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Lessons in Debt: You Earn $50K, Spend $87K...No Problem. Right?


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.

[youtube http://www.youtube.com/v/Q-w-8fXzwQE?fs=1&hl=en_US&rel=0 expand=1]

A tip of the cap to RedState.com for introducing us to Professor Davies.

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