Economic Theory of “Beer Money”

I’ve never been great at economics, but I do have a Master’s of Business Administration and more importantly, try to apply common sense to whatever decisions I make.

The recent economic downturn impacted our family as it did many families across the country.  We had to make decisions on bills to pay, food to buy and how to afford transportation to our jobs.  Vacations were cut, holiday and birthday gifts were scaled back and we realized how much we may had taken for granted in our prior economic situation.

I also observed the impact to the environment around us, most notably housing.  Lots for building a new home still remain empty in our subdivision that is less than 10 years old.  Friends made decisions to walk away from homes and take a hit on their credit as other homes that lost value and were cheaply available became more attractive.  Renting a home, rather than buying, became a very popular option for families.

Through all this there have been various discussions about how government spends money.  National defense, social programs, public safety and roads are ongoing topics of how best to spend tax dollars.  Healthcare, education, funding the arts among other topics have taken center stage nationally or locally here in Macomb County.

But what is striking is that in these discussions, individuals and governments at all levels seem to have forgotten the application of basic common sense.  Or more simply put, we shouldn’t spend more than we earn.  Life is a series of choices and we have to be responsible for the choices we make.  When credit or alternate sources of revenue are more readily available, common sense gets warped into a theory I call “Beer Money”:

When faced with financial limitations and choices on how to spend money, choices are made to spend on nice-to-haves knowing that a financial safety net exists to cover basic needs.

My simple example of this principle takes me back to my college days.  When we were in college and money was tight, we were faced with choices between spending on necessities or spending on fun.

If we had $10 left to spend, no food in the fridge and our friends wanted to go to the bar, there was only one logical choice: Go to the bar!!!  We knew our parents would NEVER let us starve!  However, had we bought groceries, they would NEVER have given us money to go the bar.

This is what I see all around me now…Beer Money thrown at the wall, like:

1. A teenager standing next to me in line at 7-11 paying cash for smokes and a Slurpee, then paying for milk with their bridge card (even worse the endless stories I hear of bridge cards being sold for cash to buy alcohol, drugs, Xmas presents, etc…)
2. Our children’s school pleading that we bring in pencils and glue so the children can learn the basics but a new digital marquis goes up the same year.

There are numerous examples every day of government money being spent as beer money, then trying to plead to the taxpayer that we cant let the country starve.

I have to make choices every day to ensure that my family eats, therefore I make concessions accordingly when things are tight.  Shouldn’t the government do the same?

What the government really needs is a middle class working housewife to manage the budget.