I know this is a technology blog but we all need to understand the “business” of our federal government. This is a democracy which means “of the people, for the people”. If you don’t like what you read here get involved – who are your congressional representatives? How did they vote on this? How do you contact them? [see this]
We all need to help steer our great country to a better tomorrow.
This information presented below is attributed to:
David Thomas
Chief Executive Officer
Equitas Capital Advisors LLC
Let’s put the 2011 federal budget into perspective:
- U.S. income: $2,170,000,000,000
- Federal budget: $3,820,000,000,000
- New debt: $ 1,650,000,000,000
- National debt: $14,271,000,000,000 [National Debt Clock]
- Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)
It helps to think about these numbers in terms that we can relate to. Let’s remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.
- Total annual income for the Jones family: $21,700
- Amount of money the Jones family spent: $38,200
- Amount of new debt added to the credit card: $16,500
- Outstanding balance on the credit card: $142,710
- Amount cut from the budget: $385
So in effect last month our Congress, or in this example the Jones family, sat down at the kitchen table and agreed to cut $385 from its annual budget. What family would cut $385 of spending in order to solve $16,500 in deficit spending?
Now after years of this, the Jones family has $142,710 of debt on its credit card (which is the equivalent of the national debt).
The root of the debt problem is that the voters typically do not send people to Congress to save money. They are sent there to bring home the bacon to their own home state. To effect budget change, we need to change the job description and give Congress new marching orders. We need to start with a balanced budget. All this does is simply prevent more debt from being accumulated.
Once we have a balanced budget we can begin to think about how to start paying down our debt.
In effect, what we have is a reverse mortgage on the country. The problem is that the voters (you and I) are still in the denial stage, and do not want to face the issue we all must face. Please, please think about this and get involved.
August 29th, 2011 on 11:40 am
I wholeheartedly agree with the sentiment, but I have a slight problem with the analogy. To say that the fictitious Jones family has an outstanding balance of $142k on their credit card doesn’t quite equate. Wouldn’t it be more appropriate to liken the Jones’ debt to a home mortgage (more comparable to the govt debt in interest rate and term)? In that case, the numbers start to look quite real for a household, and it is clear that the Jones family’s main financial problem is their low annual income, not their spending and debt (which seem quite reasonable for a fictitious family). Which sort of supports the case for raising federal revenues. Thanks for the good post, Dan.
August 29th, 2011 on 11:52 am
Thanks Chris – you have a good point about the mortgage analogy. Perhaps the best way is to look at total household debt – credit cards, mortgage, auto loans, etc. and compare to the total US debt. More apples to apples.
The counter is that US goverment tends to use treasuries with a duration of 10 years or less and rolls them.
August 29th, 2011 on 12:06 pm
Good thing Mr. Jones has that stash of gold socked away. He might start thinking about selling a little bit to raise cash and pay down some debt at these record prices.