Gov-onomics
Inspired by a comment by Lobster, here's finance writer and radio host Dave Ramsey with a household analogy of government spending (in other words, he's making like the government is an American household):
If their household income was $55,000 per year, they'd actually be spending $96,500--$41,500 more than they made! That means they're spending 175% of their annual income! So, in 2011 they'd add $41,500 of debt to their current credit card debt of $366,000!What's the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That's a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it's the only way out of debt for John Q. Public.
If I ever got a call from a family that was spending $41,500 more than they made every year, you would definitely expect me to yell at them for their dumb behavior, right? Kids, no more McDonald's four times a week. Snacks come from the grocery store now. And we're not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it's time to amputate the lifestyle!
It works the same way for the government. You can't borrow your way out of debt, whether you're a typical American family or the entire U.S. government. At some point, you've got to say, "Enough is enough!" and make the hard cuts necessary to win over the long haul.







No democratic electorate will ever vote for politicians who proposed those kinds of cuts, or tax increases to make them unnecessary. It'll never happen.
The only 3 ways this can end are hyperinflation, default, or dictatorship.
P at August 27, 2011 8:03 AM
He's wrong.
The family needs to learn to live on less than $55,000 a year. The debt needs to be paid down.
Steve Daniels at August 27, 2011 8:30 AM
Here's an even easier to follow example, which shows how little the government budget cuts will affect the debt. (Got this through a friend's link. Not sure of the source.)
The Federal Budget broken down to the household level.
Dollar Amount
U.S. Tax revenue: $2,170,000,000,000
Fed budget: $3,820,000,000,000
New debt: $1,650,000,000,000
National debt: $14,271,000,000,000
Recent budget cut: $ 38,500,000,000
Now, remove 8 zeros and pretend it's a household budget.
Dollar Amount
Annual family income: $ 21,700
Money the family spent: $ 38,200
New debt on the credit card: $ 16,500
Outstanding balance on credit card: $142,710
Total budget cuts: $ 385
Sorta brings the issue "home" doesn't it?
Al at August 27, 2011 8:44 AM
The problem is that you have a household with three kids voting on whether or not their allowance should be cut and the trip to Disneyland canceled. Even if the parents vote to cut back, the kids don't understand that the credit cards will be cut off at some point.
Steamer at August 27, 2011 10:05 AM
It's not just the debt that matters--it's what the money is spent for. In a household, debt incurred to buy a profitable business, or even to buy a more efficient air conditioner that cuts your electric bills, is not equivalent to debt incurred for short-term consumer spending.
Debt incurred for purposes such as building the Interstate highway system and the national air traffic control system and the original GI bill represented a rational investment. Much of the debt now being incurred generates no real asset but is simply used for purposes of political payoff to favored groups.
Obama, of course, likes to refer to all spending as "investment."
david foster at August 27, 2011 10:14 AM
What david foster said.
The other totem politicians kiss is Keynesian stimulus: spend money in any way possible, and consumers/business will spool up productive enterprises to grow the economy out of debt.
This, of course, presupposes a workforce and economy that has productive things to do. Not so much in America anymore, what with stifling regulation and usage rules, our penchant to buy imports, and our importation of welfare recipients.
doombuggy at August 27, 2011 10:45 AM
I've been using such numbers for a while to hep people see the errors of their thinking. Though some debate as to weather household numbers (divide everything by the number of households) or straight population, divide it all by 310 million) works better.
It sometimes helps it sink in the garbageness of political speak, the concept of raise taxes a little on one segment of society will cure anything. When we would need to raise it by 75% on everyone, to just break even. They somehow have the idea in their head that being rich = an infinite ammount of money. Which is laughable. Even if we made the tax rate 100% no deductions on those making more than 250,000 we still wouldn't ballance the budget, so raising taxes a little doing anything is a lie.
joe at August 27, 2011 11:05 AM
Yes, I want to spend less.
Here is federal employment by agency. These employees are largely lazy, and get lifetime pensions and medical care, often after just 20 years of service. If they wear pretty uniforms.
Cut, cut, cut cut, cut.
Department of Defense 3,000,000
Veterans Affairs 275,000
Homeland Security 250,000
Treasury 115,000
Justice 112,000
Energy 109,000
USDA 109,000
Interior 71,000
Labor 17,000
HUD 10,000
Education 4,487
BOTU at August 27, 2011 11:12 AM
Cut spending? Yes, by all means, but how about raising income, too?
And no, I don't mean by raising taxes, which is what liberals mean when they talk about increasing revenue.
The real ways to raise revenue are (1) by decreasing taxes, especially on businesses and those who invest in them, and (2) by creating a stable, business-friendly environment, especially by reducing and simplifying regulations.
We already know this. We've done it before. It worked then, and it will work again now, if we will just lay off the class warfare demagoguery about "greedy fat cats" and realize that it is business which generates the revenue we can use for all those precious social programs.
Sheesh! Could we not, just this once, do something that makes sense?
kirk strong at August 27, 2011 11:19 AM
Amy, apologies for threadjacking but I thought you and your readers would enjoy this. Would hope it's at least semi-related.
"Why isn't everything free?"
qdpsteve at August 27, 2011 11:32 AM
Ah, but Al - you drank the Koolaid. There is no budget cut.
The "cut" was a reduction in dreamed-of future increases. To put this into Amy's example:
- The family earns $55,000 per year.
- The family spent $96,500 last year.
- Realizing their serious debt problem, they have agreed to cut their planned spending for next year from $103,250 to only $101,300. A budget "cut" of nearly $2000. And - hey - if they keep this up, they'll have "cut" their spending by $20,000 over the next 10 years!
That is how government arithmetic works.
a_random_guy at August 27, 2011 12:37 PM
Just last month, a letter to the editor at the Illinois' State Journal Register illustrated perfectly why the government budget is doomed. The writer railing and demanding an explanation for "government waste and foolish spending." Then she complained that the government cut out free ice cream bars for seniors on July 4th. How dare they cut ice cream bars while there is so much waste in government, she said.
She didn't see that she answered her own question. Everyone wants everyone else to be cut... but they don't want to give up so much as a dilly bar.
Every penny the government wastes is on someone else's equivalent of her dilly bar, and every penny the government cuts creates an army of angry voters to make them pay.
But, like so many, she didn't see her own reflection in the mirror.
Trust at August 27, 2011 12:51 PM
"They didn't have to pay electricity bills every month. And believe it or not, there was electricity in Africa in ancient times, ok?"
Wow. Now we all know what she learned during Black History Month at her "free" public school. Thanks for the entertainment, qdpsteve.
Martin at August 27, 2011 2:10 PM
Maybe the family needs to stop invading other households five blocks away and stop sending money to everyone in town.
Gog_Magog_Carpet_Reclaimers at August 27, 2011 2:30 PM
@Gog_Magog_Carpet_Reclaimers
That really can only go so far. Reasonable people can differ about war against tyrants, and I agree for the most part about foreign aide especially to nations that hate us and wish us harm.
The vast majority of our debt is due to entitlements and handouts. No one wants to touch that. We should cut our foreign costs, no doubt, but unless we deal with our domestic problems and unfunded obligations literally approaching 100 trillion, it's moot.
It's like heading for a cliff with the cruise at 65 instead of 70. Unless you change directions, there isn't much difference.
Trust at August 27, 2011 3:46 PM
When the government pulls out that credit card and charges $311,184,000 that is $1 for every single man, woman, and child that make up the citizenry of the country. The government is spending an average of $3,960,000,000 per day. That is over $12 per person per day.
Now if you look at the net tax payers (those that actually pay more in income than what they receive) is at about 53% -- that $12 becomes effectively $24 per tax payer. And that is just the current daily deficit.
The existing debt per person is $47,096.90. (That number is climbing steadily.) The median income is about $33,000. That means that every single person has to work one and a half years to pay off their portion of the debt the government has run up on their behalf. But of course considering that about half the population are taking more than they are receiving that means the 53% will have to spend 3 years of their life paying for the government's largesse.
Every working taxpayer is trapped in the same tar pit.
Jim P. at August 27, 2011 5:59 PM
"These employees are largely lazy, and get lifetime pensions and medical care, often after just 20 years of service."
Hey, BOTU, maybe you can answer an actual question when others have just ducked: what do you cut?
It's not enough to call these people names. You'd be talking about Neil Armstrong - gee, all that fame for a couple days' work?
Say it out loud. Say, "I want fewer soldiers. I want fewer meat inspectors with the USDA. I want less justice."
The agencies you cite can show you something for their efforts. That means it's up to you to show why that something is not important today.
And don't forget that bizarre component of life called "planning". If you need something in a hurry, like an antisatellite program, you may notice you are not permitted to build one if somebody else beats you to it.
Radwaste at August 27, 2011 7:33 PM
> The agencies you cite can show you something
> for their efforts.
At market prices? Nope; we'll never, ever know what they're "efforts". But performance isn't what they're about... Budgetary expansion is how they move forward. Raddy, you're the cancer.
Do you know what happens in the private sector when cost structures aren't tested?
Monitor the paying agent, you say.
Crid [CridComment at gmail] at August 27, 2011 7:54 PM
And speaking of annoyance about government power...
I was a reading an article about Tripoli, and it ended with these words:
Got that?
Presumably they have some source for this information, someone on the ground in Tripoli. Or maybe it was someone writing from a desk in downtown Los Angeles, someone who went out for smoke on our safe streets before returning to file the article.
But that's where their mentality is: We should get someone down to city hall (or the National Defense Office) to find out how many people this government has killed while protecting itself.
Because our readers are going to want to know what they say.
THIS, THIS is why lefties adore government. They know how to find it, and they know where to park. The fact that it's expensive, corrupt or fucking murderous is not of interest to them.
But what would the governement have to say about the story I'm writing today? It would be easy enough to ask, I suppose... They're much easier to reach than those rebels, who never keep good office hours. Those guys are just like the evil businessmen in America... Always have their minds on something else when I need them!
Crid [CridComment at gmail] at August 27, 2011 9:44 PM
(It's for this same reason I bristle when idiot peaceniks bemoan the American killing of "civilians" in 21st-century conflict.)
Crid [CridComment at gmail] at August 27, 2011 9:46 PM
@Radwaste: let me (shudder) agree with BOTU here. Here is a crude first proposal. By the way, do note that eliminating *activities* along with employees results in massive savings. Many departments have more contractors than employees. Others, like the Dept. of Education or Dept. of Agriculture, have "mssions" that primarily involve interfering with other people's work - resulting in unnecessary expenditures elsewhere.
Defense: 3,000,000 --> I worked inside the DoD for years; entirely discounting the military operations, the bloat in the bureacracy is incredible. Close foreign bases, end foreign wars, discard all existing regulations and start over. Reduce by 75%.
Veterans Affairs: 235,000 --> There is a certain amount of abuse anytime you have "free" benefits (the co-pay is zero for anything military-related, and almost everything is, or could be). Veterans who are not seriously disabled, i.e., who are able to continue normal civilian careers after their service, do not need lifelong medical care. On top of that, the bureaucracy is incredible. Cut 50%.
Homeland Security: 208,000 --> The Coast Guard, Customs service and Immigration service all need to exist. FEMA is useless (are you all enjoying the current hurrican theater, as FEMA tries to justify its existence?), TSA is useless, the NPPD is beyond useless, and the Secret Service is like the FBI: a small core mission, with massive mission creep. Reduce by 75%.
Treasury: 115,000 --> One shudders at the bureaucracy: an "Undersecretary for Terrorist Financing"? A complete, separate division just for alcohol and tobacco taxes? And, of course, everyone's favorite: the IRS. Hugely simplify the tax code. Reduce by 90%.
Justice: 112,500 --> There used to be a saying "don't make a federal crime out of it". Nowadays, everything is a federal crime. Repeal most federal criminal legislation, restrict the FBI to its core mission, eliminate BATF and DEA, and cut the fat off of the rest. Reduce by 50%.
Agriculture: 110,000 --> Most useful function is the USDA, which isn't saying much. eliminate entirely.
Energy: 110,000 --> Retain responsibility for nuclear weapons and nuclear power, eliminate the rest. Reduce by 80%.
Interior 71000 --> Keep the National Park Service; everything else can go. Reduce by 90%.
HHS: 67000 --> Eliminate entirely: 100%.
Transportation: 58,500 --> Small core mission, lots of bureaucracy and mission creep. Reduce by 90%.
Commerce: 44,000 --> Small core mission, lots of bureaucracy and mission creep. Reduce by 90%.
State: 19,000 --> Wow, a federal department with an actual mission. Whack the bureaucracy by 50%.
Labor: 17,000 --> Eliminate entirely: 100%
HUD: 10,500 --> Eliminate entirely: 100%
Education: 4,500 --> Eliminate entirely: 100%
Gee, it was fun fantasizing on a Sunday morning. Of course, nothing will happen...
a_random_guy at August 27, 2011 11:19 PM
Oh, and don't forget the folks who wouldn't 'raise taxes' by eliminating the Bush tax cuts are having no problem raising taxes on the average lower-middle class by allowing the payroll tax cuts to expire.
Just come out and say it. Because the folks with the money run the country. And when they can spend our money to save theirs, it's no contest at all.
DrCos at August 28, 2011 4:44 AM
"At market prices? Nope; we'll never, ever know what they're "efforts". But performance isn't what they're about... Budgetary expansion is how they move forward. Raddy, you're the cancer."
False.
You're lying about me, and you should stop.
Radwaste at August 28, 2011 9:30 AM
Off-topic but related: Gibson Guitar Corp. Responds to Federal Raid
Jim P. at August 28, 2011 9:33 AM
> You're lying about me
Nope, here you are, arguing (sight unseen) on behalf of similarly entrenched teat-suckers. We can't price your goods, and you can't acknowledge the scam.
Nice of you to forgive my editing error though... Sabbath grace
Crid [CridComment at gmail] at August 28, 2011 10:39 AM
"We can't price your goods, and you can't acknowledge the scam.
False, again, liar.
I'm not arguing for anyone. I'm arguing that you should learn what the fuck you're talking about, and learn about common decency.
Though, if you have none, yourself, you have none to spare.
You're lying about me, and you should stop.
Radwaste at August 28, 2011 5:22 PM
Or, you could offer (convincing) corrections... Amy is crazy generous with disk space. How CAN we price your labor, when it's in your manager's interests to keep you in the budget whether you're effective or whether you aren't? Why is the DOE hiring for several dozen high-paying positions in a recession?
Remember Republicans in the 90's?
The President is a LIAR!
Remember Democrats ten year later?
The President is a LIAR!
They both seemed kinda silly.
Crid [CridComment at gmail] at August 28, 2011 8:36 PM
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