Ken Plum: Spending down the reserves

Little value would come from contemplating how much money you may have spent in the past on medical insurance during years for which you were completely healthy. If you could see into the future you could compute exactly how much insurance and savings you would need.

We calculate the amount of risk we are willing to assume and plan our savings, investments, and insurance accordingly. Government is not much different. Projections are made for revenues and expenditures, and reserves are sometimes established to cover unforeseen circumstances.

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