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US Budget - an analogy


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#1 ChurchSkiz   Members   -  Reputation: 419

Posted 17 April 2011 - 05:53 PM

I was curious what the real impact of our budget and the proposed cuts would have, so I did a little mathery:


If the US government was a family making $100k a year:


1. It would have $402k in unsecured debt (credit cards, not auto loans or mortgages)
2. It would go $42k more in debt by the end of the year - $3,500 a month .
3. The budget cuts it is proposing would amount to $1,446 or $120 a month


$120 a month is the equivalent of not ordering a starbucks latte every day or turning off cable.

Somebody call Suzie Orman on the US.

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#2 cowsarenotevil   Crossbones+   -  Reputation: 1847

Posted 17 April 2011 - 06:26 PM

Your analogy cannot provide a complete picture, though: consider the fact that the government is, ideally, an extension of the people, who, collectively, have more than enough money to pay off the debt.
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#3 Promit   Moderators   -  Reputation: 4659

Posted 17 April 2011 - 06:30 PM

Assuming paying off the debt is even a reasonable thing to do. It isn't. Don't try to 'compress' macroeconomics to every day sizes, by the way. It is dramatically misleading.

#4 Khaiy   Crossbones+   -  Reputation: 1340

Posted 17 April 2011 - 07:49 PM

The US government isn't a family. Families aren't charged by others to provide some degree of services for a whole population, can't mint their own currency, don't have to deal with infrastructure issues, aren't made up of members who change every couple of years by popular opinion, and on and on and on. The numbers are scary if you condense them down to a family. But just about every factor is different between the two, so scaring is about the only useful application of that condensation.

#5 Alpha_ProgDes   Crossbones+   -  Reputation: 4505

Posted 17 April 2011 - 07:59 PM

Assuming paying off the debt is even a reasonable thing to do. It isn't. Don't try to 'compress' macroeconomics to every day sizes, by the way. It is dramatically misleading.

Huh? Family or no, I would think not having $14 trillion in debt is a good thing. I know that our current economic system is based on "having debt", but not that much debt. What did i miss here?


Sidenote: why is your Reputation so low???
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#6 way2lazy2care   Members   -  Reputation: 778

Posted 18 April 2011 - 09:12 AM

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perhaps people will find this to be a better analogy?

#7 frob   Moderators   -  Reputation: 16154

Posted 19 April 2011 - 12:47 AM

I was curious what the real impact of our budget and the proposed cuts would have, so I did a little mathery:

If the US government was a family making $100k a year:

1. It would have $402k in unsecured debt (credit cards, not auto loans or mortgages)
2. It would go $42k more in debt by the end of the year - $3,500 a month .
3. The budget cuts it is proposing would amount to $1,446 or $120 a month


$120 a month is the equivalent of not ordering a starbucks latte every day or turning off cable.



About the only similarity between a family budget and the US federal budget is that both involve money.





The economics are more similar to those of a multinational company, but still quite different in scope and function.

Consider that the largest public corporation by revenue is WalMart, in 2010 coming in at $258B. It is highly complex and simultaneously simple; the way it works in studied in economics classes around the globe.

The US Government is currently $3.7T, and it is also studied by economists around the globe. It is far more complex in its scope, and simultaneously in many ways is more simple than the biggest global corporations.


Comparing it to a family budget shows a lack of understanding of the economics involved.
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#8 zoni2233   Members   -  Reputation: 99

Posted 19 April 2011 - 07:13 AM

I am from Switzerland and I never understood why the US is having so much fun making debt. I can only end badly in one big crash!

#9 Don Carnage   Members   -  Reputation: 608

Posted 19 April 2011 - 06:09 PM

The US dollar is the old maid or "Black Pete". If it crashes, it will surely just be you and me that suffer, whereas the bankers and the "elite" will have a field day, with their gold, land and possesions safely locked away. The promise from the winners of the game, is that America will very quickly regain it's economic potential, perhaps with a new stronger economy, the Amero?

Another analogy could be the hungry little caterpillar, that has eaten all the leaves on the golden apple tree, and all it's cousins are starving, because the hungry little caterpillar was very hungry and not very little and kind of bossy. But the hungry little caterpillar didn't care much for that: "I'm gonna be a real pretty butterfly some day soon!", it said drowsily, as it spun the last few threads of golden silk, and closed off it's cocoon.
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#10 owl   Banned   -  Reputation: 364

Posted 19 April 2011 - 06:47 PM

I am from Switzerland and I never understood why the US is having so much fun making debt. I can only end badly in one big crash!


Because it's free money you're never going to give back. When it comes the time to pay back some debt, you just ask that money from someone else and many times you might end paying a lot less that you should. Ultimately, the ones who end up losing are the debt share holders.
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#11 Prefect   Members   -  Reputation: 372

Posted 20 April 2011 - 12:48 AM


Assuming paying off the debt is even a reasonable thing to do. It isn't. Don't try to 'compress' macroeconomics to every day sizes, by the way. It is dramatically misleading.

Huh? Family or no, I would think not having $14 trillion in debt is a good thing. I know that our current economic system is based on "having debt", but not that much debt. What did i miss here?

The debt is simply another way to look at a large amount of wealth in private hands. For the US government to pay off its debt, it has to destroy wealth in private hands. You may want to do that, but then it's important how you go about it, and in which way the economic pressures flow. Basically, if your goal is to reduce the US government debt, this will most likely fail, because the method by which this is attempted is typically to make the economically bottom 95% bleed, whereas the relevant part of the wealth is really in the top 5%. If, on the other hand, your goal is to destroy the wealth of the top 5% and you go about this in an effective way (via property taxes etc.), then you may well be successful in reducing the government debt. But you do have to keep in mind that the debt does not only correspond to the wealth of the super-rich; it also corresponds to retirement funds, so one precondition to getting rid of the government debt is to eliminate those funds at implement a radically different retirement system, etc.
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#12 Prefect   Members   -  Reputation: 372

Posted 20 April 2011 - 12:55 AM

Sorry for the long paragraph that follows, looks like the forum editor is broken...

If the US government was a family making $100k a year:


1. It would have $402k in unsecured debt (credit cards, not auto loans or mortgages)

You misunderstand the way the monetary system works. If you, as a private person, owe money on a credit card, there is the possibility that you will be unable to fulfil your contractual obligation, which is to send money to your credit card provider.

The only contractual obligation that the US government has towards holders of treasury bills is that interest and principal will be paid out - and the US government will always be able to do that, because they're the ones who run the monetary system. To believe that the federal government could become insolvent or bankrupt is as absurd as believing that Blizzard may one day become unable to pay out World of Warcraft in-game gold.

You have to get away from looking at those financial ratios. Without context, they are meaningless numbers. They only become relevant in the context of what is happening in the real economy. For example, if the government, in an attempt to reduce its deficit, squeezes the private sector out of money, then naturally this will restrict aggregate demand, which will increase unemployment. Then suddenly reducing the deficit at the current time starts to look like a pretty dumb thing to do. (Of course one could perhaps argue that the size of the deficit is fine as it is, the problem lies in that too much of it flows directly into the hands of the super-rich where it doesn't have a positive effect on jobs - but this just underscores the fact that simply looking at those aggregate numbers without context is entirely meaningless.)
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#13 Alpha_ProgDes   Crossbones+   -  Reputation: 4505

Posted 21 April 2011 - 01:08 PM

So basically what you are saying is: the $14 trillion debt really isn't a problem.

Debt is debt. I understand our economic system functions by having debt. But when debt become too much debt for a nation to have?
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#14 way2lazy2care   Members   -  Reputation: 778

Posted 21 April 2011 - 01:22 PM

Debt is debt. I understand our economic system functions by having debt. But when debt become too much debt for a nation to have?

tomorrow.

#15 Khaiy   Crossbones+   -  Reputation: 1340

Posted 21 April 2011 - 02:09 PM

So basically what you are saying is: the $14 trillion debt really isn't a problem.

Debt is debt. I understand our economic system functions by having debt. But when debt become too much debt for a nation to have?


There are a lot of different viewpoints on how much debt is too much for a country. But there's not a ton of support for most of them. For people talking about how the current US debt is an unacceptably high percentage of our GDP and we're approaching catastrophe not only if we don't decrease it but even if we just stop increasing it, there's Japan, which has had debt at something like 200% of GDP for a long time. Not that we'd want Japan's deflationary stagnation, but it's anything but a catastrophe.

While there are valid concerns about national debt levels, especially during a period of anemic growth following a massive recession, most of the people who are preaching doom and gloom because of it in the short and medium terms are using it as a cover to get to policies they favor anyhow, even if they're only tenuously connected to the debt issue. It's mostly about ideology right now, not economics.




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