Cutting back

Jack Bernier couldn't believe his luck! The scratch-off lottery ticket he purchased on a whim was a $500 winner! Since his family was caught up on their bills and they weren't saving up for an immediate purchase, he decided to treat his family to a wonderful dinner.

Normally, the Bernier family was frugal with eating out. In a typical month, Jack, his wife, and their two kids would eat out once at one of the many moderately-priced chain restaurants. There would be a couple of trips for fast food, a pizza, and maybe a trip out at lunch with the guys from work. The Berniers were proud to spend about $100 a month eating out.

This month, however, they all went to that nice restaurant downtown. They had steak, shrimp cocktails, a good bottle of wine, and dessert. It was pricey, but this was a rare treat. And with that bill, Jack realized his family had spent $500 eating out that month.

Next month was back to normal. He met with his financial advisor one afternoon.

"Jack, you are doing well, but you should consider saving a little more each month towards your retirement." The financial advisor pointed to some figures. "You probably want more savings, to provide for some emergency funds as well as supporting your basic needs in retirement. Save now. Cut back on expenses, if you need to."

"Don't worry," Jack replied. "Why, just this month, I've cut back on our family's restaurant bills by 80 percent!"

Who would believe Jack had cut back? Sure, he did spend less, but it's clear he couldn't sustain that level of luxury in the long term.

Remember that next time someone refers to a Social Security benefit cut. Just like Jack's expensive restaurant visit, the current levels of spending on Social Security aren't sustainable, so a "cut" that doesn't place benefits lower than a sustainable level really isn't a cut.

However, in recognizing that Social Security benefits under President Bush's plans are less than originally planned, I will let you call them benefit cuts. All you have to do is refer at the same time to the massive payroll tax cuts. After all, a plan that doesn't change payroll taxes from their current levels will have much lower taxes than a plan that keeps current benefit levels and funds them with the needed taxes.

Update: Welcome, Carnival of the Vanities readers! Some of my favorite posts are here.