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Thread: The Budget Simplified

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    Default The Budget Simplified

    The picture says it all.





    Any thoughts?
    "Nothing happens until the pain of staying the same outweighs the pain of change."

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    Quote Originally Posted by Traveler View Post
    Any thoughts?
    Sure. People who don't say what's on their mind are quite irritating and difficult do deal with.

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    Just to make copy-pasting easier:

    The budget explained in simple English.

    I love it when complex things are simplified so that we can all understand.

    • United States 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 cut: ...................$38,500,000,000



    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 credit card: ..........................................$142,710
    • Total budget cuts which some politicians are proud about: .........$385



    Stop the insanity now. Vote them out and demand a balanced budget.
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    Ti centric krieger's Avatar
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    annual family income is more akin to the total GDP figure, which is 15 trillion. so that household by comparison would have an income of $150.000. yawn.

    also, "outstanding balance on credit card" is misleading. US credit card companies charge an interest rate of around 30%. the US government currently borrows at less than 2% for loans with a 10 year repayment term. investors offer them these loans because they assess the US as highly credit worthy. they apparently neither worry about default chance nor about inflation.

    a "balanced budget" is more ambitious than necessary, because nominal GDP grows at a rate of almost 6% a year historically. you just have to spend a little less than that in order to rein in the debt, i.e. to shrink it relative to your nominal income: make the debt-to-GDP ratio fall over time. currently the spending is at about 10%, so there is some cutting or revenue raising to be done, but +/- 6% would get the job done fine. of course just reining in the current output gap (i.e. unemployment, capacity under-utilization) of 8%, which both increases the GDP in "debt-to-GDP" and raises tax revenue, would go a long way toward that goal.

    the US govt has issues, but you really don't need to spin the data to this extent to argue that point.

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    Quote Originally Posted by labocat View Post
    annual family income is more akin to the total GDP figure, which is 15 trillion. so that household by comparison would have an income of $150.000. yawn.

    also, "outstanding balance on credit card" is misleading. US credit card companies charge an interest rate of around 30%. the US government currently borrows at less than 2% for loans with a 10 year repayment term. investors offer them these loans because they assess the US as highly credit worthy. they apparently neither worry about default chance nor about inflation.

    a "balanced budget" is more ambitious than necessary, because nominal GDP grows at a rate of almost 6% a year historically. you just have to spend a little less than that in order to rein in the debt, i.e. to shrink it relative to your nominal income: make the debt-to-GDP ratio fall over time. currently the spending is at about 10%, so there is some cutting or revenue raising to be done, but +/- 6% would get the job done fine. of course just reining in the current output gap (i.e. unemployment, capacity under-utilization) of 8%, which both increases the GDP in "debt-to-GDP" and raises tax revenue, would go a long way toward that goal.

    the US govt has issues, but you really don't need to spin the data to this extent to argue that point.
    I think you make a sound argument, but the problem is that you can't really look at the GDP as the annual family income. If anything you can look at the GDP as the family's total value of everything they own. So essentially that would be the total value of their house, cars, etc..., which translates to $146,000. So they can't use it as something to pay off the debt unless they sell everything they own, which kind of defeats the purpose. However, you can look at the annual GDP growth rate as part of the annual family income, so that would be 2.8% of $146,000, which is $4,088. So all together the annual family income would be $4,088 plus $21,700, which is $25,778.
    Last edited by Raver; 01-30-2012 at 04:19 AM.
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    Ti centric krieger's Avatar
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    to be fair it does make a valid point about tiny budget cuts being presented as major achievements through the use of words like "billions!!" (in trillion dollar contexts) and using 10 year time frames to make the cuts look 10 times as big.

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