Lessons in Debt: You Earn $50K, Spend $87K…No Problem. Right?
- Posted on February 16, 2011 at 4:22pm by
Mike Opelka
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Still trying to wrap your head around the budget battle? Perhaps it would be helpful to pretend it is your own household budget. If you earn $50,000 a year but spend $87,000 you would have a problem. That’s the example given to us from Duquesne University Economics Professor Antony Davies;
If the Federal government were scaled down to the size of the average US household, here’s what its finances would look like:
- The Federal government would earn $50,000 a year in tax revenue (the same as the average US household).
- It would be $325,000 in debt.
- It would pay almost $10,000 a year in interest on that debt.
- Last year, it would have spent $79,000.
- This year, it is hoping to spend $86,000.
- The $100 billion in spending cuts (that some politicians view as draconian) would be equivalent to the household cutting its $86,000 in planned spending down to a mere $83,700. Not a bad start, but the household has another $33,700 to go before it balances its budget.
The annual budget is $3.73 trillion, a staggering amount of money that appears even bigger when you see it written out. $3,730,000,000,000.00. According to the President, that is how much money we require to operate the country for the next year. We have a problem, the country does not take in enough money to cover the $3.73 trillion. Current projections have revenues falling about $1.1trillion short of that amount, meaning that we will have to borrow that money in order to keep living the way we have been living.
And then there is the overall debt that is building at a staggering pace. The Professor made a little video to explain it graphically for us.
A tip of the cap to RedState.com for introducing us to Professor Davies.
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Comments (68)
streetrodder
Posted on February 16, 2011 at 7:15pmIt’s the new math. Thats why they dont see a problem.
Report Post »triplc4469
Posted on February 16, 2011 at 7:06pmWe have become a nation of “stuff” junkies, both in government and as individuals. And as with any other junkie, we will only accept rehabilitation when we’ve hit bottom and have run out of options.
We have been hoodwinked into believing that everyone deserves (and can have) that big TV, that free medical care, and that 3000 sq foot house, and that the government can provide these things without future consequences.
Getting out of debt is hard…believe me, I know. It sucks. Giving up the stuff is hard. That is why I don’t believe our politicians — Republican, Democrat or otherwise — are going to be able to turn this around. We just aren’t at the point where we are puking face down in the gutter…but we’re definitely crawling on the sidewalk.
Social Security, Medicare and Medicaid need to be unraveled…intelligently. But the discussion needs to be had, and neither the Democrats nor the Republican have the guts to stand up to the American people and say “We have to do something.” Washington D. C., bearing the namesake of one of our most courageous founders, is currently populated either by self-serving cowards or by those who want our system unraveled. Either way…we’re in trouble.
That said…my biggest contribution has been to vote my conscience and post on a stupid blog site…so I’m as much to blame as anyone else. If the 2010 elections didn’t shake our politicians into reality…what will?
Report Post »ds7
Posted on February 16, 2011 at 7:01pmthe problem is only 1 person in 10,000 understands the basics about the relationship between money, value, the federal reserve and fractional reserve banking.
modern banking is basically legalized theft. there are lots of good sources to educate yourself on about this fraud on the internet.
money as debt
Report Post »the money masters
the secret of oz
the zeitgeist addendum
Strong-oldman
Posted on February 16, 2011 at 6:47pmHere is some good news kids,
Report Post »If Obama vetos the cuts and time marches on
then by 2012 we can cut out every program they love.
And they will never come back again…
TheRemodel
Posted on February 16, 2011 at 6:07pmOK, enough. No raising the debt limit. Enough.
Report Post »Rightsofman
Posted on February 16, 2011 at 5:59pmSoooo you can’t spend more than you take in and remedy the situation by borrowing more so you can spend more and then borrow more…..it seems so unfair.
Report Post »triplc4469
Posted on February 16, 2011 at 5:59pmThis assumes that we aren’t adding any new debt and in fact paying it down. Up until about FDR our national debt would get paid down in peacetime, and then balloon during each war. Since WWII, our government has shown no consistent approach to paying down the debt, even in peacetime.
So, I would agree with you and would feel a whole lot better if the feds had a clearly outlined plan or some track record of being able to do this, but recent history shows us that politicians on both sides of the aisle have no inclination to pay down the debt, and thus the risk to our nation grows with each passing day.
Individual households since 2007 have discovered that having debt on the books allows for a more co
Report Post »triplc4469
Posted on February 16, 2011 at 6:43pmOops…hit the post button a bit early…this was in reply to Isles Fordian…sorry…
Report Post »Marnin
Posted on February 16, 2011 at 5:33pmThey should just start working for the government,then they could get twice the pay of the private sector and do half the work and have the dept paid off in no time!
Report Post »OkieTea
Posted on February 16, 2011 at 5:27pmYes, bottom line is that you will not be receiving social security or medicare and neither will I. The answer is a 50% cut of all spending across the board – no exceptions. Everybody works – no exceptions. Retirees will have to go back to work. Even paraplegics will have to work. If a person is actually physically incapable of performing some kind of service, then and only then can we afford to support them through family members or some sort of charitable means. This is how the country successfully worked in the past and it’s the only way it will work in the future. Life is hard……..and it’s about to get harder still.
Report Post »woodypynes
Posted on February 16, 2011 at 4:57pmThe most troubling part of this whole thing is that both the D‘s and the R’s know about this. They have known for a very long time about this. What we are witnessing is a determined effort to undermine the USA and turn it into something it fought wars to avoid becoming.
Report Post »Stick together and stock up. This isn’t a joke.
roxee
Posted on February 16, 2011 at 4:51pmEasiest way to balance the budget is Cut the Benefits to Banks and their employees ! The IRS is a Private Collection Agency… U.S. Code 31….we pay Taxes to Great Brition!!
Report Post »docgreen
Posted on February 16, 2011 at 7:11pmI don’t believe the Banks work for the Govt! Yes they are Federally Insured by the Govt, but the Employees don’t work for our Govt! So it wouldn’t help reduce the deficit! The only way this works is if our debt doesn’t go up, and we start getting to the real causes of overspending and balancing the budget!…..
Report Post »Islesfordian
Posted on February 16, 2011 at 4:49pmAlright, our debt is huge and a serious problem. But there are some apples and oranges here.
The debt shown is total present and future debt, but this is cointrasted with the GDP of a single year. It should really be contrasted with the cumulative GDP of those years for which required payouts are projected. I may be in hock for 500K and earning only 100K a year but that is actually a manageable debt if I radically cut my expenses and pay off a little, 20K over the interest every year. that still means 50 years of debt but it CAN be done.
Report Post »Blackhawk1
Posted on February 16, 2011 at 5:01pmThe only way your assumption would work is if, and I say IF the Government spends less than what they take in from now on and start paying off the debt. Do you really think the Liberals will do that? If you do I have some real dry land in the Everglades for sale.
Report Post »Islesfordian
Posted on February 16, 2011 at 5:49pmNo, I don’t think the liberals will or want to. Spending is their power. I was just wanting to correct an error in the presentation. We have to have all our facts right if we are going to win our case because the needed measures are so drastic that the libs will pounce on any error to impugn our argument.
Honesty and the facts are our best argument.
Report Post »Islesfordian
Posted on February 16, 2011 at 5:53pmfor me the better argument is showing how much we owe and what the debt service of that debt is and then comparing that debt service to our discretionary spending. All you need to do then is show when the former is expected to equal the latter.
Report Post »TheRemodel
Posted on February 16, 2011 at 6:28pmIt is a good point, but instead of showing our projected revenues over that period as another tall blue bar…it would be a red bar going down, because we will not balance the budget, and thus have no ‘net’ positive revenues to compare the obligations to. Just more net debt.
Report Post »davuf
Posted on February 16, 2011 at 4:42pmTheir spending comes down to the Keynesian Economic argument. According to that model the strength of the economy is a factor of consumption, investment and government spending. Because the government spends 1T more than it takes in it adds to the economy. Furthermore they believe there is a multiplier where every dollar spent in the government makes three in the private sector. They believe the economy is being artificially propped up by government spending and if we stop spending we will fall into a deep recession.
Report Post »docgreen
Posted on February 16, 2011 at 7:22pmUtopia! Obama’s!
Report Post »ctate970
Posted on February 16, 2011 at 4:41pmWe have to make some serious cuts but no one seems to get it.
Report Post »silentwatcher
Posted on February 16, 2011 at 4:47pmyou can’t get thru a locked door unless the one with the key opens if first.
Report Post »Thedaddy
Posted on February 16, 2011 at 4:41pmThank you, nuff said
Report Post »silentwatcher
Posted on February 16, 2011 at 4:40pmNo, no problem, unless you are the federal goverment with ‘unlimited’ resources.
Report Post »Psychosis
Posted on February 16, 2011 at 4:39pmmove along, nothing to concern your little heads about here
God help us
Report Post »Danglinbags
Posted on February 16, 2011 at 4:37pmHow can we believe this guy who says he’s a professor? He spells his own first name wrong. I will only trust Carney for my facts. He is a fair individual with proven trustworthiness.
Report Post »Lucent
Posted on February 16, 2011 at 4:36pmThis is the material that the Tea Party and Repub’s need to be plastering the media with constantly. Maybe if the truth is repeated often enough, it will sink in?
Report Post »Steve Martin
Posted on February 16, 2011 at 4:31pmAmasing. Now I would like to see the Democrats explain how this all Bush’s fault.
Report Post »Snowleopard {gallery of cat folks}
Posted on February 16, 2011 at 4:40pmGive them time, they will, assuming the explenation has not already been prepared in some shape or form already in their game book.
Report Post »Steve Martin
Posted on February 16, 2011 at 4:51pmPelosi has already started. If we don’t spend this money babies and old people will die.
Report Post »docgreen
Posted on February 16, 2011 at 7:20pmDidn’t you hear the Press Secretary? He allready stated it was Bushes fault! We get rid of Gibs and this Flinky steps right back into it! I wonder if anyone has told him people are tired of them blaming Bush, when Obama’s spending like a little kid in a candy shop!…. Did anyone see the articles about Obama going into business with Sorros? Hmmm, let me guess where? I guess Palestine! Yep, imagine that, how much money do we throw away the these Yahoo’s? Terrorists all of them! Israel needs to clear out Gaza and push all muslims into the dirt!
Report Post »Snowleopard {gallery of cat folks}
Posted on February 16, 2011 at 4:29pmWhat else is new, we know Obama has sought to destroy and control the country for some time, and with us being so deeply in debt, with a severely weakened economy, along with the progressives non stop lying to pacify the citizens of the nation while making them move to rebellion, is what he also is seeking to do.
So Obama will continue his pressure program to destabalize and detonate everything; to blame any and all other people than himself, and to make himself into the saviour of the country when all hell finally breaks loose upon the land.
No suprises at all on so many things across the board.
Report Post »Bullwinkle
Posted on February 16, 2011 at 6:20pmAmen!
Report Post »godlovinmom
Posted on February 16, 2011 at 4:28pmmakes sense to me..a housewife from Oregon..how come our government doesn’t get it…unless…they have alterior motives…hmmmm
Report Post »home_of_the_brave
Posted on February 16, 2011 at 4:27pmWay to go professor, finally someone speaks the truth besides Glenn. He’s a professor of economics no less so lets see how the left deflects this one.
Report Post »Snowleopard {gallery of cat folks}
Posted on February 16, 2011 at 4:37pmThey will in the old fashion way, blame and distort, while lying and trying to dig up any and all dirt they can find; failing that they will just make up whatever is expedient for them to use.
Report Post »Bullwinkle
Posted on February 16, 2011 at 6:19pmYou know that somehow Bush will be dragged in to be blamed.
Report Post »LadyIzShy
Posted on February 16, 2011 at 4:27pmwell this is an eye opener but those who see it already have them opened
Report Post »Snowleopard {gallery of cat folks}
Posted on February 16, 2011 at 4:31pmVery true, he puts it into simple terms anyone who wishes to can understand and not be able to have any refute in return. We are on a knife edge right now, with the cliff just ahead and the abyssal depth of the oceans down below at the bottom. This is the last chance to change and turn back, it is not yet too late to make the changes before all is lost.
Report Post »cnsrvtvj
Posted on February 16, 2011 at 4:34pmGood point Ladyizshy. That was a great explanation. Maybe even liberals will be able to understand that one. I know, I’m dreaming again. I almost fell out of my chair when the President said that his budget shows that America can live within its means. What means would that be Mr. President?
http://www.donsmithshow.com – see the Selective Outrage video
Report Post »Rogue
Posted on February 16, 2011 at 4:44pmScary stuff. I’m hoping Austan Goolsbee is going to come out soon with a White House Whiteboard explanation of the same problem that will put my mind at ease through lies..er, um… creative math.
Report Post »Blacktooth
Posted on February 16, 2011 at 4:48pmSo if we can understand the problem, why can’t the government?
Report Post »TexasCommonSense
Posted on February 16, 2011 at 4:50pmThis is why we can not afford Obamacare. Anyone who believes Obamacare is deficit neutral is seriously gullible.
Report Post »River0
Posted on February 16, 2011 at 4:52pmOnly when the markets wake up to this – and crash – will Obama be called to account. For some reason, the stock and bond markets are blind to our looming catastrophe. Many very savvy people – like Rick Santelli on CNBC – are utterlly baffled by the ridiculous rising markets.
The world is coming unglued, but still they rise.
Report Post »TexasProgressive
Posted on February 16, 2011 at 5:58pmI make 125K per year and have about 250K left on my mortgage…
Report Post »DashRipRock
Posted on February 16, 2011 at 6:16pmDamn Texas progressive
I didnt know garbage men made that much
Report Post »TexasProgressive
Posted on February 16, 2011 at 6:31pmDash – never knock the working man…now get out of your trailer and get yourself a job.
Report Post »SpankDaMonkey
Posted on February 16, 2011 at 4:25pm.
Report Post »Smartie Pants, don‘t tell us tell Obama he just don’t get it……….
docgreen
Posted on February 16, 2011 at 6:03pmOh he gets it, he’s trying to do this! He’s spreading the wealth by bankrupting the US! Then we all start with new money! Everyone gets the same dollar amount! It doesn’t matter if your in Africa and or the US! Its Obama’s Utopia!
Report Post »royalstar
Posted on February 16, 2011 at 6:38pmOh he gets it. That is the crux of the problem.
Report Post »pajamash
Posted on February 16, 2011 at 6:53pmWhere’s ABC? How would he/she twist things to try and make this gentlemen look stupid?
Report Post »CatB
Posted on February 16, 2011 at 6:58pmI know he “gets it” .. but it does kind of remind me of the old “joke” .. what do you mean I am out of money? .. I still have checks.
When will the moochers of society wake up and realize this won’t be good for them either?
Report Post »drbage
Posted on February 16, 2011 at 7:17pmOr the family in question could be just like Obama and not include the interest on the debt in doing their calculations so that the economics would look good.
Report Post »Rice Water
Posted on February 16, 2011 at 9:11pmLet’s see…if you have a mortgage and student loans, you’re already WAY past being $325K in debt. For the sticklers who’ll differentiate between “deficit” and “debt”, well, throw in another $20K in credit card balances. As far as I can see, the Federal Government is as fiscally responsible as the average American household.
Report Post »Hobbs57
Posted on February 16, 2011 at 9:54pm@ Pajamash…..hahaha … I like your thinking, yeah where is the liberal media when I need to be lied too so I can feel better and just go about my merry little life….
Report Post »watchtheotherhand
Posted on February 16, 2011 at 9:59pmOne key factor the prof. left out of his example is a money printing press that can print money out of thin air to pay the debt and interest on the debt (Federal Reserve). Oh never mind you are stealing from future generations any wealth or future they may have had…..that’s their problem, they should have been born earlier. The Fed and our “spend what we don’t have government” are more dangerous to our future than any foreign military bar none……..“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principles of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale” Thomas Jefferson
Report Post »Rice Water
Posted on February 17, 2011 at 10:39am@watchtheotherhand
Buddie, I’m not defending one way or another. My flatline response to this is “We’ve all been partying beyond our means for the past eight years. And now we have to deal with the hangover”
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