Short Lesson on Spending

[Omaha Steve]

Need some help on this one.

Subject: A LESSON ON SPENDING
A simplification, I know, but it still holds………
---Short Lesson on Spending ...
Why the U.S. was downgraded:

• 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 November 2012

[Curmudgeoness]

1. I have seen this several times.

I have a few answers, and will watch for others.

First, there is not an outstanding balance on credit cards. Much of the debt is money that the household owes itself....kind of like the husband has "lent" money to the wife, so it shows up as a debt. But since that debt is really just an accounting issue and not money that has to leave the household if and when it is paid back, does it really matter?

Another thing that is not listed in the family income is the ability to make a lot more money if they want to (which would be an increase in tax rates to a more sustainable amount, like when Bush took office). This household is like one where the family income is coming from a part time job, but there is no reason that they cannot get a full time job except that they don't want to.

This country is very wealthy, and this family has very rich relatives who could get them out of debt by 1) giving them a good job and 2) paying the family back what they owe them (notice that there is no place for the debt owed to this family from people trying to cheat them out of their money).

I would like to hear more debunking ideas.

[SheilaT]

2. More to the point,

an individual household has very little in common with a government responsible for over 300 million citizens and much of the infrastructure of the country. And national security. And a bunch of other things that aren't coming to mind immediately.

You simply cannot compare a federal budget to a household budget.

[Curmudgeoness]

3. This is true, but the point of that circulating email

is to explain where the US debt is right now and to try to make it relate to something people can grasp. At first glance, it is very effective, and to just say it is apples and oranges isn't going to be an argument that many will understand. Believe me, I have already tried that. We have to frame this as something as simple as what they have put out there. This is one of the biggest problems that we Democrats have---we take the conversation to an intellectual level, while the Repugs are putting out simple to understand nonsense.

[JDPriestly]

4. Families don't print their own money.

Our government does. And that means that when it borrows, it has to print more money. The additional money could mean that money will buy less -- in an economy in which there is a lot of demand chasing products.

But in a deflationary economy, the government doesn't want to reduce the money supply or cut its expenditures because if it does it will reduce the amount of money that the government can tax in order to maintain the current tax rate and still raise sufficient funds.

In an inflationary economy, the government does want to reduce the money supply so it prints less money (requires banks to have more reserves and loans them more) and may raise taxes and cut its own spending.

Right now, if you think we are in an inflationary economy, then it would be right to cut the deficit.

But if you think we are in a deflationary economy, then we should not cut the deficit.

[Bolo Boffin]

5. The U.S. was not downgraded because of revenue/expenditure ratio

but because of the knuckleheads in the House who can't work with anyone rationally.

Number one.

Number two, maybe this family should stop spending $7,000 on a security system and bombing its neighbors.

[Shagman]

6. Some questions...

How much of that budget goes to interest on the debt, most of which was run up by Reagan, Bush, and Bush?

How much revenue is lost to corporate welfare and the 1%'s tax cuts?

Are the costs for occupying Iraq and Afghanistan included?

Can you say oversimplified and irrelevant?