Visualizing the national debt

Personal Income in the US in 2011 can be seen in three ways:

• Per capita $41,560

• Median     $62,273

• Average    $42,980 (wages)

Given the Federal Income of $2,170,000,000,000 (2.17 trillion), and taking away eight zeroes we come to $21,700. From that simple figure we can visualize the debt problem as a personal income. However, that is only about half the "average" wage and per capita income.  The "median" is the point where half the personal income is higher and half is lower.  And so, let us double the figures and compare with the US government.

On a personal level, then, if we acted like the government, we come up with this scenario:

A person comes into a financial adviser's office and asks for advice.  He wonders if he can ever get out of debt.  So he lays out the facts:

"Well," he says, "I made $43,400 last year.  But my expenses were $76,400.  I got by with my good credit by adding $33,000 to my card.  The creditors remind me that I now owe $245,420."

"Uh-huh," the adviser says, "Have you worked on a budget?"

"Why yes," the client says, "I've found $77.00 that I can cut!"

Now I don't know about you, but I'd say that guy had better have a "rich uncle" or work two jobs.  That's our government for you.  But even if ALL the income was spent toward the debt, it would take a decade to pay it off.  In our hypothetical analogy, there are a few things that the hapless debtor can do. 

The easiest would be to declare bankruptcy, simultaneously ruining credit and alienating creditors.  In such a state of affairs, the individual would be on a cash-only system for seven years or so and HAVE to be on a budget that includes saving toward many of his expenses.  This option probably will not be taken by the government (which owes "itself" most of its own debt).

Next step will be to stop spending more than is taken in.  This is something the government can do.  Most states must have balanced budgets, so why can't the federal government?  If the government set apart some money to also pay down the debt, then it would be even better.  The hard part is deciding to cut back on present spending -- austerity.

We know what this looks like in our average households, but it appears that the idea has been lost in Washington and in some state capitals.  With the taxpayer citizen the cost of living itself is adjusted each time a spending choice is made.  In the private sector, this will result in goods and services being delayed or abandoned.  The yardwork will be "in sourced" to weekends with a lawn mower and/or a rake rather than to someone who makes money this way.  The lowest man on the economic ladder will become even poorer while the middle man maintains the status quo.  Old clothes will last longer and may even be replaced with quality used clothing in the after market.  Retailers lose out, along with those lower-paid salespersons on the floor.  Standards of living begin to change, starting with the middle class.

In our example, the debt-ridden citizen would have to make quite a few changes.  His standard of living would have to be cut back to almost poverty levels in order to begin paying down his debt.  While living off of two-thirds of income, the huge debt begins to diminish.  Meanwhile, he becomes to realize that he CAN live on less.  New habits change him in many ways.  Life becomes simpler and soon the looming debt begins to look less threatening.  Once the debt is gone, having not incurred new debt, then the money begins to work FOR him.  Savings grow even as things are being bought with cash.  He re-enters a middle-class lifestyle and begins to live like those who are "rich," until one day they would be prosperous once again.

The government must learn from the "governed."  Do the math.  The choice to "live beyond ones means" brings financial collapse, whether it be a family or a government.  Many people die broke, and some die deep in debt.  The nation is now both.  Our representatives must make hard choices.  We expect it of ourselves.

Who's in charge, anyway?

The real power is NOT in the president of the United States! Power is in the Congress - the Senate and the House of Representatives. The authority of the president is in executing the laws passed by the Congress. He can veto, but the veto can be over-ridden. The president usually compromises to stay in a "working relationship" with the "powers that be."

Which brings us to the economy. Who "holds the purse strings"? The House of Representatives, the closest thing we have to "democracy" in this conglomerate of "sovereign" states. IF the federal books had to be balanced as do the individual states' books, then we would not be in the mess we are in right now. That being said, a few figures from the Americans for Tax Reform show that whereas things are "worse off" today than they were seven-and-a-half years ago, they did not get there under Republican control, but under Democratic:

The combined cost of staples (Bread, Eggs, and Milk) went from $4.84 to $5.77 in 6 years under the Republicans. That is a 19.2% rise, or 3.2% per year. In the two years since the Democrats were elected in November of 2006, that price has gone to $7.12. That's a 29.5 % rise, or a 15.3% per year. That is a rate of over FIVE times the Republican economy!

Inflation overall went from 3.7% when George W. Bush took office to only 2.1% as America was bamboozled into voting in the Democrats in November, 2006. Since then, inflation has gone to 5.4%. That's a 43% DECREASE in a "Republican" economy compared to a 61% INCREASE in a "Democratic" economy. Hmmm . . .

Unemployment went from 4.2% to 4.6% (+ .4%) in six years. In the two years under Democratic control it has risen to 6.1% (+ 1.5%). Almost FOUR times the increase -- or OVER ELEVEN TIMES when annualized! Even in the two months from election day to the new congress began, the unemployment rate went up .1% (.6% annualized, compared to a .07% per year for the six years previous!)

But then, those wage earners out there -- the "working men and women" ARE still better off than they were eight years ago! Our average wage went from $28,700 to $32,960 -- a steady rate of over $500 a year. That amount did not keep up with inflation, but across the board tax cuts in the six years, and to an extent even since under the veto threat of the president, helped to indeed leave the average man in better shape now than then!

And, finally, I challenge any liberal who might be reading this to name me one Republican/Bush policy that has effected the economy adversely.