Thursday, January 5, 2012

Let the Election Time Viral Emails Begin!

OK. So if you are going to send out a viral email to try and explain the US budget and debt issues by making an analogy between the US government debt and household debt, at least make a serious attempt.

The following was emailed to me the other day promising to answer all my questions.   Yeah, right. At the very least, I hope you will learn more from my attempt.



This rather brilliantly cuts thru all the political doublespeak we get. It puts it into a much better perspective.

Lesson # 1:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's 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 the credit card: $142,710
* Total budget cuts: $385

Got It ?????

OK now Lesson # 2: Here's another way to look at the Debt Ceiling:

Let's say, You come home from work and find there has been a sewer backup in your neighborhood....and your home has sewage all the way up to your ceilings.

What do you think you should do ......

Raise the ceilings, or pump out the crap?

Your choice is coming Nov. 2012


My edited version. Additions to the original in bold with an explanation.

* U.S. Current dollar GDP: $15,492,000,000,000 (US Household Net Worth: $58,000,000,000,000 and doesn’t include value of federal and state land, infrastructure, and equipment)
* U.S. Tax revenue: $2,170,000,000,000 (Social Insurance & Retirement revenue: $900,000,000,000)
* Fed budget: $3,820,000,000,000 (Social Insurance & Retirement spending: $1,750,000,000,000; Military spending: $768,000,000,000)
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000 (Outstanding public debt: $9,657,000,000,000, of which $4,656,000,000,000 owed to foreign investors, and Intergovernmental holdings: $4,614,000,000,000)
* Recent budget cuts: $ 38,500,000,000

Tax revenues are significantly lower because the economy has sustained a long period of above average unemployment and underemployment that decreases personal, corporate, and social insurance and retirement taxes. Spending is significantly higher because of increased unemployment compensation and spending on other means tested income security programs that more people are qualifying for given the current economy. Spending is also significantly higher for the military where spending is 2 times greater than spending in 2002. The part of the national debt owed to the public, corporations, and foreign investors is about 62% of GDP or 16% of national net worth. The largest foreign holder of US debt, China, holds 11.7% of the public debt; Japan holds 10%.

Let's now remove 8 zeros and pretend it's a household budget:

* Value of family’s current annual assets: $154,920 (Family’s total net worth: $580,000)
* Annual family income: $21,700 ($9,000 put aside for health care, job loss, an elderly member of the household)
* Money the family spent: $38,200 ($17,500 spent on health care, job loss, retirement spending; $7,680 spent on insurance and protection)
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710 ($96,570 owed to creditors, of which $46,560 is owed to foreign creditors at low fixed interest rates, and $46,140 that you borrowed from yourself – no interest, so not like a credit card)
* Total budget cuts: $385

Remember, your annual family income is down because you and your spouse were unemployed at various times throughout the year. Also, because your annual income was lower, you weren’t able to set aside as much for health care and Uncle Ernie’s retirement. Your spending was higher because your kids lost their jobs and moved back in with the family. You are still paying for your retired Uncle Ernie’s expensive habits and he just turned 90 (good for him, but you didn’t think he’d still be living with you for the past 15 years).

You had to dip into your retirement nest egg to borrow $46,140 which you treat as borrowed money to be paid back if things improve (no interest rate costs). You have also borrowed another $96,570 over the years, about $50,000 from your neighbors and local businesses/banks (like a credit card but at very low fixed interest rates). You borrowed $46,560 from foreign lenders (like a credit card issued from a foreign bank, but again, at very low fixed interest rates). Despite what you may have read in another viral email, of the debt you owe to foreigners, you owe about 11% or $11,370 to China and $9,790 to Japan. Therefore, of your total debt including money you borrowed from yourself, you owe China about 8%.

I'm pretty sure that if we posted the actual balance sheet of the average American household, our analogous household above would stand up pretty well. 

And regarding Lesson 2?  Is that really the best we've got?

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