Look At It This Way (#LAITW)


Budgets and deficits and debts… Oh my!

by on Sep.24, 2014, under Analogies

This might prove a fun beginning. Dave Ramsey made this analogy of a home budget situation that reflects the federal state of affairs in 2011:

Income: $55,000

Expenses: $96,500

Overspending by: $41,500

Debt: $366,000

The rhetorical question that usually follows is something like: “Who’d run their household budget like that?”

The problem is not so much the debt (many people have mortgages on their homes of that magnitude), but the amount of overspending – not living within the means.

If you multiply the numbers above by about 39 million (!), that’s what was happening within the federal government in 2011. To be fair, there are problems with comparing the federal budget to a household budget. Here are two discussions along those lines: The Federal Budget is NOT like a Household Budget: Here’s Why and Why the federal budget can’t be managed like a household budget. My feeling? Just because the federal government can borrow more readily than a family can, and just because it has more assets than a family does, doesn’t mean it should overspend.

And I think we should be careful about assessing the government’s assets. For instance, I don’t think private enterprise should be counted as an asset of the government (i.e. in GDP) just because it can tax it to death or grab it outright. Actual government assets, like oil fields on federally owned property, should likewise be counted carefully. If the government makes it impractical or impossible to develop that oil, that asset isn’t worth much?

As for me, I stay within my means (generally). And I don’t let my debts ever outweigh my assets. And I say this applies as a principle equally well to organizations large and small.But then, I’m conservative.

But then, I’m conservative.

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