The Family Budget and the Federal Budget

I got one of those serial right-wing emails today from one of my low-information-voter acquaintances.  It went like this:

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

  • 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 ?????

The intent, clearly, is to lead the average American Idol fan to the conclusion that our deficit is caused by congressional reluctance to adequately trim “fat” from the budget.  I was incensed, of course, but quickly realized that the REAL problem could be brought to light simply by extending this analogy.  So I replied like this:

So, the family has a budget of $38,200 (after taxes, let’s assume) and debt of $142,000.   You can find a breakdown of 2011 federal spending HERE and a model of how the average American family spends its money HERE.  Matching the family expenses along the same lines as the government, the family will spend its annual budget roughly like this:
Housing & food (roughly 49% of household spending):                                     $18,700
These roughly equate to Medicare, Medicaid, Social Security & interest on the debt, which compromise 49% of federal spending and all, like housing & food, are basically unavoidable.
Healthcare, insurance & pensions (roughly 31% of household budgets)          $11,900
These roughly equate to federal discretionary and non-entitlement mandatory spending, which make up 31% of federal budget.  It’s basic O&M, cutting it is doable, but seriously short-sighted and unwise.
Clothing, entertainment and everything else (20% of household budgets)       $7,600
Roughly equates to Defense, 20% of federal budget.  There is some room for cutting, but even cutting it ALL won’t fix the problem and would be kind of like walking around naked and with no shoes.
So, the family takes in $21,700 and spends $38,200 annually.  What are you going to cut from that family budget so you can cover its needs AND pay down that debt, Einstein?  Answer: You’re not.  You can’t.  It simply costs too much to properly house, feed and provide for the family to solve the problem simply by cutting spending.  You’re going to have to get some of the people in that house who are not pulling their weight to contribute to the family income.  It’s the same problem we have as a country.
Okay, you say, let’s cut Medicaid.  After all, that’s just welfare for people who can’t afford to pay for their own medical expenses, right?  Fine.  If this hypothetical family was apportioned by age the same as the U.S. population, there would be two adults aged 30-54, two children aged 15-23, one child under 14 and one adult over 65.  Most Medicaid goes to poor children, nursing home care and people on life support.  Cutting it would be like deciding not to spend money on the youngest kid’s insulin treatments, unplugging the life support of one of the adults or throwing grandma out into the street.  Pick one.

The 1% and its apologists are fond of making this a choice between freeloaders and hard working people.  It’s not.  It’s a choice between really RICH people and the rest of us.  It’s a choice between greed and need.  Pick a side.  But be careful.  Someday you might be the one who needs insulin treatments, nursing home care, life support or be the grandma or grandpa who kicks kicked to the curb.  Your choice.

3 thoughts on “The Family Budget and the Federal Budget

  1. if only we could tax the rich 1% to pay for all the wonderful programs that the goverment wants to give us for free, then they would truly be free. what a fantasy. just as reducing the “fat” doesn’t raise enough money neither will taxing the rich. if all proposed taxes are passed [ not likely ] it would amount to about 10 days of deficit spending. once the middle class is hooked on all the goodies and the goverment needs more money the middle class will become the target. that’s were the money is.
    think of the drug dealer who gives away free samples and to where that leads. you will note that i mention no political party in this scenario. they both play this game. there are no free lunches even if someone else pays the bill. it will only lead us to serfdom.

    5

    • The point of this post is NOT that you can cover the deficit solely with increased taxes on the rich. Rather it’s that you can’t fix it solely with budget cuts without decimating the society.

      Medicare? Social Security? Life support? Critical care for poor children with debilitating diseases? That what you’re calling “freebies?” And don’t look now, but the rich are getting off pretty cheap these days considering that they consume far and away more of what society provides for the common good, e.g. the legal system (protecting their physical and intellectual properties), transportation systems, communications networks, armies of publicly educated workers, by far the world’s most powerful standing armed force, etc. Mitt Romney and his ilk pay less than 14%, and I pay 20%-25%? Looks to me like they’re not pulling their weight.

      No, taxing them at 30%-40% won’t fix all our problems by itself, but it will fix some of them and could go a long way toward righting the entire ship. Check out the January 16 post on this blog titled “Why is the middle class disappearing?” It makes a good case – using actual data as opposed to metaphorical references to drug dealers and free samples – that the middle class would be a lot more robust, the economy a lot stronger and ergo the federal revenue stream a lot more capable of sustaining the current level of government spending had we simply maintained something truly resembling progressive taxation.

      If Joe Sixpack truly has another $20,000-$30,000 per year in his wallet, he’s going to SPEND a lot of that money, which will create a lot more jobs and hence a lot more middle class taxpayers (ECON 101 – the American economy is driven by consumer spending). That which Joe doesn’t spend, he might stash for Joe Jr.’s college education. All that extra tax revenue would allow the government to continue funding public colleges and universities at levels where they wouldn’t have to quadruple tuition. Then, when Joe Jr. graduated from college, not only would he likely be able to find a job, he also probably wouldn’t be $100,000 or more in debt.

      If Mitt Romney has that money, he’s going to park it in the Caymans where it won’t do anyone any good except his already very well off family.

  2. Obama was born in Hawaii. Doesn’t really mttaer if his Kenyan father was around for the birth or not. By current law he is a US citizen. People who question this make themselves look foolish or worse.Likewise, it is wrong to blame Obama for the meltdown of the US economy and for our soaring national debt. George W Bush and his party drove the US economy over a cliff before Obama was ever elected. Ronald Reagan very nearly bankrupted the country during the 1980s. Republicans are to blame for this mess. They love to spend trillions of dollars on unnecessary wars and a bloated imperial military. They all believe in Republican Big Government, but unlike Democrats, they want to put it all on the government’s credit card. Republicans spend like crazy but then cut taxes to corporations and the wealthy. They cut off government revenue and thus create these huge budget deficits. And they refuse any talk about restoring taxes to a responsible level that would end the deficits so they are not serious about cutting deficits or paying off the national debt. They want to use the debt as an excuse to end Social Security, Medicare and Medicaid. Medicaid needs to be reformed and greatly trimmed back. But Social Security and Medicare are vital programs that are supported by payroll taxes. There is no reason to end them. So if the choice is to have a black president and keep Social Security and Medicare, or to have a white Republican president and end these programs, I will vote for Obama just like I did in 2008. I don’t want to have to go off and die under a bridge when I get old.

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