Federal Budget vs. Household Budget: How Do They Compare?

Discussion in 'Economy' started by kwc57, Aug 3, 2011.

  1. kwc57
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    kwc57 BOHICA Obama

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    A little slice of reality from Dave Ramsey.

    Federal Budget vs. Household Budget: How Do They Compare? - daveramsey.com

    Federal Budget vs. Household Budget: How Do They Compare?
    You can't borrow your way out of debt.
    from daveramsey.com on 28 Apr 2011

    By Dave Ramsey

    Whenever the talking heads on TV start talking about the national economy, most of our eyes start to glaze over. The gigantic numbers that they throw out there are ridiculous; most Americans have no idea what those numbers mean in practical terms. So, I thought it’d be fun to turn those figures into something we can understand a little better—like a household budget.

    The federal government will take in $2.173 trillion in 2011. That’s their income, and it sounds pretty good. Until, that is, you factor in that the federal government will spend $3.818 trillion during the year. So, just like many families, the government’s outgo exceeds their income—to the tune of $1.645 trillion in overspending. That’s called the deficit. Altogether, the government has $14.2 trillion in debt.

    What would happen if John Q. Public and his wife called my show with these kinds of numbers? Here’s how their financial situation would stack up:

    If their household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000!

    What’s the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it’s the only way out of debt for John Q. Public.

    If I ever got a call from a family that was spending $41,500 more than they made every year, you would definitely expect me to yell at them for their dumb behavior, right? Kids, no more McDonald’s four times a week. Snacks come from the grocery store now. And we’re not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it’s time to amputate the lifestyle!

    It works the same way for the government. You can’t borrow your way out of debt, whether you’re a typical American family or the entire U.S. government. At some point, you’ve got to say, “Enough is enough!” and make the hard cuts necessary to win over the long haul.
  2. waltky
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    waltky VIP Member Supporting Member

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    Granny says, "Dat's right - `cause the Great Recession ain't ended yet...
    :mad:
    Report: US Household Income Below End-of-Recession Level
    August 21, 2013 WASHINGTON (AP) — The average American household is earning less than when the Great Recession ended four years ago, according to a report released Wednesday.
  3. kwc57
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    kwc57 BOHICA Obama

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    Well Walt.....thank you! I created this thread back in 2011 and you sir, were the first to respond. I'm guessing that the truth contained within was too much for the left to attempt to rebutt. Kind of like turning the light on and watching the cockroaches scatter for cover.
  4. Freemason9
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    Freemason9 VIP Member

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    Dave Ramsey is a talk radio entertainer and a financial advisor. He is NOT and economist, and when he compares federal "debt" and household debt he proves it.
  5. Moonglow
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    Moonglow Gold Member

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    My family just budgets in wars.
  6. FA_Q2
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    FA_Q2 Gold Member

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    Well the main difference is that we have a fiat currency and the government has the ability to print its way out of almost anything. The essentially amounts to stealing the money from the people at large through the devaluation of the currency that they hold but meh, there is at least a difference. This mostly manifests itself in the fact that the government can, in fact, run a permanent deficit given that the deficit grows at a slower or equal rate to the growth of the economy. Then that devaluation will not equal the increased value of all the goods expressed in the economy.

    The fact that we can run a permanent deficit is a BIG difference in governmental and household budgeting. The fact that we are not undergoing that type of debt at the moment though is the problem. Our economy is anemic but our debt is increasing at a massive rate and only going to get worse.

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