US Debt in Simple English

Discussion in 'Politics' started by Deacon, Dec 17, 2011.

  1. Deacon

    Deacon
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    This was sent to me today and I thought it was interesting:

    Budget explained in simple English

    United States Tax Revenue: - $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

    Recent Tax Cut: - - - - - - - - - -$38,500,000,000


    Now, remove 8 zeros and pretend it's a household budget.

    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

    *****************

    Rob
     
  2. kyredneck

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    Cool. I like this. It kinda puts things in perspective for this point in time. It's our unfunded liabilities that's getting ready to drop the hammer on us:

    http://usdebt.kleptocracy.us/
     
  3. Arbo

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    It's unfortunate (and fiscally dangerous) that peoples' eyes glaze over when they see so many zeros. This illustration is brilliant in its simplicity.
     
  4. InTheLight

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    It's a good, neat way to look at our debt situation. The only flaw is that the United States will continue on into the future and will have income producing years every year. Not so with people's households.

    Still, I liked the analogy.
     
  5. billwald

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    How is this different than the family buying a house with a mortgage?

    One difference is that the US government is borrowing money at around zero interest.
     
  6. InTheLight

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    There is no deadline to pay back and the 'family' will be making money for centuries.
     
  7. marke

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    Great post! Thanks
     
  8. Arbo

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    A mortgage is secured debt.
     
  9. kyredneck

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    ???

    How to Tell When the Debt Crisis Gets Serious

    ".....Interest payments will account for just 5.4 percent of federal spending this year, compared to 12.5 percent in 2000. That's one reason politicians can get away with blasting hot air about the debt, while doing little or nothing about it.

    But that won't last. Interest rates are nearly certain to rise from their historic lows as the global economy recovers and demand for capital picks up. The White House predicts that by 2015, interest payments on the national debt will balloon to nearly $500 billion, or nearly 12 percent of all spending. That's without a debt crisis that could drive rates even higher. And in the "out years" after 2015, America's debt, on its current course, would begin to consume so much cash that it would suffocate the economy."
     
  10. kyredneck

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    More from above article:

    "Investors begin to shun U.S. government securities. This is already happening, to a limited extent. Investing firm Pimco, the world's biggest bond trader, recently disclosed that its largest mutual fund, the Pimco Total Return Fund, has reduced its holdings of U.S. government securities from 12 percent in January to nothing at all. That doesn't necessarily mean Pimco believes a debt crisis is coming. But it does suggest that Pimco feels the yield on Treasuries is too low given the risk of a default, however marginal that might be. Other investors don't necessarily agree; overall demand for government securities remains much higher than the supply, which will help keep rates low for now. And concerns about China cashing in the large amount of U.S. debt that it owns are probably overblown, since the export-dependent nation would be harming its biggest customer if it did anything to weaken the U.S. economy.

    The signature event of a bona-fide debt crisis is often a "failed" auction in which the government in question can't sell all the securities it wants to at preferred interest rates, because investors feel the risk of a default justifies a higher rate. But there are usually several precursors to that. "You get a vicious circle in which there's increased nervousness, then interest rates go up," says economist Bill Cline of the Peterson Institute for International Economics. "Then the expected accumulation of debt is more rapid, which reinforces concerns about solvency." Market watchers carefully monitor demand for Treasuries, so if it began to fall significantly, it would be big news."
     
  11. kyredneck

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    3 Big Lies About Cutting the Deficit

    February 15, 2011 Rick Newman

    Maybe they're finally starting to get it in Washington. Just a couple months ago, politicians of both parties were lavishing a fresh round of tax cuts on practically every American. Now they're competing over who can take the most money away. President Obama's budget for the next fiscal year proposes $25 billion in spending cuts for 2012, plus a freeze on certain categories of spending that could save another $40 billion per year. Republicans say that's not enough, and they're aiming for $100 billion or more in cuts. Both sides are even targeting a few of their favorite projects, to prove how serious they are.

    Okay, nice start. But if this is all there is, the budget deficit will remain far too big for the rest of history, and the swelling national debt will eventually crush the U.S. economy. Despite the most aggressive cuts proposed in decades, for example, the U.S. government under President Obama's budget would still spend 42 percent more than it brings in, borrowing the difference. That might be okay for a tech startup funded by Silicon Valley venture capitalists, but it's not okay for a mature industrialized nation hoping to stay ahead of China. If the Republicans got their way and wrangled a full $100 billion worth of spending cuts, they'd cut the amount Washington needs to borrow down to about 40 percent of total spending. That might forestall the day of reckoning by a month or two.

    Both sides, in other words, are playing small ball, while acting as if they're undertaking heroic efforts to save the republic. The reason they're ducking and weaving is obvious: Neither party wants to admit that fixing America's finances is going to take a painful combination of tax hikes and spending cuts that will hit almost every American. The nation's most treasured and expensive programs—Medicare and Social Security—will have to be revamped, with beneficiaries bearing more of their own healthcare and retirement costs. Middle-class taxes will go up, no matter what form they take.

    Under one serious plan for cutting the debt, for instance, the typical American's after-tax income would fall by 4.3 percent. For somebody making $75,000 a year and paying about 20 percent of that in federal taxes, after deductions, that's about $2,600 in lost income per year. But nobody in Washington is ready to tell you that. Instead, here are the fibs they're peddling:

    The debt is the other party's fault. The formula for solving problems in Washington is to first go through an extended period of blame and recrimination, to see how badly you can damage the other party and therefore gain an advantage when election time comes. So Democrats blame the $14 trillion national debt on undisciplined spending and irresponsible tax cuts during the Bush administration, while Republicans blame the Obama stimulus plan and other efforts to crank up spending to help offset the ravages of the 2007-2009 recession.

    You probably know the truth: Both parties are wrong, and right. During the eight years of the Bush administration, the national debt rose by about $6.1 trillion. By the end of Obama's third year, it will have risen by another $4.8 trillion or so. There are caveats—Bush generally enjoyed a stronger economy than Obama, for instance—but it's fair to say that both parties have maxed out the government's credit without a plan for how to pay it back. The most recent evidence of that is the $860 billion tax-cut and stimulus bill passed in December, which was a joint venture between President Obama and Congressional Republicans.

    The blame game matters, because there's no way that any one party will be able to solve the debt problem through its own pet initiatives, even if a single party controlled the White House and both chambers of Congress. Spending cuts alone will never do it, nor will tax hikes on businesses and the wealthy. Divisive battles over the past perpetuate partisan bickering, when what's needed is cooperation. So while Republicans and Democrats focus on scoring political points, the problem simply gets worse.

    The pain can be passed to somebody else. Democrats want to tax the rich. Republicans want to cut subsidies for supplicants and deadbeats while forcing millions who rely on government funds to migrate to the private sector. The basic premise behind most of the spending cuts outlined so far is that they can happen in ways that won't affect mainstream Americans, letting the middle class off the hook.

    That's nonsense. The middle class—all of it—absorbs the bulk of government spending, through programs like Medicare and Social Security, tax deductions for mortgage interest and employer-paid healthcare benefits, unemployment compensation, decent roads and other infrastructure, and the stability that comes from a strong national defense. The biggest and most popular programs need to be cut. Tax deductions claimed by millions need to be eliminated or reduced. There may even need to be a national sales tax on everyday items. Putting all this off may actually be a disservice to the middle class, because the longer we put off a solution, the deeper the spending cuts and the bigger the tax hikes will need to be.

    Serious budget cutters know this, they just don't feel like mentioning it right now, lest voters think unkindly of them once the big election in 2012 comes around. When he was in the Congressional minority, for instance, Republican Rep. Paul Ryan of Wisconsin produced a "roadmap for America's future" that called for the partial privatization of Medicare and other changes to cherished programs meant to cut costs and keep them solvent. But those ideas haven't yet surfaced in any of the Republicans' official debt-cutting plans, and Ryan, who's now chairman of the House Budget Committee, didn't mention his ideas for cutting Medicare or Social Security when he gave the rebuttal to President Obama's State of the Union address. Maybe they don't seem like such good ideas now that Republicans control the House and voters are paying more attention to them.

    Voters are noble. Politicians speak of "the American people" in reverent tones, as if they possess profound collective wisdom and would never stoop to greed or selfishness. But if you ask the American people how to solve the debt problem, they basically say, cut everybody else's benefits but leave mine alone. They may be even more gridlocked than Congress, in fact.

    In surveys by the Pew Research Group, Americans seems to be aware of the debt problem, yet they still want to see spending increases—rather than decreases—in 16 out of 18 major categories, with education at the top. They also oppose tax increases by a signification spread. Baby Boomers in particular are strongly opposed to many of the measures that could go the farthest toward paying down the debt, like reducing some of the biggest tax deductions and raising the retirement age at which people qualify for Social Security. It's not surprising that boomers oppose such things, since they'd bear the cost directly. But they'll feel even deeper pain if the debt bomb explodes and some of the cherished programs they rely upon have to be scaled way back.

    To be fair, Americans don't have a leader at the moment who's telling them the truth about the nation's finances, detailing what needs to be done, explaining how the burden will be shared fairly, and convincing voters that shared sacrifice is in everybody's interest. So they're skeptical and selfish. Sooner or later, however, we're all going to have to give. When you start to hear that message coming from Washington, pay attention: It might signal an outbreak of truth.

    -----------------------------------------------------

    I wholeheartedly disagree with the first sentence of the last paragraph. Ron Paul makes no bones about telling the American people what needs to be done.
     
    #11 kyredneck, Dec 19, 2011
    Last edited by a moderator: Dec 19, 2011
  12. billwald

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    >>Originally Posted by billwald
    >>......the US government is borrowing money at around zero interest.

    >???

    3 month T-bills just sold at a negative interest rate.
     
  13. kyredneck

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    Can you please cite this for me? So that I, and others, can understand.
     
  14. billwald

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