Page 90 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

Barron’s states, “A budget surplus is an excess of income over spending for
a government, corporation, or individual over a particular period of time.”

Notice the words “excess of income over spending.” This does not
necessarily mean living below one’s means. The definition does not say a
surplus is created due to a reduction of spending, although a reduction of
spending may lead to an excess of income. It does mean focusing on

creating excess income—financial IQ #1: making more money. Rich dad
loved the words “excess of income.” This chapter is about excess of
income, rather than reducing expenses and living below your means.

BUDGET SURPLUS OF A GOVERNMENT

Barron’s states, “A government with a surplus may choose to start new
government programs or cut taxes.”
There are some issues with this statement. Problem number one is that

when governments create a surplus, they spend the money. Here is how
government contracts work: if a government agency is efficient and saves
money, the agency is punished, instead of rewarded, by having next year’s
budget reduced. To avoid this, most government agencies spend all their

budgeted money, even if they do not need to. This means costs keep going
up and the chances of a government budget surplus are slim to none. In
other words, government bureaucracies are designed to operate on a budget
deficit, and regardless of who is in power, taxes will go up.

How Democrats manage a budget. You may recall from the previous
chapter that Democrats love to tax and spend. Democrats love to spend on

more government social programs like Social Security and Medicare. The
problem is, social programs only grow bigger because they fail to solve the
problem they are created to address. In order to counteract this, the budget
is increased, and the vicious cycle continues. In government, mediocrity is

rewarded and efficiency is punished.
The following is a diagram of a Democrat’s budget: