

The US Budget Explained As a Family’s Household Budget - fosk
http://www.catholicvote.org/discuss/index.php?p=21034

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jerrya
One problem with this chart is that it presents a snapshot in time and so you
can't see how the various portions of the budget have changed.

So here is Jared Bernstein( * ), former member of President Obama's economic
team explaining how the "Family Budget Not Equal to Government Budget"
([http://jaredbernsteinblog.com/family-budget-not-equal-to-
gov...](http://jaredbernsteinblog.com/family-budget-not-equal-to-government-
budget/))

 _Heading into work the other day, I heard a Congresswoman on the radio using
a common argument that always sticks in my craw—or it would if I knew what a
‘craw’ was.

Here’s the gist: “The federal budget is just like a family budget, and we in
government must tight our belts and live within our means just like families
do.”

There are similarities which I’ll note below, but it’s almost always used as
an argument for cutting everything to the bone right away, and in that sense
it’s wrong.

First of all, it’s bass-akwards: when families are tightening their belts, the
federal government is the one institution that can actually help the
economy—and these belt-tightening families—by loosening its belt and running a
deficit.

That deficit should be temporary and should come down when the private economy
climbs up off the mat—which again tweaks the analogy: when families start to
loosen, gov’t should eventually start to tighten (“eventually” because these
transitions can be fragile and if gov’t tightens too soon, it can reverse the
early gains–see UK).

But there’s another fundamental way in which this family budget analogy gets
misused. Families borrow to make investments and to get over rough patches.
They run deficits too. I went into pretty deep debt to finance college and
grad school and I’m glad I did.

The whole credit system is based on the fact that if we had to pay cash-as-we-
go for everything, we’d seriously underinvest. And that’s true for families
and governments—and yes, you can overdo the borrowing thing. But to flip too
far the other way is equally dangerous.

So, while it sounds good and has some merit, I’d use the “gov’t budget=family
budget” argument with care and I’d discount those who want to use it as a
hammer to insist on instant cuts. _

( * ) _Jared Bernstein joined the Center on Budget and Policy Priorities in
May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief
Economist and Economic Adviser to Vice President Joe Biden, executive director
of the White House Task Force on the Middle Class, and a member of President
Obama’s economic team.

Bernstein’s areas of expertise include federal and state economic and fiscal
policies, income inequality and mobility, trends in employment and earnings,
international comparisons, and the analysis of financial and housing markets.

Prior to joining the Obama administration, Bernstein was a senior economist
and the director of the Living Standards Program at the Economic Policy
Institute in Washington, D.C.

Between 1995 and 1996, he held the post of deputy chief economist at the U.S.
Department of Labor._

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TomOfTTB
A couple things here...

1\. The argument is used to create a mental model of the situation. Some might
use that model to make an argument for cutting but that doesn't mean their
argument is inherent in the model and as such it doesn't invalidate the model.

2\. Families also can spend money that, in theory, can help their personal
economy. Education, moving to an area with better jobs, etc... So the argument
isn't "bass-akwards" as the site contends.

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hkmurakami
Although I detest pie charts, these numbers do probably give us some
perspective on just _how_ unbalanced our spending currently is.

Big numbers out of the scope or our everyday lives are difficult to fathom.
Perhaps it would have been nicer to adjust the "income" to $40k or so, which
is the US median household income.

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terinjokes

      Annual Family Income:				$ 40,000
      Money the family spent: 			$ 70,415
      New debt on the credit card: 			$ 30,415
      Outstanding balance on the credit card:	$263,060
      Budget cuts: 					$    709.67

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hcack
I'd be more interested to see national budgets compared to other national
budgets than to family budgets.

Nobody expects a family to pay for military R&D, and many expect their
government to. We abide the state precisely because it takes on these
responsibilities.

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jinushaun
Very "tea party" centric pie chart. Who the hell sends over 60% of their
income to taxes?! Talk about scare tactic. It should be closer to 0-25%,
especially given how many people celebrate the annual April jackpot (aka.
refund checks)

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bluedanieru
I look forward to "War on Terror explained as a pissing contest on primary
school playground" and other nonsensical childish bullshit in support of
utterly disproven ideas.

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TomOfTTB
The one thing I'd add is The amount of revenue generated by the Top 10% of
income earners. Using the household budget model it would be $6,835.
(individual income tax is about 45% of federal revenue and the top 10% pay 70%
of that). Too many people think we can solve all our problems with a modest
increase on "the rich" when the truth is our hole is much deeper than that

(the top 10% is anyone over $113,000 which is why I put "the rich" in quotes)

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rdl
More realistically, it's not "outstanding balance on the credit card", but
"outstanding balance on the mortgage", or even less bad -- the interest rates
paid by the federal government to borrow are absurdly low, largely due to the
US Dollar's status as the global reserve currency.

If I could borrow an infinite amount for 1-4%, I could think of a lot of
things which would produce vastly greater returns. Genuinely needed
infrastructure, technical education (from infancy to technician, engineer, or
scientist level) for anyone capable, science, ...

Now, the US doesn't actually spend borrowed money on that kind of stuff...

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TomOfTTB
I don't agree with that. Much of our debt comes from bonds which need to be
repaid in a few years. So we're constantly having to reborrow on our debt much
like someone jumping from credit card to credit card.

If anything the current debt is like the credit card and the unfunded
liabilities are the mortgage.

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rdl
The average maturity of US debt is 5+ years. And, can be rolled over -- at
worst, rolled over at historically prevailing interest rates.

Off balance sheet liabilities are more of a concern than the official debt.
The declining ability of the US to repay debt is a major concern (due to
declining competitiveness). The actual level of official debt right now isn't
itself a huge concern.

