With the election happening in about a month there is more talk than usual about the US Budget, cutting the deficit and National Debt. Monetary units of measure like Billions and Trillions are thrown around on television so much these days that people have become desensitized to them. The term debt is used rather loosely and I fear we have reached a point where it is becoming accepted as a normal way of life, in both government and personal finance. With respect to the government debt most people barely acknowledge a problem exists, or if they do they really cannot quantify it nor do they understand just how big the problem really is. In any event most expect that someone (Superman? Jedi Knight?) will probably do something, or Congress will step in and make things better at the last minute like they always do. If only.
So how can we wrap our arms around this monster? Is there a way to graphically depict just how bad the situation is? I think there is but the data just has to be framed in terms we can all comprehend. I was not an economics major in college but I know how to search for information and (as a bonus) know how to read. Although the finances of this nation are truly complex you don’t have to be a genius to see the big picture. I reject the notion that anything related to the economy should only be left to the “experts” to discuss, we mere mortals should defer to their gratuitous displays of knowledge and accept their every suggestion as fact. Nay says I.
I hope to make a pretty decent case for just how big of a problem we are facing and to show you how many of the typically proposed “solutions” by either party pretty much equate to tossing a bottle of water at a raging forest fire. I should mention that I am not the first person to do this, I posted another article which originally was on Peak Prosperity a few years ago entitled: How to explain the current economic situation to friends and family. With that in mind, let’s begin.
- In 2012 the US pulled in revenue of $2,468,000,000,000
- In 2012 the US had expenses of $3,795,000,000,000
- That means in 2012 the US had a deficit equivalent to $1,327,000,000,000
- Total Debt held by the US in 2012 equates to $16,350,000,000,000
Here is a simple bar graph chart which represents what I just listed out.
- In 2012 the Family pulled in revenue of $60,000
- In 2012 the Family had expenses of $92,260.94
- That means in 2012 the Family had a deficit equivalent to $32,260.94
- Total Debt held by the Family in 2012 equates to $397,487.84
Now that we have an idea of just how bad the situation is and some frame of reference established using the single family example, let’s talk about possible solutions. I’ll take the standard arguments for “fixing things” proposed by both parties and crank up the volume a bit, just for the heck of it.
Solution 1: The rich need to pay their fair share, increase taxes on the top 1%. According to Bankrate.com in 2009 there were 1.7 million Americans in the IRS’s top taxpayer category from which they (the IRS) collected $318,000,000,000. It’s 2012 and that data is 3 years old so let’s get crazy and propose that we double the amount of taxes collected by the IRS for that taxpayer category. This equates to $636,000,000,000 which we can use to offset our deficit and overall debt. Will that new found revenue make much of a difference when compared to today’s numbers?
As you can see we are starting to make some progress towards covering ONE YEAR’s worth of deficit for the US budget. The extra revenue would come from those drastic tax increases on the top earners combined with massive across the board cuts all government programs. Still yet we fall short and the reality is what I’ve proposed is purely a pipe dream, here’s why.
Remember last April when the government narrowly avoided shutting down? “Fiscally conservative” Republicans versus “Overspending” Democrats essentially in gridlock over a paltry sum of around $30,000,000,000. That’s 30 BILLION DOLLARS. This amount of money is why the government almost shut down. Do you know what $30,000,000,000 is next to our current deficit and debt? Let me show you and oh yes, I’ll even include 2011’s combined total interest payments on our debt just for comparison’s sake.
Who knows how this whole thing will play out, your guess is as good as mine but regardless I hope you enjoyed the article. I hope more than anything it encourages you to seek out your own facts and to come to your own conclusions and to be able to understand just how deep of a hole we are in. All of this of course should harden your resolve even more to prepare for troublesome times which lie ahead.