What's the Difference?
What is the difference between this hypothetical family budget and the US Government's budget?
One answer is: eight zeros, because these are essentially the US budget numbers with eight zeros knocked off.
A second answer is: Prisons and the printing press. Because the biggest difference is that in the family budget context, everyone sees these numbers as simply insane, while on the national level at least half of folks think they are just fine. The difference is that the US government can take money from other people at whim and by force, backed by the threat of incarceration. And if that fails, it can print money (actually using bits and bytes rather than the printing press, but that's just a detail) to pass the cost of its extravagance onto other people in the form of inflation.
Update: The chart above probably over-estimates the belt-tightening. If you really wanted a comparable situation to today's federal government, the example would say that the family spent $37,000 last year, proposed to spend 38, 285 next year, but agreed to only spend 37,900 for a $385 "cut", said cut being claimed despite the fact that actual spending will be $900 more than last year.
Mark:
A great video version of this can be seen here: http://www.youtube.com/watch?v=Li0no7O9zmE
February 16, 2012, 2:58 pmAnother guy named Dan:
application of government budgeting to my household:
Five years ago I planned to buy a $100k Ferrari next year. But to save money, I'll buy a Porsche Cayman for $50k instead. Then by applying the $50k in savings toward the cost of the Porsche, it will end up not costing me anything.
February 16, 2012, 4:22 pmme:
Well, the other crucial part is where there's people all over trying to give the family more money because holding part of the families debt is seen as so incredibly safe. Oh, and let's not forget - who is saying that anyone is planning on repaying any of this debt, ever?
February 16, 2012, 6:10 pmAriel:
Ok, so how did you get my family budget? Have you no decency?
February 16, 2012, 8:53 pmWilliam Bruce:
Sarcastic order for taxonomical compliance: In the blogospherical dialect of politico Newspeak, this is to be henceforth referred to as "austerity." All opportunities for compliance with blogospherical standard will be monitored, and non-compliance will be corrected.
February 16, 2012, 9:55 pmNoumenon:
It's a fallacy of composition to compare a government budget to household finances. Nothing is the same when you go from individuals to an entire nation. For example, an individual can improve his position by putting money in a savings account, but when a whole country does this it merely drives down the returns to saving.
My alternative model would be a household that earns $120,000 (GDP minus 8 zeroes), has chosen to put $24,700 in an envelope to support Grandma, but finds out that Grandma has been spending $37,900 a year for the last decade. Clearly you need to do something about Grandma's access to your cash, but raising her allowance instead is entirely within your means.
February 17, 2012, 12:59 amIGotBupkis, Three Time Winner of the Silver Sow Award:
>>> while on the national level at least half of folks think they are just fine.
Well, this would be because THEY are insane.
Glad I could essplane it to ya... ;oP
February 17, 2012, 2:59 amIGotBupkis, Three Time Winner of the Silver Sow Award:
>>> it will end up not costing me anything.
LOL, nice. Indeed, a balanced budget amendment means utterly nothing whatsoever without a mandate that says that the government -- at all levels -- MUST use GAAP.
February 17, 2012, 3:00 amIGotBupkis, Three Time Winner of the Silver Sow Award:
>>> For example, an individual can improve his position by putting money in a savings account
True, and how is that relevant? Do you see anyone in the government actually doing ANYTHING to cut back expenses?
Define how this is relevant to the expenses issue, and then you'll actually have anything worth saying.
Until then, you're just bloviating on peripherally related matters.
You example is ludicrous because YOU are not making enough MONEY to increase Grandma's allowance. Because you're not doing anything to pay off all that credit card debt. Even in a household example, having more than 100% of your annual income incredit card debt (i.e.,excluding a home, which is an asset nominally worth the amount you're in debt, or close to it) is generally a bad sign.
February 17, 2012, 3:10 ama_random_guy:
The problem with the article on Fox is this: they want to discuss what expenses to cut. The situation is far beyond that - there is just no point in arguing whether to trim a bit here, or a bit there. Turn the problem around: it's not a question of what to cut; the only possible question is what we can afford to fund.
In other words, zero everything. Assume that, for FY 2013, every federal program ends, every federal employee is fired, zero expenditures. Then set your budget. Then argue about which programs you are going to fund with that budget. Anything that doesn't make it in is gone.
In other words,
February 17, 2012, 4:39 amTim:
Let's add those unfunded liabilities as a line item: $600,000
February 17, 2012, 7:09 amlitehouse:
There is an important difference between a family and the US government budget. The government owes most of its debt to its own citizens! In your analogy, the one who holds the debts the family is making is simply one of the family members. Looks like a zero sum game to me...
February 17, 2012, 2:23 pmDavidR:
This is definitely government math.
In the real world, $24,700 - $37,900 = a debt of $13,200 (not $13,300).
February 18, 2012, 2:06 amNoumenon:
Bupkis, it's relevant because it's an example of how individual-level accounting does not translate to government-level accounting. I could have used the example of how one person can see better if he stands up at a concert, but if everyone stands up, no one can see better.
And I disagree that I am not making enough money to pay off Grandma's allowance. In my example, I am making $120,000. Grandma would have a hard time paying off her debt, but I would not. The economy, too, is large enough to pay off the government's debt. We just don't want to, because they wasted it.
February 18, 2012, 5:54 amMe:
So it's the citizen's fault that the debt is not paid? Bullshit. The country's budget works the same as any other budget. Making it look complicated is how the politicians screw the people. Money in and money out. The rest is just smoke and mirrors.
February 18, 2012, 6:55 amme:
I'll agree with Me here (who, btw, is not me ;)). Iceland is the one country that did the right thing and went through a quick and painful default, with citizens and politicians deciding not to bear the brunt of investment decisions made by others. I just wish Greece, Spain and Portugal had done the same.
February 18, 2012, 1:32 pmIGotBupkis, Three Time Winner of the Silver Sow Award:
>>> The government owes most of its debt to its own citizens!
I believe it owes a fairly enormous portion of that debt to other people and governments.
Since the only real way to collect on a defaulted international bill involves military force, this is not what you'd call an "ideal scenario".
A casual perusal of "who owed what to whom" shows that unpaid debts are, in fact, the primary instigator of a surprisingly large percentage of the wars in the last 800-900 years.
Now, gasp that China is getting a lot of that debt. And that China has, due to its own stupid policies, a large excess of "extra" males -- men for whom there are an insufficient supply of available women.
Now, what, do you think, is the historical tendency when this happens in a nation?
This coming century will be... very interesting, in the apocryphal "Chinese" sense of the term.
Looking back, they're going to really wonder what the eph was so seriously wrong with most people in this time, that they can't grasp why this isn't smart.
>>> The economy, too, is large enough to pay off the government’s debt. We just don’t want to, because they wasted it.
Again, when I see that they actually ARE making any effort at all to pay down this debt, I'll be a lot more patient about the amount of it. ATM, the primary effort seems to be to subtly inflate the money supply to catch up with the debt. The printing press is not the proper long-term way to go by any rational economic measure.
Regarding "point #2", of course they wasted it, they're a freaking GOVERNMENT. It's 95% of what governments DO.
February 21, 2012, 1:56 am