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Federal debt for dummies (like us)

January 22, 2013

Deficit spendingJust how dumb are we, fellow citizens?

Politicians win our votes by spending more money for things we like.

They keep our votes by borrowing more money instead of raising our taxes.

It’s a vicious cycle that will bring this nation to financial ruin.  When the day of reckoning comes, the politicians and their cronies will be wealthy and the rest of us will be screwed.

If you’re smart enough to see what’s happening, please go to FixTheDebt.com and add your voice to the hundreds of thousands of fellow citizens who are demanding an end to this national scandal and moral outrage.

It’s hard to see the truth about federal spending because most of us (including me) can’t even begin to think in terms of billions (or trillions) of dollars.  It’s much easier to understand if we lob eight zeros off the government numbers and think of the results as a family budget.

Here’s what the federal government’s estimates translate to in a family budget:

~ Annual family income:                   $24,410
~ Money the family spends:              $35,450

~ New debt on the credit card:         $11,040

~ Family’s credit card debt:               $163,660

Common sense tells us that this family is headed for disaster.  Mom and Dad would have to dramatically increase their income and/or decrease spending.  Add back those eight zeros, and it’s no different for the nation we love.

Common sense also tells us that no credit card company would allow this debt continue to increase.  The same is true for the nation, except that the government tries to hide the truth by printing and borrowing more money.

Even worse, government uses the Federal Reserve to keep interest rates artificially low, and props up its borrowing capacity by borrowing from itself.  These are short-term attempts to fool economic reality, which is like trying to fool Mother Nature.  These shortcuts simply delay the inevitable, prevent the gradual adjustments that would allow a soft landing, and set us up for a catastrophic crash.

It gets even worse!  Our government doesn’t follow the Generally Accepted Accounting Principles that businesses must follow.  As reported in the Wall Street Journal, the actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion — more than five times the total debt shown in government accounting.  Knock off the eight digits and it means $868,000 of debt on the family credit card!

Is this sustainable?  No.

Will the politicians fix it without being forced by a public outcry?  No.

If you haven’t already done so, go to FixTheDebt.com to add your voice to that outcry.

(For more on this topic see the Deficit Spending chapter.)

2 Comments
  1. Tom Basso permalink

    Joe, I’ve seen this work before and it’s dead on. We are in severe trouble and coming to the point of no return soon. We may already be in a position where the economy may struggle for decades trying to deal with the debt load. Wake up voters!

    Like

  2. Mike Ruddell permalink

    The U.S. is like a alcoholic. A friend of mine is a alcoholic, and his take on the debt is similar to his drinking days. He did not get better until hit rock bottom. I guess “We are all Greeks” (P. B. Shelley).

    Like

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