If The United States Budget Looked Like
Joe Six-Pack’s
The United States budgets, deficits,
obligations, and financial position can be hard to understand and
very complex. But,it can be simplified to get a better, easier to
understand, snapshot of the financial status of the Federal
government. To do this, I am going to take the real 2010 budget
numbers and official IMF holdings to turn the trillions of dollars
into a typical American household budget to show where we stand. To
do this little trick I’m going to rename a few accounts and do some
significant division. In fact, in this scenario, each dollar will
represent one hundred million real dollars. So, without further ado,
here’s our U.S. Household Budget and Financial Statement:
Income: $23,810.00 (Median income
for a single person in North Carolina)
Expenses:
Mandatory: $21,840.00
Discretionary: $13,678.00
Total: $35,518.00
Current Debt: $140,780.00 (3 BR, 1300
sq. ft house in Raleigh)
Savings Account: $1,320.00
It’s amazing to me how much this really
looks like what I would think the typical American household looked
like before the dominoes started to fall. Let’s start by looking more
closely at this scenario. We have a single man, Mr. Joe Six-Pack,
living in a 1300 square foot, 3 bedroom house. However, to keep this
analogy accurate, the house he lives in has a market value of $0. Not
too hard to imagine today. Mr. Six-Pack still owes over $140,000 on
this house that has no re-sale value.
Mr. S-P has to spend over $21,000 per
year on “Mandatory spending”. Think food, clothing, shelter. He
can’t cut back at all in these areas and those costs may go up. They
include interest and payments on his house, by the way. Now, he also
likes to party and spends more than half his annual income on things
that are not needs. Think vacations, parties, entertainment, etc. In
order for Joe to get his spending under control so he could at least
break even, he would have to cut his fun budget to $1,970.00 per
year. That’s only $164.17 per month. That’s an 86% cut across the
board in the “extras”. But, even if he does that it will take a
long time for him to actually pay down his big debt.
The other major problem we see for Joe
is that he’s not much of a saver. If he took a pay cut and couldn’t
get his credit card limit raised he would run out of cash in a flash.
For all the debt Joe has, he doesn’t actually “own” much. Luckily
(or unluckily) for Joe, he has a credit limit of $143,000.00 and his
limit keeps getting raised (just like yours used to do).
Now, my little scenario is a very
simplified version of the real world. But, it does paint a more
accurate picture of where this country is financially. By the way, I
used Raleigh, North Carolina only because it had a median income
figure very close to that of “Joe” after I did the dollar
conversion.
Sources:
Michael Wigle's space 