Saturday, April 9, 2011

What do the Federal budget numbers really mean?

According to, the United States of America now has $14.3 trillion in debt. That number is climbing - rapidly. The official budget of the United States indicates that in fiscal year 2011 alone, the country will borrow another $1.267 trillion just to pay this year's bills. This results from receipts of $2.567 trillion and outlays of $3.834 trillion.

But numbers in the trillions are just too large for most of us to grasp - a fact most politicians count on, to keep us in the dark about what they're really doing. So we offer the following, simplified illustration: Imagine we're talking about your household income, expenses and debt.

We'll begin with a baseline we can all relate to: your annual income is $38,340. The problem is that your expenses are 1 1/2 times your income, so you're using credit cards to pay your bills. Even worse, you're using a credit card to make minimum payments on another. Your spending and borrowing habits mirror those of the Federal Government, so here's what your financial statement looks like:

Annual Income: $38,340.00

Annual Expenses: $57,510.00

New Debt This Year: $19,170.00

Another way to look at this is how far behind you fall each month:

Monthly Income: $3,195.00

Monthly Expenses: $4,792.50

New Debt This Month: $1,597.50

Washington politicians are now crowing about a historic a $38 billion budget cut. But what would this really look like in our household budget example? Let's translate this self-proclaimed "accomplishment" into numbers we can all understand.

Your annual budget is $19,170 in the red. So you struggle, prioritize, eliminate, pinch pennies, and manage to find savings of 3%. That's a whopping $1,725.30 you won't spend this year, or $143.78 each month. The result of your courageous, "historic" budget slashing?

Annual Income: $38,340.00

Annual Expenses: $55,784.70

New Debt This Year: $17,444.70

Or in monthly terms:

Monthly Income: $3,195.00

Monthly Expenses: $4,648.72

New Debt This Month: $1,453.72

Progress, to be sure. But hardly of the magnitude necessary. If you don't do something dramatically different, and quickly, you are heading for bankruptcy.

Politicians are telling us that the results of their budget dog and pony show are wonderful , but don't believe them. The American people are not being well served by the clueless, partisan, political class elites.

Most elected officials in Washington, DC are not serious about addressing this very real problem. They are borrowing and spending the United States into economic ruin, and they must be stopped.

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