It’s not ok
Hi Everyone. Â I thought I’d drop in for a quick guest post. Â I am Holly’s husband and support her by managing the technical details behind this site. Â This is her blog and she’ll write the majority of posts, but every once in a while I may jump in and write one.
When I think about the budget, the numbers are so huge it is impossible for me to grasp what they really mean. Â What does a trillion dollars look like? Â What will it buy? Â If we increase our debt from $13 trillion now to $25 trillion over ten years, what does that mean? Â Is $813 billion per year (in 2010) for the Department of Health and Human services too little or too much? Â What about $770 billion for the Social Security Administration? Â How about $688 billion for the Department of Defense?
I’d like to try to think about the numbers in terms that are a little closer to home.  If I divide them by the population then I get numbers that are similar to an individual’s budget.  If I then consider that I have a wife and two kids, and therefore a family of four, I can make the US budget numbers look more like my family’s budget numbers by dividing by the population and multiplying by four.
Department of Health and Human Services: $876 per month
Social Security Administration: $831 per month
Department of Defense: $742 per month
Those are pretty big numbers. Â If we can afford them and we want what they provide, then I guess that’s ok. Â Can we afford them given our current income? Â No. Â So, we’ll need to think about raising our income, lowering our expenses, or a combination of the two.
We’ve been charging up our credit card to pay for these and other services for a long time.  How bad off are we now?  My family of four owes $177,000.  That’s a pretty big number.  How much are we charging on the credit card every month?  $1,500.  Wait, my family is charging $1,500 on our credit card every month!? Ouch.  Looking at our budget, if everything goes exactly to plan then in 2020, just ten years from now, my family will owe about $300,000.
It seems to me that the debt is going the wrong way. Â Don’t we normally try to pay off our debt? Would you run your family’s budget this way? Â Do you typically run your credit card up another $1,500 every month?
Think about that $300,000. Â If we follow this plan my family’s interest payment will be $890 per month, just on the public portion of the debt. That’s more than our most expensive budget item is now (Department of Health and Human Services is currently $876 per month). Â Can you imagine paying $890 every month, just for the interest on your family’s credit cards? Â Naturally, not only will we be paying $890 per month in interest, we’ll still be charging another $1,300 on the credit card every month.
My eight year old daughter is in the class of 2020. Â As she graduates from high school and transitions into college we’ll be handing her a $75,000 credit card bill. Â How would you have reacted if your parents did that to you?
This is not ok.
All of these numbers were taken from the 2011 US Budget and the US Census Bureau US Population Projections.  They do not consider the CBO’s bleaker viewpoint.
April 12th, 2010 at 1:33 pm
It’s even worse if you consider that your share of the debt rises with your income. You can’t evenly divide the debt — or any government spending — by a simple count of citizens because many citizens generate little or no income and therefore pay little or no federal income tax.
The 2008 Census lists about 117 million households, but somewhere around 48 million of those have a household income below $40,000 and will be contributing little or nothing to paying for government services or the debt. Instead, if you prefer calculations based on individual citizens, the Census lists about 240 million citizens above 15 years old. About 70 million of those people have an income $40,000 or above. If you evenly divided $25 trillion by 70 million, that’s $357,000 per person making $40,000 or above. $357,000 to a person who made $45,000 a year would be a staggering debt that could not easily be paid — at 5% interest it would run almost $2,000 a month to pay back in 30 years, which would be most of that person’s after tax income. At 10% interest, it would take more than $3,000 a month. Interest rates have certainly run higher than 10% in recent history.
If you ran existing government on today’s tax rates, and then apportioned special taxes for the $25 trillion debt to invididuals making $100,000 or above, the debt would be almost $2 million per person. At 5% interest with 30 year repayment, that would be more than $10,000 a month. Again, a staggering debt that can’t be paid. If you move up to families making above $200,000, the numbers get even worse.
The only way out of this crisis is going to be extreme inflation, which will wipe out debts. It will also wipe out life savings, stock markets, businesses and even lives.
April 12th, 2010 at 9:32 pm
Ed,
I find myself in an unfortunate, pessimistic position. So many people don’t understand the reality of our situation. I count myself as one of the more informed, and I do not see an easy way out of our predicament. We have a very small window of opportunity to address our situation, and work through it in a controlled manner. It will require serious adjustments to our taxes and our spending that I don’t believe our elected officials are prepared to make. If we don’t take corrective action, and continue on the current path, hyper-inflation will happen, but…. after a time our economic situation will normalize. I do see hyper-inflation as one way out of this situation, but I see it as the worst option. Hyper-inflation is really the cruelest tax there is, it hurts the people on a fixed income the worst. I am trying to be optimistic; I am trying to educate people on the truth of the matter. I pray that enough Americans will take the time to really understand the situation. I am not a macroeconomics professor, but the way I see it….we need more revenue and we need to cut our spending. I am not sure what the balance is but if we want to head off hyper-inflation and a depression, we need to act quickly.
Holly
August 22nd, 2010 at 4:27 am
Thank you, Holly, for making the effort to inform people of the problems and to inspire people to come up with solutions or make personal changes to cause positive change. I think you show great optimism. That is something I cannot do.
November 3rd, 2010 at 4:46 pm
I am Holly’s Dad and I just want to say that I am so proud of my daughter’s efforts – learning truth and transmitting to others if they will only take the trouble. The economic structure of government today constitutes one of the most widespead and pernicious system of lies in human history.