Connie Mack’s Penny Plan is insulting

Sean Hannity was peddling Connie Mack’s “Penny Plan” on his radio show as a common-sense plan for reducing spending that could not possibly be difficult or harmful to anyone. The way Hannity talks about this plan is actually insulting, and it’s important to understand why.

Whether the “Penny Plan” can be effectively used to cut spending in the United States budget is a separate issue that I may address in a separate post. At this time, however, I only want to talk about the way that Hannity and others present the plan to the American people.

The plan is presented as a common-sense plan that obviously should be painless and not that difficult to do. Hannity makes an analogy to you planning your household budget, and he appeals to your emotions this way: All I’m asking you to do is cut spending by one penny for each dollar that you spend. One penny! Is that really too much to ask? This isn’t asking for anything difficult. This isn’t asking for big cuts. Just one penny for each dollar spent! That’s almost nothing.

The argument is that in the short-run the cuts “feel painless”; however, when you cut one penny on the dollar that you spend each month the first year, and you cut another penny the second year, and another penny the third year, then in the aggregate over time you end up saving a lot of money.

That’s the rhetoric. When you read those words and take them at face value, they may sound quite reasonable. After all, what’s a penny? It’s just one percent of a dollar. That doesn’t sound like a lot. Surely, it should be easy to get rid of just one percent.

And it would be easy… for Sean Hannity. It would be easy for me. It could very well be easy for you. But when Hannity presents this as something that should be “obviously” painless for anyone to do, they are being blind. They are being insulting.

To understand why, don’t look at Hannity’s household budget or even your own. Let’s look at a household that is really struggling.

Let’s say you make about minimum wage in an hourly job. Depending on where you live, after taxes are taken out you might take home about $900 per month. Let’s say you live in a 500 square foot apartment, and your rent is $450 per month, or half of your income. You are very sparing and meager with your use of utilities, so your total for all of your utilities (phone, electric, gas, water) comes to $100. I don’t even know how realistic that is… but let’s say you’re good at keeping your usage to a minimum. You naturally have no television or internet, because you can’t afford it, so at least you don’t have those bills to worry about.

You have to get to work, so let’s say you either drive a paid-off old clunker and spend $30 on gasoline OR you spend $30 per month on a cheap bus pass. Either way, that’s another $30 per month.

This leaves you with $320 per month for food and other household necessities. That’s about $11 per day on average, although not all of that goes to food. Once in a while you have to buy laundry detergent and do your laundry, or you’ll get fired from your job. Once in a while you might want to buy a toothbrush or soap. Any time you need to buy things like this, it comes out of your $11 per day food. On some days, you have to decide between brushing your teeth without toothpaste and buying more food. On other days, you have to decide between doing laundry with hot water but not detergent and buying more food. Those are choices that it have become normal for you to make on a week-by-week basis.

If this is your budget, then you break exactly even at the end of each month. That’s without a going out to the bar for a drink ever, or going to see a movie ever, or any other needless expenses. That’s just for the basics.

Now let’s say you have some debt: a medical bill, let’s say. So you decide you need to develop a plan to cut down on your spending, so you can start paying off your debt.

What do you do?

This is when Connie Mack comes down from the heavens on fluttering wings, and appears to you in a vision, and says: “I have a brilliant and painless way for you to cut down on your spending!  Each year, simply cut one penny out of each dollar of your spending. That’s not a lot, right? It’s just one penny! That will obviously be painless, because one penny is almost nothing. That won’t be difficult.”

Sounds awesome.  Let’s do it.

I mean: let’s actually take a look at how that would work out for you.

The first year on this plan, you have to save $9 per month (one percent of $900). That can’t be difficult, right?

Your biggest expense is rent, $450, and this is not negotiable. You can’t simply decide to “tighten your belt” and somehow only pay $445.50  (deducting the 1% amount of $4.50).  If you write a check to your landlord for $445.50, when your rent is $450, you’ll get just as evicted as if you pay him nothing.

Same thing goes for getting to work: you pay for a bus pass, or you pay for the gas that you need. You don’t have control over that $30 cost. So the reduction of $0.30 per year that you need to take your 1% out of these expenses is going to have to come from somewhere else, as well.

So what’s left?  Groceries and Utilities.  You can get the entire $9 of savings by completely fasting one day per month. Fasting one day per month doesn’t sound that bad to most people; I’m sure it doesn’t sound like much of a challenge to Sean Hannity. But when you’re already spending less than $11 per day on food, we can pretty much assume that you are already constantly hungry. But still: that’s one option open to you.

What’s the other option? Utilities!

Can you drop your utilities from $100 to a meager $91 for all utilities, including electricity, phone, water, and gas? Maybe. Shut off the electricity. Let’s hope you live in a moderate climate. Get rid of your phone completely. It won’t be easy, and it won’t be painless. But it’s possible. It’s something you can do, for that first year.

So there you go: You have accomplished your goal of reducing your spending by one penny for each dollar spent each month for the first year.  You have either skipped one meal per month, or you have gotten rid of your phone. Please go ahead and tell me how painless that was.

At the end of that year, you have saved $108 (that’s $9 per month for twelve months) that you can put toward your medical debt.

Do you still need to save more?  How many years do you think you can keep doing this? Can you cut your utilities down to $82.09 the next year? Down to $73.27 the next? At what point does not having electricity or gas start to interfere with your ability to go to work? Or clean yourself? Or cook that really, really cheap food that you are eating?  You can’t cook rice and beans if you have no power.

How many days can you fast, when the rest of the time you are living on $11 per day for food, before it interferes with your ability to perform your job? Or maintain your health?

The problem with Sean Hannity and other talk show hosts, not to mention all of the Republican politicians who are on board with this plan, is that when they pontificate about one penny on the dollar “not being that much” for a household to save, they are thinking only of their own households.

They are not living a life where 50%-90% of their expenses are fixed and immutable: rent, utilities, transportation. They are living lives where their rent (or mortgage payments) account for maybe 10% or less of their monthly income. The rest of their money goes to expensive car payments and DVD’s for their children to watch, or buying alcohol or having a television set, or any of the other entertainments and recreations that we all take for granted. So of course cutting a penny on each dollar isn’t a big deal.

But when your income is so low that that 50% of your income goes to your rent each month, one penny on the dollar is not a small amount at all. It’s a day of food. Or a bill. Or the ability to buy laundry detergent that month.

Now, I’m not saying that our national budget is exactly analogous to the low-income household I’ve just been describing. That’s a separate conversation.

I just want to draw your attention to how insulting it is for Sean Hannity to go on the air and proclaim that saving one penny on the dollar is, globally and universally, “no big deal”.

When Sean Hannity tells you to think about what that savings means in terms of a household budget, you’ve got to actually run the numbers.

And, you have to be honest with yourself about what some people’s monthly budgets are really like.

Think about a penny.