Once again I got an Email I had to share with ALL of you. This example may be the best description of the ‘spit in the ocean’ Spending Cuts we have seen recently!
The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is so we created a breakdown of federal spending in simple terms. Let’s put the 2011 federal budget into perspective:
U.S. income (Tax Receipts and Other Revenues) $2,170,000,000,000
Federal budget (Projected Spending) ……… $3,820,000,000,000
New debt (Spending – Income..This Year!!) … $1,650,000,000,000
National debt (To People/Countries) ……… $14,271,000,000,000
Recent Budget Cut (Politicians agreed to cut)…. $38,500,000,000
It helps to think about these numbers in terms that we can relate to. Let’s remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.
* Total annual income for the Jones family: $21,700
* Amount of money the Jones family spent: $38,200
* Amount of new debt added to the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Amount cut from the budget (or spending reduction): $385So in effect last month Congress, or in this example the Jones family, who owe $142,710 on their credit card, sat down at the kitchen table and agreed to cut $385 from its annual budget. What family would cut $385 of spending in hopes of paying off the $142,000 balance while adding $16,500 in additional debt each year?
You would think the Jones family (or our Congress) would recognize and address this situation, but in this example, the Jones Family does not…. and neither does our Congress. Unfortunately, while the Jones Family’s situation is fictitious, our country’s is real and when you add eight zeros, its really scary.
One part of the debt problem is that the voters typically do not send people to Congress to save money. They are sent there to bring home the bacon to their own home state.To effect budget change, we need to change the job description and give Congress new marching orders.
It is awfully hard (but not impossible) to reverse course and tell the government to stop borrowing money from our children and spending it now. If we don’t take serious action soon,our kids and Grandkids won’t know the America that we grew up in.
Very well put! I know we have made progress because at least they are talking about spending cuts; even if their arguments cost more than they cut. It is better than talking about spending more. Thanks for the great E-mail!
Pete G
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The S & P downgrade of the country was justified by the key comment in their statement. “The effectiveness, stability & predictability of American policymaking & political institutions have weakened at a time of ongoing fiscal & economic challenges”.
I work for a township that is closing on a Bond sale this Tuesday. To put Bonds up for bid requires that you get a rating from at least one rating agency. We chose Moody’s and S & P. To be rated we have to present all of our financial records (annual report, town budget & other records). We also have to produce a 5 year plan for borrowing, and must let them know any possible negative items that may raise a red flag (possible lawsuits & refuse disposal costs are a couple of examples) Then we have a multi hour conference call with our financial advisors & the rating agency.
We went through this process, & we managed to get a AAA rating from both agencies. Our Federal Government has not passed a budget in nearly three years (I can’t imagine not adopting a budget for one year). Besides the Feds not even having a budget (it is the law that we have one, shouldn’t Harry Reid & Nancy Pelosi be in jail for not obeying the law? Boehner did pass a budget this year, but Dingy Harry refused to even let it be put up to a vote).
Now we have Pelosi ranting that the GOP wants dirty air & water, Chuck Schumer says that the Republican house bills are putting a gun to the head of the Senate, John Kerry is demanding that the media not give equal time to the Tea Party (censorship?), and BO is having parties with Stevie Wonder, Herbie Hancock & others to celebrate his birthday (and the 513 point drop in the Dow).
I know what we had to go through to get our triple A, how could S & P give these total incompetents a good rating when we don’t even have a budget, and we have a deficit larger than the GDP. Heaven help us.
The markets were certainly not impressed with the debt ceiling bill. I realize most of the losses in our market were caused by the Euro catastrophe developing overseas. But the Europeans are just a half year or year ahead of us. The same will happen to the dollar before the end of ’12 if the Federal government does nothing more than argue about our deficits.
And now Standard and Poors has downgraded the United States from AAA to AA+. Wasn’t it just a week ago President OBOMBA was arguing that we needed the debt ceiling increased to prevent this from occuring? There’s already talk of replacing the dollar with another currency to be the world’s reserve currency. If this occurs, we ain’t seen nothing yet. You think you saw inflation in the early 80′s??? How’s $7 to $10/ gallon gasoline grab you?
What I’m looking forward to next week is how the White House spins this downgrading of our debt rating as nothing serious AFTER they’ve been using the possibility of a downgrade in our debt rating as a reason to raise our debt ceiling. I believe some of the words used to describe a downgrade of our debt rating were crises, disastrous consequences, etc…
I’ll bet you a dollar to a doughnut that next week this downgrade will be discussed as unfortunate and only occured because we refused to “invest” in our future by taking money from working folk and giving it to those who would rather be entitled to money than earn it.
Any takers????
Hutch