months or the entire clothing costs for a year for the average male. It seems like a tiny amount, until you consider that three bucks, five days a week, for 50 weeks out of the year, becomes a hefty sum.

The Latte Principle works with just about every aspect of a household budget. Instead of buying lunch, bring your lunch four days a week. Instead of spending seven bucks a day for a sandwich and chips and a drink, the cost is more like three dollars a day. That’s $800 dollars a year in savings. Instead of going out to eat three nights a week, only go out twice. For a family of four, the savings can be upwards of a thousand bucks a year. So far, by just cutting some of the discretionary spending, we’ve found over $2500 per year in savings. That will pay a decent chunk of the credit card balance or two months on the mortgage. That amount of money will pay for a significant difference in household finances.

Now apply the Latte Principle to the federal budget. Think of earmarks as the morning latte. These programs and projects are all discretionary. They don’t add up to much individually, but in the aggregate, they are a nice chunk of change. Think of grant programs at the different departments as times eating out. These need to be seriously cut back because we need the money elsewhere, for the entitlements, the mortgage, and the debt, the credit card balance. Bringing lunch to the office? That is like curtailing building projects and aid to states.

States can use the same principle. Do we need those extra dog parks and watercolor classes? Is it vital to our economy that aid to counties must increase every year? Will the nation shut down if we increase governmental employees’ contributions to their pensions and health care costs?

This is not an excuse for letting entitlements strangle our economic growth. This principle is an argument for getting our side, and even some fiscally responsible Democrats, [a rapidly shrinking category] to make the necessary choices for our overall economic health. We are in a financial mess that both parties contributed to. The Democratic Party will, as a whole, fight tooth and nail for their payoffs and paybacks to their patrons. But, Republicans must bite the bullet and cut out the morning latte. It may sting, but responsibility isn’t always fun. Sometimes it means skipping that meal at Jack in the Box.