To understand the U.S. federal budget, divide by 100,000,000

Philip Greenspun divided the U.S. 2011 federal budget by 100,000,000 and wrote a little parable:

We have a family that is spending $38,200 per year. The family's income is $21,700 per year. The family adds $16,500 in credit card debt every year in order to pay its bills. After a long and difficult debate among family members, keeping in mind that it was not going to be possible to borrow $16,500 every year forever, the parents and children agreed that a $380/year premium cable subscription could be terminated. So now the family will have to borrow only $16,120 per year.

Understanding Congress's solution to the federal deficit problem

• [highlyverbal]

  Where was this analogy when George W. Bush issued a tax rebate out of the Clinton surplus?!

• [yrogerg]

  Oh god I’m spending way too much time on commenting on that blog why am I explaining the Prisoner’s Dilemma to a bunch of people who ostensibly attend Harvard and also presumably took a single social science class (any social science class!) at some point ever, or at least watched A Beautiful Mind?

• [JoshP]

  The reason this analogy is so powerful is that it takes into consideration the minuteness of human perception. Noone can visualize, much less value 100 trillion anything. But all of us can imagine exactly what we would spend 20,000 dollars on. It personalizes the argument in generalities. This isn’t about specifics.
  Anthropologists and Psychologists know that we have hard wired numerical limits where we just stop giving a f***. They are usually at the mid three figures. Brain too small…world too big.

• [Anonymous]

  It is very easy to fix the Federal budget. Here is the new “Green Budget”:
  Every person and company pays 15% income tax. There are no longer any deductions or itemizations. Money located anywhere in the world is taxed. Individuals can take 5% off of that if they vote in the Federal Election.
  No Federal subsidies are paid to any company that is profitable.
  No Federal agency can hire more than 800 people in Washington DC.
  The Pentagon gets $300B per year.
  Any other company that gets Federal military or social aid gets a bill for it and if they can’t pay it will turn into an interest bearing loan.
  Every resident of the US gets $300/mo. for medical help. It is no longer legal for a medical provider to operate if they do not provide at least three $300/mo. insurance programs. It is illegal for a medical provider to use exclusions. If you make over $300,000.00 per year you do not get this.
  Every agency must post its use-of-funds budget online for comments 6 months before they get to use their money. The Federal OMB office has police authority to prosecute abuse.
  Believe it or not, that would pretty much fix our budget problems!

• [KaiBeezy]

  .
  even if both the labeling and premise
  of the original exercise are flawed
  it is still illuminating to get
  a better sense of the proportions
  .
  here’s another way
  each line = 1.0 trillion
  each set of three dashes = 0.1 trillion
  each single dash = 0.033 trillion
  a bit awkward
  but it let me set the smallest amount
  to a single dash
  .
  annual budget $3.82 trillion
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — -

  annual taxes $2.17 trillion
  — — — — — — — — — —
  — — — — — — — — — —
  — —

  annual debt $1.65 trillion
  — — — — — — — — — —
  — — — — — — –

  cuts $0.04 trillion
  -

  .
  better also show the actual
  current budget deficit
  $14.29 trillion
  $14,290,000,000,000
  divide by 100,000,000
  $142,900
  which i guess is what we’re trying to
  pay down with the “cuts” above
  and according to the premise
  would be the family’s total debt
  looks like this
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — — — — — — — — —
  — — —

  .
  did i get that right?
  oy
  .

• [GrrrlRomeo]

  Or, you know, the family could just find a way to increase their income.

  What’s the difference between leaving your grandkids monetary debt later and cutting their education now while not spending on any home maintenance? Well, you leave them with a broken, falling apart house that they’re too stupid to know how to fix.

  Future: “Congratulations on eliminating the deficit. Now we just have a nation of stupid people and broken outdated infrastructure.”

• [KaiBeezy]

  .
  oops
  $14.29 trillion is not
  the current budget deficit
  it is the *total* public debt
  .

• [KaiBeezy]

  .
  ok, so i guess the interesting thing
  about the original premise was
  re-proportioning the numbers
  to something easily understandable
  .
  mine is just a graph
  .
  people don’t grok graphs?
  .

• [Rob Cockerham]

  This is awesome. It helped me understand the size of the problem.

  Obviously I can’t use this example to find a solution to the problem, but I can use it to visualize the magnitude of the problem.

  • [styrofoam]

    There’s some serious cognative dissonance going on when it’s Rob Cockerham “this helped me visualize the magnitude of the problem.”

• [Anonymous]

  That is brilliant. Plus, they would probably stop participating in the quarterly PBS fundraiser.

• [The Raven]

  “what would happen if we took last year’s budget and cut everything by 10% across the board.”

  Oh, lots of people would die and be homeless. Medicare+Social Security are big parts of the Federal Budget.

  More food for corvids!

• [phisrow]

  They left out the part of the story where one parent insisted that they would refuse to cash any more paychecks until the fiscally ruinous habits of giving a nickel to the homeless guy and buying a condom were abolished…

• [Anonymous]

  Nice. But forgot to add that one of the family’s primary breadwinners, we’ll call him Gerald Ebenezer, is funneling 90 percent of his paycheck to Swiss bank accounts and his secret Argentinean family.

  • [Mister44]

    I thought his name was Ebeneezer Goode.

    http://www.youtube.com/watch?v=YFJdUJg4wOk

    • [Anonymous]

      Ahhh, the perfect antidote to supply side voodo Reagnomics, a 31 year long drug binge!

• [sgt_doom]

  Here’s a far more reality-based way to understand the REAL American economy, which has been dismantled over the past 35 years, FYI:

  FORENSIC ECONOMICS 101

  Private equity firms/leveraged buyout firms manage and oversee the bulk of the largest pension funds (superannuation funds) out there, including most union funds. They leverage these funds to destroy unions and future union employment, while structuring them with credit derivatives which profit themselves but end up destroying those funds.

  With the destruction of those funds, which must either be bailed out or allowed to default, comes the further destruction of local governments as they are usually heavily invested (through their bond issues) in those pension funds. Thus allowing the super-rich to go in and pick up new assets at bargain basement values.
  This would be considered the optimal asset stripping.

  U.S. foreign aid (US taxpayer assisted) is well known to be directed to countries which will then purchase weapons systems from defense contractors, but what is less known is what the greater slice of that foreign aid goes to.

  The bulk of it is managed and manipulated by American-based multinationals to build foreign factories, production facilities, R&D labs, worker training, etc., to which the multinationals then offshore American jobs to, and create new jobs at. Extreme examples of this were the two “free trade agreements” supported and passed during the Bush administration, lobbied on behalf of by former president, Bill Clinton (in the pay of the jobs offshoring industry), involving Jordan and Oman.

  Foreign aid established factories in those two countries, which then imported the cheapest labor they could from Bangladesh and the Philippines, chiefly benefitting the American-based multinationals who exported those jobs to the factories, and the small number of wealthy and connected managers and owners in Jordan and Oman who managed those factories.

  The co-opting of the conservation lobby (Nature Conservancy, League of Conservation Voters, Sierra Club, etc.) and the environmental lobby (those entities duped into supporting cap-and-trade) by Wall Street (corporate and individual land monopolists and oil/energy corporations).

  For example, when a volunteer group works to set aside a tract of land for conservation purposes, etc., and they don’t continuously track the final result, they are unaware that some, or all, of the tract is eventually sold for pennies on the dollar to foreign corporations, either in a quid pro quo deal, or which is owned through circuitously laddered holding companies by an American-based multinational.

  Also, various conservation groups will lobby on behalf of tax cuts and benefits for set aside lands, unaware they are working – for free – on behalf of those super-rich land monopolists.

  The controlled, compromised and highly manipulated tax code which chiefly exists to benefit the one percent, the speculator class.

  A traditionally popular example of this is the “Louis B. Mayer clause” dating back to 1954, where Mayer’s tax attorneys bribed the usual congressmen to insert a special clause in the tax section to allow Mayer to avoid paying taxes on his fortune when he retired. This clause specified that only the special pre-existing tax situation (i.e., exactly targeting only Mayer’s situation) existing prior to the date of that clause was allowed – the complete antithesis of all legal foundation, i.e., a law is normally passed to be in effect which affects everyone after the passage of said law!

  A recent example is the “Blackstone Group clause” – essentially the Blackstone Group bought some congress critters to allow them to continue paying the same capital gains tax rate after they went public, when by law they should have begun paying the higher corporate tax rate. Some law professors (Davidoff comes readily to mind) would claim this was “deft tax law.”

  No, it is simply absolute corruption.

  “All money is hierarchically controlled as an asset to private sector institutions and elite capital holders who have the ability to call in their chips, i.e., your bank digits, where as it’s an interest-bearing debt to governments and the people.” — Damon Vrabel

  “A good investment is to own a senator, but a great investment is to own the US Treasury.” — Anon

  • [jmtd]

    tl;dr. Anyone care to summarize?

• [Anonymous]

  The part of dividing numbers is useful since we have a hard time dealing with big numbers, but he left out the part where after we imagine the government is a family with credit card debt we need to realize that the US government is nothing like a family with credit card debt.

  If fiscal conservatives have real arguments about why current levels of government deficit spending are bad, they should make those arguments.

  If fiscal conservatives can’t make their argument without assuming the federal government is something it isn’t (a family with credit card debt), then they have no arguments.

  In good faith, I assume they do and anxiously await the time when we can debate this issue in a honest way.

• [boo]

  And when you all stop whining and start producing products, I will believe you.

  • [martin0641]

    Everyone cannot be a producer, but we are all consumers, it is only through artificial scarcity and the widening of the gap between classes that the rich can keep holding on to all the toys. Luckily, technology tears that wall down quickly, and eventually the price system will fail.

    The purpose of government is the general welfare, not to make the top 1% who already have more than any human could ever need – more wealthy. America is supposed to allow life, liberty, and the pursuit of happiness – which is made impossible by the top 1% grabbing so much of the pie and rigging the system in their favor, congressionally, judicially, and by nudging national policy to their benefit, that an average individual cannot realistically compete, many end up in jail or in so much debt that they are slaves to lenders who have caused prices to skyrocket. Check out tuition since the 70s.

    It’s not a foot race, it’s a drag race, and the top 1% are born with a monster machine ready to go and most other people have a unicycle if they are lucky. The rags to riches, considered statistically by how often it actually happens, is a fairy tail for apologist suckers who have been fooled into someday thinking that they too will “earn” their place at the table.

• [Anonymous]

  Using credit card debt as an analogy for the national debt is completely misleading. Credit card debt is owed to an outside entity (a bank). Most government issued debt is held by members of the family itself in the form of treasuries that the members have bought using money they earn from holding jobs. Granted, a significant amount of the debt is owed to the Chinese and Japanese neighbor down the street, but much has been borrowed from the people within the family’s household.

• [Anonymous]

  Doesn’t anybody consider the $12,000 per year our family spend on defense? How come that’s of the table?

  • [Anonymous]

    Well, they could spend less on guns, but that’s one of the few things that they previously *agreed* they could buy. Most of their other expenses were impulse-buys at Costco.

• [Anonymous]

  I’d like to hear Philip Greenspun explain why that family is spending so much money on guns?

• [Maurice Reeves]

  Well, unfortunately, that’s as far as they got. Mom thought Dad should take that promotion and pay raise even though it might mean he spends a little more time in the office and have a few more responsibilities. Dad wants Mom to stop donating to the shelter and the free clinic. He says we shouldn’t give out any more handouts. Ever.

  Of course, that didn’t stop him from borrowing a whole bunch of money to pay off Junior’s debts went he went on that week-long coke-fueled bender in Amsterdam after getting his MBA. But then again, Dad’s never been able to say know to Junior.

  And let’s not get started on Dad’s endless hunting trips. He keep going out and buying new guns and gear every week on credit.

  Not like Mom’s doing much better. She’s been footing the bill for Grandma’s house and living expenses and medical expenses for a long time now, no questions asked. Grandma’s been to the doctor six times this week for all kinds of unneeded procedures, and Mom just pays them off without blinking an eye.

  Maybe it’s time I got emancipated from these two…

• [Anonymous]

  We won’t be able to have any sort of real budget discussion until our out of control “defense” budget is included in what can be cut.

• [Anonymous]

  The problem with the family analogy is it opens the door to readers adding other variables into the equation to justify their own spending beliefs, (like extended family members, neighbors, other expenses, etc) rather than looking at a straight comparison of numbers, which was the original point of the exercise.

  A better model for simplifying the exercise might be:
  Water = debt
  Cup = what we can afford

  We have a 21oz cup that we are trying to fill with 38oz of water. Our leaders took an eyedropper and removed 1 drop of water from the cup to make room for the 17oz of water that won’t fit into our cup.

  It’s completely irrelevant where the water comes from, what it’s used for and who needs it. The simple fact is, at this moment in time our cup is only so big and we have a certain amount of water that we have to carry.

  Liberals want a bigger cup.
  Conservatives want less water.

• [Roy Trumbull]

  I think Dickens had it right in David Copperfield:
  ‘My other piece of advice, Copperfield,’ said Mr. Micawber, ‘you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and—and in short you are for ever floored. As I am!’

• [Anonymous]

  So by that logic, no one here has ever taken out a substantial student loan or a mortgage or has car payments. Sometimes deficit spending is good. An investment like a house (well it used to be an investment) or an education or a car (to help get you to the good job you got with that education), these are all worthwhile if done judiciously. A credit card that lets you take advantage of a sale is another example. Or your roof leaks, hot water heater goes etc… these might necessitate deficit spending. Not all debt is bad. It just needs to be managed.

  If we assume there will be some inflation, then paying back the debt with inflated dollars is one way around this. If we can jumpstart the economy and have a bigger tax base, this is another way to solve the problem. Raising taxes (or at least not cutting them) on the wealthy seems like another way to reduce the deficit.

  I long for reasonable debate on this but so long as politicians assume you are stupid enough to fall for their platitudes and finger pointing then no one will be accountable and focused on fixing the problem in a reasonable manner that doesn;t throw the baby out with the bathwater.

  Until that happens I’d rather have the Dems in charge. They seem less greedy.

  • [Anonymous]

    >implying debt is better than no debt ever

• [GeekMan]

  Solution: Put the kids to work.

• [Anonymous]

  Are cuts to WIC, public broadcasting, etc. really analogous to a $380 premium cable package? I think not.

• [xian]

  Where’s the part about dad’s $20,000 gun habit trying to keep the neighbors under control?

• [el_gallo]

  Mister Greenspun’s argument is simplistic garbage. This is something I would expect to hear on the Paul Harvey show — a folksy feel good fantasy that shows us, golly shucks, those pointy heads in Washington just need some common sense and good ol’ fashioned belt tightening. Yup.

  Applying the same technique to Fukushima, well them Japanese fellers just need some cement, a few shovels and a couple of barrels of elbow grease.

  • [Unmutual]

    This is something I would expect to hear on the Paul Harvey show — a folksy feel good fantasy that shows us, golly shucks, those pointy heads in Washington just need some common sense and good ol’ fashioned belt tightening. Yup.
    

    really? That was not my read on this at all.

    My take is that this shows what a bunch of theater and distraction all that drama last week was. It was completely meaningless, ideological posturing.

    And after reading that Taibbi piece today . . . I think I am really and truly ready to just give up caring.

  • [Mark Frauenfelder]

    “Applying the same technique to Fukushima, well them Japanese fellers just need some cement, a few shovels and a couple of barrels of elbow grease.”

    That seems about right for a problem 100,000,000 times smaller than Fukushima.

    • [el_gallo]

      And my point being that the reality of the situations, and the remedies, do not scale. One guy with a shovel might be able to solve 100,000,000th of a Fukushima, but 100,000,000 guys with shovels will still all be exposed to deadly levels of radiation working in shifts at the real Fukushima.

      Greenspun’s analogy is fundamentally false.

      • [Unmutual]

        No, you just do not understand the difference between an analogy and an equivilency.

        a·nal·o·gous/əˈnaləgəs/Adjective
        1. Comparable in certain respects, typically in a way that makes clearer the nature of the things compared.

        But if it makes you feel better we all think you’re really smart.

        • [el_gallo]

          Your argument about semantics has totally invalidated my arguments!

          I’m glad you can admit I’m smart, though.

        • [Jonathan Ehrich]

          I’d like to second el_gallo and a bunch of others that macro /= micro, nor are they remotely analogous in any useful fashion.

  • [Anonymous]

    He doesn’t have any room in his analogy for the revenue lost by keeping the Bush tax cuts in place or the fact that the US spent and continues to spend a ton of money on the wars in Iraq and Afghanistan.

    Countries have the power to choose to raise and lower taxes, and to choose when to start and stop wars. Families don’t. Analogy: fail.

  • [Cook!EMonstA]

    Simple answers for simple people who don’t dissect complex problems. Here is a simple answer along the same lines. The family MUST increase earnings. Almost ALL of the 16,500 this family is borrowing is to pay for the fact that they spend too much money supporting their local militia, buying guns and ammo for two shooting ranges over the last 10 years. Of course, this example only ever considers spending priorities as a throw away, cut the cable bill, nonsense line.

• [Anonymous]

  Please read something like
  http://www.pkarchive.org/trade/company.html
  or
  http://yglesias.thinkprogress.org/2011/03/households-and-states/
  which provide insight into why the “family budget” metaphor is NOT a good way of analyzing national fiscal policy decisions.

• [EvilSpirit]

  The family adds $16,500 in credit card debt every year in order to pay its bills.

  Wow! Where can I get one of these credit cards that only charges 3% interest? I’d borrow every penny I could on it, and plow it into my mortgage.

  • [Anonymous]

    It’s currently about 4% for a mortgage in Europe, I think.

    • [Anonymous]

      “in europe” is pretty imprecise.

      I pay 3.24% pro year for my mortgate, I live in Norway, which is part of Europe, but not part of the euro-zone or the EU.

• [David A]

  Trick of course being that America spends on military spending.

  Over 687 billion a year. Which is more than all other countries in the world. COMBINED.

  We could cut our “defense” spending 75%, and still be spending way more than any other country individually.

  http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

  • [teapot]

    America will probably have to give up its booming investments in death and destruction before things fly right. Pity the Repubs would never let that happen because they’re worried about looking weak. Trust me, it looks much weaker to bankrupt your country posturing than to address the reality of its problems.

    Remember: Al Qaeda told us this was how they would destroy America, as they acknowledge they don’t have the physical might to bring the US down.

    David A: It’s not quite “more than every other country combined”, but it’s more than the next 20-or-so countries combined, which is truly disturbing.

  • [Nadreck]

    But then without all that muscle to project a presence in the Middle East the price of gasoline might go up so high that it would cost more for a litre of gas than it would for the litre of milk that you toot down to the grocery store for in your SUV. Any politician that let that happen would be immediately impeached.

    • [Anonymous]

      $2.50/gallon for milk if you buy 2 for 1 generic. ~$4.00/gallon for generic gas with no possibility for discounts.

      • [Anonymous]

        Down here milk is over $4 a gallon cheapest….

        • [Antinous / Moderator]

          The cheapest gas here is $4.09 per gallon.

        • [djn]

          Interestingly, the ratio is close even though the abolute prices are different: I pay about $8/gallon for milk and $9/gallon for gasoline, though they’re typically even closer.

        • [peterbruells]

          Comparing gross and gas and milk prices are a little dicey, considering how much tax rates for gasoline vary.

        • [djn]

          That only makes it more interesting. ;)

    • [Antinous / Moderator]

      Um, I don’t know where you live, but gas is more expensive than milk here.

    • [David A]

      Gas might be expensive if it isn’t subsidized?
      Yeah, so what?
      http://i.imgur.com/J94CI.png
      http://i.imgur.com/JEeir.png

      Worst comes to worst, your long haul freight can run on natural gas.

      And everything else that isn’t military or international travel could just as easily run on electricity.

      Sure you’d need some infrastructure, but compared to the cost of 1 years military budget it’d be a steal.

      • [Mister44]

        re: “Gas might be expensive if it isn’t subsidized?
        Yeah, so what?”

        The libertarian in me says to stop the subsidized. The realist in me says it would be a horrible move and would effect the poor more than anyone. Everything they touch, from twinkies to hats with beer cans on the side, would cost more as would their commute to work, etc.

        We are decades off from viable solar powered cars. When that happens, hell yeah, lets do it. Right now the technology does not exist to make it a valid option.

        re: “Worst comes to worst, your long haul freight can run on natural gas. ”

        Why switch from one non-renewable resource to another? Increase its use by making it part of the freight system and see the price rocket.

    • [manicbassman]

      “But then without all that muscle to project a presence in the Middle East the price of gasoline might go up so high that it would cost more for a litre of gas than it would for the litre of milk that you toot down to the grocery store for in your SUV. Any politician that let that happen would be immediately impeached.”

      Petrol in the UK already is more expensive per litre than milk… sadly our idiots continue to hamstring our economic recovery by loading us down with more and more green taxes on our fuel to prevent “climate change”… well, that’s their excuse, but we all know thy’re conning us as they really need that duty to cover the repayments on the loans we’ve been signed up on to pay for all our bloated public services stocked to the brim with such non-jobs as “diversity coordinaters”, “Traveller liason officers”, “five-a-day facilitators” and “walking bus organisers”…

  • [Jeffrey S]

    We have over 700 military bases. There might be some waste there.

• [Cocomaan]

  Mark, the latest news from Wapo is that it wasn’t even a $38b cut:
  http://www.washingtonpost.com/business/cbo-budget-deal-cuts-this-fiscal-years-deficit-by-just-353-million-not-38-billion-touted/2011/04/13/AFFJnkWD_story.html

  “WASHINGTON — A new budget estimate released Wednesday says that the spending bill negotiated between President Barack Obama and House Speaker John Boehner would produce less than 1 percent of the $38 billion in claimed savings by the end of this budget year.

  The Congressional Budget Office estimate shows that the spending bill due for a House vote Thursday would pare just $352 million from the deficit through Sept. 30. About $8 billion in cuts to domestic programs and foreign aid are offset by nearly equal increases in defense spending.”

  So, it’s more like they decided not go out to eat. Once. At some point during the year. At McDonalds.

• [Anonymous]

  The US budget is not the same as a household budget unless the household can print its own money and its credit card rate is 3.52%.

  Seriously though, the unemployment rate is far more important than the debt right now and simplistic parables like this are a dangerous distraction.

• [hapa]

  i like that “an individual voter” reading a blog at harvard law needs help with big numbers. this suggest an explanation for the stupid ‘deficits r allwiz rilly bad’ metaphor.

• [boris]

  I agree with el_gallo, this is just silly. There are a lot of options available to the US government that are not available to a family, so the analogy is false. It’s easy to understand, but wrong and (probably purposefully) misleading.

  • [el_gallo]

    One (just one) of the very basic facts Greenspun ignores: How come so many people are willing to loan the U.S. government money at such low interest rates? Answer: they fully expect the U.S. to be able to pay that money back to them.

    The family debt analogy makes it seem like the U.S. is a non-credit worthy nightmare. (I mean, who would loan those spendthrifts all that cash every year? That’s crazy! Golly, shucks.) The reality of the world’s faith in the U.S. government and economy shows that it is anything but.

    • [Cocomaan]

      Our credit rating might be AAA, but at this time, the only organization buying treasuries is the Federal Reserve. You can check that out yourself.

      The Treasury then plays the Federal Reserve interest on our debt, which is reinvested into the market in the weekly, sometimes daily, POMO. Sound healthy to you? This is precisely why PIMCO stopped buying US debt. When the Fed inevitably pulls out of quantitative easing due to mounting inflation, who will be there to buy US debt?

      Fun fact: China is no longer the largest single holder of US debt.

      • [el_gallo]

        When the Fed pulls of out of qualitative easing due to rising inflation, I expect everyone will be buying our bonds who can afford to.

        • [Cocomaan]

          Well, of course, that assumes that the Fed ever stops QE. Which it won’t. The only way out of the debt crisis is inflation, and the rest of the world knows it.

  • [sgt_doom]

    el_gallo is partially correct, of course, with the monetization of the banksters’ debt (all those trillions of dollars’ worth of securtized debt the sold around the planet, which the Fed Reserve then reimbursed everyone for as the banksters’ had no money to back it up) on the backs of the citizenry,

    hence the continuing economic meltdown.

    And with the 74% or greater of the GDP made up of the Fantasy Finance Sector, there really is no economy anymore.

• [Anonymous]

  Successive governments in the US, for the past 35 years, encouraged public and indulged themselves in spending tomorrow’s money today, and pay the day after and the day after and the days after. Thereby the government has created “WORLD’S LARGEST DEBT-BASED ECONOMY”

  Public fully forgot how many tomorrows’ money has already been spent and how many day afters to pay… (their children’s & grand-children’s days after too).

  The real solution lies (for public as well as for the governments) not in finding whether we can get a debt or not but in how long our future is locked in paying that debt.

  IS IT CORRECT TO SPEND MONEY AS IF THERE IS NO TOMORROW ?

  Tomorrow will be created by today.
  Our deeds today creates tomorrow.
  Tomorrow is not created on its own. We have to (must) plan it and create it.

  All the best America.

• [UUbuntu]

  Interesting, but there are a couple of inaccuracies and omissions here:

  First, the income may be $21700 per year, but that’s because the family chose to take that income instead of the 27-30000 per year that they were entitled to take. Without the recent tax cut extensions we left some 6-8000 on the table.

  Second, the $380/year isn’t for a “premium cable subscription”, it’s more like for an “optional prescription medication” which is likely to lower future medical bills in the future. We cut that because it’s optional and easy to do, not because it’s a luxury.

  Third, the family budget items that make up most of the $38200 in spending are items that most of our families would consider life-requirements — security and dignity for our most vulnerable family members and/or protection of our property lines.

  If we’re not willing to go into debt to protect our own family or our own land, then what’s the point of having a government at all?

  Now we can certainly spend less on property protection (i.e., Defense), but cutting money that will otherwise protect our humanity is a step we should take very cautiously.

• [boris]

  …But no matter what, that analogy is never right. The United States of America is effectively immortal, it can coerce people into giving it money, it can print currency, and it is in a million other highly relevant ways not remotely analogous to an ordinary family or even an ordinary business enterprise.

  Economic Death by Analogy

• [Anonymous]

  yeah right!! We all know that the US is not one big happy family. A family, we all know, has the social obligation to take care for each other. But in the US there are many uncle’s, called Scrooge and Dagobert that have left family standards, making more money they ever can spent and not willing to cut in their budget.

• [The Raven]

  Obviously, this family needs to save for retirement.

  Oh, wait…

  OK, so, this is a large extended family which produces all its own goods and only borrows within the family. Obviously, we must do everything possible to insure that the wealthiest members of the family become even wealthier and arrange matters so that all other members of the family are indebted to the wealthy members.

  Croak!

• [David A]

  All the while, America actually has one of the lowest effective tax rates of any developed country in the world.
  http://www.ekonomifakta.se/en/Facts-and-figures/Taxes/Taxes-and-GDP/Tax-as-a-percentage-of-GDP/

  And spends dramatically more on healthcare per capita, while getting worse than average results per capita.
  http://www.youtube.com/watch?v=Rq77LzLM0jw

  17 of every 100 dollars in the US economy is spent just on healthcare.

• [Unmutual]

  It’s also inaccurate because he needs to multiply everything by 100,000,000, his numbers are way off. derp derp derp

• [gerryblog]

  A government is not like a family. It’s immortal, it can set its own income, it can make money appear by fiat, and it has access to an effectively infinite line of credit besides. The government doesn’t have to “balance its checkbook”; it has to spend counter-cyclically to bolster the economy during downturns.

  The discourse we’re having around the deficit is completely wrongheaded on just about every front.

• [Anonymous]

  I won’t take any cuts seriously until two things happen:
  1) Eliminate Afghanistan and Iraq occupation costs to pre-occupation levels
  2) after 1) make a non-negotiable 20% cut to all military and police budget items (no loopholes, no exceptions)

  If we do that consistently every year for a decade or more then we might find ourselves on the right track.

• [Kerouac]

  I just can’t figure out why this family is running up so much credit card debt when it is voluntarily reducing its wages to avoid making its employers pay the going rate.

• [DarthVain]

  Normal people don’t understand money at that magnitude. I use the same method to try to simplify arguments to make them understandable.

  One example of the is the Canadian Gun Registry. Conservatives and others argue OMG ponies that it is costing Canadian citizens a ton of money and should be abolished.

  Initial Cost: 2 Billion.
  Operating Cost: 1-4 million.

  So operating cost is 1000x times less than to build the thing, which has already been done.

  So the analogy I like to use is would you throw away your 30,000$ new car because it cost you 30$ each year? Does that make sense to you. Even if you argue that it isn’t all that effective, considering the cost I think it is worth keeping around for awhile to see for sure!. I mean when you put it in terms like that it is absolutely ridiculous to simply get rid of it.

• [HRB12]

  >won’t take any cuts seriously until two things happen:
  1) Eliminate Afghanistan and Iraq occupation costs to pre-occupation levels
  2) after 1) make a non-negotiable 20% cut to all military and police budget items (no loopholes, no exceptions)

  —

  You do realize defense spending is less than 20% of the budget? And that number is not likely to increase? And you realize that every day 10,000 Americans are joining the ranks of Medicare?

• [M]

  The really funny thing about this thread is that most of the people who posted indignantly above are going to go out in 2012 and vote for the same people who put us in this mess. They say they won’t, but then the names will be on the ballot, and they’s whine that if they don’t vote for Dems like Obama, they’ll have Republicans, and that will somehow be different.

  News flash, delusional ones, it won’t be different. You already did that, and Obama screwed you. Wake up, suckers.

• [Don]

  Agree with boris. The federal budget is not at all like a household budget. The two are not comparable, and it is not only misleading to compare them, it biases the discussion.

  In recessionary times, families wisely pay down their debt if they can. But if everybody cuts their spending to pay down their debt, demand falls and the recession gets worse. That is when government needs to increase spending, to support demand and keep the economy from crashing. The time to pay down the government’s debt is when families are flush.

• [Unmutual]

  Agree with boris. The federal budget is not at all like a household budget. The two are not comparable, and it is not only misleading to compare them, it biases the discussion.

  But the premise of the parable was not that it took into consideration all the different options available to our government.

  It addressed very specifically the debate over a paltry 38B in cuts for the purpose of point out how incredibly absurd it was.

  • [Don]

    We can agree that it’s absurd to describe $38 billion in cuts as taking action on the deficit. No argument there.

    But the comparison of the federal budget to a household budget is itself absurd, even to make a valid point. It encourages the very kind of thinking that we should be trying to discredit.

    We should be talking not about the deficit, but about the lack of demand for goods and services. We should be asking leaders not “How are you going to balance the budget?” but “How are you going to stimulate demand?” The household-budget analogy leads directly away from the right question.

• [Stefan Jones]

  From the local “indie” newsweekly:

  Nine things the rich don’t want you to know about taxes.

  • [sgt_doom]

    Excellent clip from the tax expert for the working people, Mr. J.

    And always important to keep in mind that over 70% of American-based multinationals and corporations paid no federal taxes.

    Sure wish everyone would read very closely my first comments on Forensic Econ 101!

• [J.K.]

  I would like to third el_gallo (he’s already been seconded) and others for pointing out the wrongheadedness of this folksy little analogy. Almost immediately upon reading Mr. Greenspun’s little fable, I felt deeply offended.

  Keynesian economics is grounded in empirical analysis; it is descriptive. You may believe that Mr. Keynes was right or wrong with respect to his conclusions, just as you may accept or reject Einstein’s interpretation of the link between gravity and mass. Just as gravity is indifferent to your intellectual acceptance of it, so too are the great macroeconomic trends indifferent to your awareness of their movements or to your theories about why they move as they do. Go ahead, mock gravity. It’s still going to hurt like hell when you slip on that banana peel.

  Mr. Greenspun is trying to convince you to step on the banana peel, and by way of misdirection, he is telling you that you have no choice but to step on the banana peel.

  When private spending declines, the economy recesses. A reduction in government spending that occurs contemporaneously with a decline in private spending will not revive the economy. If the reduction in government spending is sufficiently aggressive, the distribution of wealth can be altered for the worse. By “worse,” I mean that the number of people eating cat food and living in the sewer after such an experiment in debt reduction is higher than the number of people who were eating cat food and living in the sewer before the austerity plan began.

  It is a little bloodless to say that high unemployment and a collapse of the public sector is simply a bad thing. Let’s call it a Panic, or a Bust, or … a Great Depression. This is the sort of dislocation that can give an entire generation PTSD, and for good reason. The mechanisms of civil society can break down. Pretty soon, every place looks a little bit more like Mogadishu, and a little bit less like Milwaukee.

  One of the most serious failings of our cultural education is that as a group, we aren’t properly trained in economics. I’m not just talking about some airy standard of intellectual rigor for egghead college graduates. I’m talking about an understanding of the world that is as basic to our day-to-day lives as knowing how to read or write. Greenspun’s duplicitous yarn wouldn’t have found a receptive audience if we all had a better awareness of how actively misleading his analogy is.

  Not knowing economics is more than simple innumeracy, and more than simple ignorance of political or social theory. It is more than ignorance of philosophy, logic, history, sociology, anthropology, or of the social sciences in general. It is all these things together, and it is an ignorance that some people are only too happy to take advantage of for their own benefit.

• [Anonymous]

  “You do realize defense spending is less than 20% of the budget?”

  Those numbers lie. Roughly half of the real defense budget is hidden in other line items, systematically moved over during the last 30 years for the specific purpose of making the total harder to see.

  • [JohnAspinall]

    “You do realize defense spending is less than 20% of the budget?”

    “Those numbers lie. Roughly half of the real defense budget is hidden in other line items, systematically moved over during the last 30 years for the specific purpose of making the total harder to see.”

    A very important point; thank you for making it. Here’s a good example: the manufacture of nuclear weapons. What could be more about defense? Yet the Pantex plant is run by, and budgeted under, the Department of Energy. ( http://en.wikipedia.org/wiki/Pantex )

    • [Don]

      One way military expenditures are hidden is to put military dollars in the civilian column, by for example hiring civilians to do military work. Another, bigger deception is to lump the money derived from income tax, in with the Social Security trust fund. (I believe that trick started in the Lyndon Johnson administration.)

      Un-obfuscated pie chart here shows the military consumes 54%.

• [yrogerg]

  This solves the innumeracy problem, yes, but the way Greenspun frames it is deeply misleading. First off, governments aren’t households and shouldn’t be expected to act like households. And, before anyone suggests that this is a perspective unique to Keynsians, let’s just note that the Paul Ryan “Path to Prosperity” conjectures that the government can bring in more money by way of tax cuts; nobody would ever suggest that a struggling household could fix its budget woes by taking a substantial pay cut at work, because working extra hours or a second job would more than balance things out.

  Second, there’s the fact that he presents the budget agreement as dropping the “premium cable package”. Meanwhile, in reality, the provisions being pared away include not only investment items that are arguably important for long-term solvency, but also items like IRS tax inforcement, which sees roughly a 10:1 return on the dollar spent. Cutting these items is much more like trying to save a few hundred off your gasoline or transit budget by skipping work days.

• [Waynu]

  The successive governments in the US for the past 35 years encouraged public and indulged themselves in spending tomorrow’s money today, and pay the day after and the day after and the days after. Thereby the government has created “WORLD’S LARGEST DEBT-BASED ECONOMY”

  Public fully forgot how many tomorrows’ money has already been spent and how many day afters to pay… (their children’s & grand-children’s days after too).

  The real solution lies (for public as well as for the governments) not in finding whether we can get a debt or not but in how long our future is locked in paying that debt.

  IS IT CORRECT TO SPEND MONEY AS IF THERE IS NO TOMORROW ?

  Tomorrow will be created by today.
  Our deeds today creates tomorrow.
  Tomorrow is not created on its own. We have to (must) plan it and create it.

  All the best America.

• [Anonymous]

  How to solve the problem: cut military spendings until the problem is solved.

• [Unmutual]

  Where did the family budget comparison originate? It was not with Greenspun, it came from our politicians.

  Greenspun is using their narrative to explain why the proposed cuts are so absurd. They are ideology driven, not a serious attempt to control spending. Perhaps he could have made that clearer, instead of a cable bill, it was dad’s porn subscriptions, which mom has been wanting to cancel for decades now.

• [jphilby]

  Of course, the last thing the man at the bank wants Mom and Dad to do is to pay off their bills.

  The man at the bank knows that every cent they owe him will keep generating income for him. Lots and lots of income. So the man at the bank will make that as difficult as possible. And if the Mom and Dad won’t relent, he’ll throw them out of the house and have them fired.

  That’ll teach them to get uppity ideas.

• [grimc]

  Reading his responses there, several people have said that there’s a difference between a government and a family. He ignores them and prattles on about ‘not passing on debt to our children’ and that infrastructure improvements “aren’t very lucrative”, as if the only reason to invest in them is to make money.

  What does this guy teach? Sure as hell hope it isn’t economics.

• [Scarecrow Repair]

  You whiners are ALL missing the point.

  It is simply an exercise in bringing the numbers down to an understandable level. It has nothing to do with whether a government is comparable to a family, or whether NPR is equivalent to a condom, or any other such stuff that is not between the lines just because it is your pet peeve and you want it there.

  It is just numbers that mean more than trillions and billions. The point is to show how much debt we have and how pissy little the politicians are arguing about.

  Whether you think the debt is the most important thing to consider or so immaterial as to be meaningless is besides the point.

  You whiners who are arguing over what kind of tree is right in front of you need to step back and see the forest. You are as bad as all those congress critters lying about cutting $38 billion and fighting over whether NPR’s handful of water belongs in the ocean.

  • [Don]

    I gather you haven’t read the comments, since more than one person agrees with you.

  • [grimc]

    Then he could’ve simply divided the numbers by 100,000,000 but he chose to put it in the context of a family budget.

• [Anonymous]

  One important difference between this simple story and the fed budget dilemma. The Fed Gov can easily increase its annual income. Its called “taxes”. Consider them an investment in the future.

• [Floyd R Turbo]

  So perhaps the family can confiscate the earnings of their neighbors to pay their bills or better yet force their own children to go work hard to turn over their money to the family. After all Daddy works hard and the kids can shut up and fork over their dough to be “fair”.

  No… the family needs to scale back every where — sacrifice in spending — and earn some money (it’s called balance Obama).

  Paul Ryan’s plan is the better way out. Whining about “entitlements” (life liberty and property are the entitlements we get — quaint I know) is a useless exercise when the whole thing will come crashing down. It’s a bipartisan circle jerk.

  • [Keith]

    life liberty and property are the entitlements we get — quaint I know

    That must be from the preamble of the Libertarian Constitution. The real Constitution says we’re entitled to “Life Liberty and the pursuit of Happiness.” I know in Libertarian Land, happiness=property but in the real world, not so much.

    Paul Ryan’s plan, applied to this analogy, calls for taking Grandma out back, shooting her between the eyes, and burying her under the rose bush as a way to cut spending.

    But at least it doesn’t raise taxes on those poor benighted corporations!

    • [AnthonyC]

      That we would be the start of the Declaration of Independence, not the constitution.
      Floyd R Turbo was quoting Locke’s Two Treatises on Government. You know, the British philosopher whose ideas were the basis of the enlightenment and the underlying justification for our founding fathers’ ideas.

      I may not be a libertarian, but you can’t complain about “life liberty and property.”

      • [grimc]

        Jefferson probably had a good reason to go with “pursuit of happiness” instead of “property”.

    • [EvilSpirit]

      Well, yes, except that it’s in the Declaration of Independence, not the Constitution.

  • [Owen]

    You mean Paul Ryan’s plan that cuts taxes for the rich and for corporations? Or am I thinking of the wrong crackpot idea?

• [RickB]

  Likening a national economy to a household budget is a fallacy of composition.

  • [el_gallo]

    Yep, and one designed purposefully to enable and legitimize the Republican “solutions” proposed by Floyd R Turbo — it’s a crisis so we better hunker down and get ready to eat us some cat food for a while.

    • [Antinous / Moderator]

      You can afford cat food?

      • [el_gallo]

        My public sector union went on strike to ensure it was part of my overly generous government employee pension plan. On the other hand, we only get generic.

• [Goyo Marquez]

  Uhh…the analogy only works if the family can print it’s own money which is accepted at stores in exchange for goods.

• [MooreUSA]

  A more accurate parable might be that the spendthrift family, already deep in debt, found that leaving Aunt Nancy didn’t pay the bills for the last few years, so Uncle John is having to clean up the mess.

  Getting rid of premium cable is a good first step if next month the family is going to have a debate about what to do with the Jag sitting in the driveway that Uncle Lyndon bought in the sixties, and the family just keeps pouring money into.

• [Anonymous]

  Interesting concept, what would happen if we took last year’s budget and cut everything by 10% across the board. We then say, we will have no new projects. If organization x needs money, they seek it from an existing budget. Don’t pick and choose, don’t argue over what is important. Oh, and bye the way, that 10% applies to congressional pay too.

• [Anonymous]

  Well, the family could also tell each other that; “Maybe we should get rid of ALL money forever and instead install a global management of the earths resources and distribution”… just a thought, that a couple of million people getting in to now…
  www thezeitgeistmovement com

• [roboton]

  The whole analogy seems really weird to me. The family economy is not a separate, smaller function of the federal economy, the family economy exists because of and within the federal economy.

  It’s like saying “Here’s what your overall health would look like if your body were compared to your liver”

• [monopole]

  Now consider that the family lives in a town of 193 families and is responsible for 18% of the towns income and runs the police force and the biggest bank. And there aren’t any other towns, anywhere.

• [brianary]

  gov’t ≠ a family

  gov’t ≠ a business

  gov’t ≠ a small furry creature from Alpha Centauri

  Over-reliance on analogy belies a lack of facility for complexity.