U.S debt

Found this on surfing the web




Below are some comments from Reddit that are relevant.

It's a mistake to perceive the "family income" as a real value. To do so misses the point of the analogy, which is the relative values of income, expenditures, and debt.

This artifact of perception can be removed by adding one zero back to all figures, which means we're now talking about a family in which the parent(s) bring in a six-figure income, which is quite sufficient for maintaining a family with a high standard of living.

Annual family income: $217,000

Annual expenditures: $382,000

New debt: $165,000

Outstanding debt: $1,427,100

Total budget cuts: $3,850

Now it becomes obvious that "get a real job or stop feeding the children" is a false dichotomy. We could likely surmise that in this case, the parents are both college-educated with "real jobs" already, and that a sudden 76% increase in annual income is very unlikely. Additionally, while cutting their annual budget by half or more may decrease their current standard of living, it will in no way threaten the availability of life necessities such as food or shelter, and it will lead to long-term stability as opposed to financial ruin.

This analogy holds up when applied back to the US federal government, since federal tax receipts as a percentage of GDP have remained fairly stable over the decades since WWII despite tremendous changes in tax rates over that time period. Drastic increases in tax revenues are simply unrealistic; the only way to achieve long-term financial stability is by making drastic cuts in expenditures.



But there a difference in comparing household finances with the Government.


Let's see here's a few:

1) The government is effectively immortal. It doesn't age or grow old. If it stops growing the national debt, inflation will reduce its real value, year after year.

2) The government's expenses are far more flexible than a households. A household has certain fixed costs. You need food. You need shelter. The Federal government can be everything from Ron Paul's dream - a tiny government that does little more than run a small military, to a huge Norwegian-style cradle-to-grave welfare state.

3) The government can print money.

4) The government can arbitrarily increase its income. Imagine if at your job, you made the same hourly wage, but you could work anywhere from 10 to 100 hours per week, just depending on how hard you want to work. Most people have no where near this flexibility; the government does.

5) The government can plan longer term. The federal government can justify building a giant hydroelectric dam that will take half a century to recoup its construction cost. The same does not apply to a household budget.

6) In most households, during boom times they spend and take on debt; in recessions they save and pay down debt. Ideally, the government should do the exact opposite.

7) If things get really bad, the government can simply renege on all foreign debt. At war with China? Well we declare the bonds held by them to be null and void. Nothing they can do about it. An individual has bankruptcy, but this really isn't the same as you don't get to keep most assets during bankruptcy.