Others have previously posted attempts to put the federal fiscal morass, with its incomprehensible numbers in the billions and trillions and gazillions, into household budget terms we should be able to understand. Here’s my take at putting last night’s Senate-passed plan into that perspective, using the following facts:
National debt: 16.4 trillion dollars, now at the debt ceiling which by law must be raised in the next two months
Federal spending: 3.54 trillion dollars annually
Federal revenue: 2.45 trillion dollars annually
Budget deficit: 1.09 trillion dollars annually
Spending cuts passed overnight by the Senate: 15 billion dollars over 10 years (1.5 billion per year), to forestall the 109 billion dollar sequester for 60 days during which the next Congress will allegedly come up with a “grand bargain”
Revenue hikes passed overnight by the Senate: 620 billion dollars over 10 years (62 billion dollars per year)
What this picture translates to, for a typical middle-class family (the factual numbers above are all adjusted by a factor of 0.00000003):
A spendthrift couple named Red and Blue—both have been spending in an entirely uncontrolled fashion, though Blue has lately held the credit cards and accelerated the pace—survey the state of their finances. Last year they earned net income of $73,500. They spent $106,200. Their total current debt is now $492,000, and all their credit cards and lines of credit are maxed out.
Here’s their plan for 2013. One of them will find a second job, very part-time, to bring in added net income of $1,860 during the year. They cannot yet agree on how they can possibly spend that much less (meaning, $1,860) in 2013. So, for the next two months, while they figure it out, they will plan to spend $45 per year less than they did last year. Meanwhile, Red and Blue continue to blame each other for their sorry state.
Suppose you are this couple’s debt counselor. What do you think of their plan???
Today, the U.S. House of Representatives is effectively filling the role of the nation’s debt counselor. What should the House do with the bill that has been presented to it???
It has been noted by some wags, by the way, that this type of comparison is faulty because the government can print its own money, basically paying its bills via IOUs. Maybe that works for a while, but do you think China will take our IOUs indefinitely? And, for those retiring in 10 to 20 years, would you like your Social Security checks to be replaced by IOUs? This is all pretty simple arithmetic, and unfortunately the geniuses in DC failed the lessons on addition and subtraction.
Those of us who have climbed out of debt know the job is really hard, and making large cuts in spending seriously hurts. Our elected legislators and executive officers have shied away from every tough decision they can. How long can they continue to kick the can down the road? The implement that comes to mind is a shovel, a very large shovel….