Comparing the federal budget to the household budget

The sky changes color over the U.S. Capito in Washington, DC. 

Most individuals face a challenge in managing the money they make and the money they spend. The solution, of course, is making a budget. When it comes to talking about government spending and debt, a lot of politicians and talking heads like to compare the spending of the entire country to spending at an individual level -- saying if families can manage to stick to a budget, so can the government.

The analogy makes some sense:  it's easy to get our heads around.

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But Marketplace’s David Gura says the government is huge with a lot of complicated expenses. For the individual, or the family, they really only have to worry about housing, food, transportation, and a few other categories. But government spending priorities are very different: take the example of defense spending, which isn't exactly on the family balance sheet, but takes up about 20 percent of the national budget. Plus, a big chunk of the budget goes to social welfare programs, which isn't the same for families.

On the other side of the balance sheet, the government can also tax people and print money. They can also borrow at much lower rates than the average person.


About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.
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The total Federal debt (not counting state and local debt) is around $53,000 for every man woman and child in the nation. A family of 4 owes over $200K in federal debt. This will not end well.

You guys have done a big diservice to your listeners by attempting to show how the most common explanation of government budgets is bunk, and replacing it with NOTHING. Basically the away you're leaving your listeners is that it's just too complicated for the common man to understand, so just trust the politicians and professionals like David.

Your example of how things are different for government today are largely examples of where we've lost our way. Printing money from thinn air is a realatively new phonomenon, and yes, some house holds even try these kinds of things, and it eventually goes bad for them too. No families don't have defense department spending but they have other high expenses that waste away their wealth. Regarding borrowing money cheaply, I can borrow today at a lower rate than the government could borrow just 5 years ago. Interest rates go up and down, and since the only way we can afford to pay our debts today is with ever more debt, we will be in trouble when rates eventually are forced to rise. It's short sighted to think rates will always be as they are now.

The laws of economics ARE like the laws of the physical universe. There may be some delay in their effect, but they eventually always win. You simply cannot consume more than you produce in the long run. Sure in the short run (the only time frame politicians think about) you can live it up and run up credit, but eventually you will pay the piper.

This type of disinformation will not pass for acceptable much longer on a taxed and controlled people. Budgets are not like Newton's 2nd Law which is unable to scale up to galactic proportions. Revenue - Expenses is the same at 2 cents as it is at $2T annual deficits. The "low interest rate" the govt is so blessed to receive is actually inflation courtesy of Ben Bernanke and Alan Greenspan. Two outstanding gentlemen whose business it is to finance state debt and would have no ulterior motive to advocate for more state debt and usher the way via record low teaser rates (0%) that will inevitably adjust upward each year as international efforts to instill confidence in the USD market fail (namely controlling oil producing countries and weapons suppliers). Global inflation fears will be the controlling force over how much taxes will be stolen from working Americans. National Debt is taxation without representation, plain and simple. One lazy generation trying to enslave the next.

The Air France crash in the Atlantic occurred bc the copilot had been pulling back on the yoke, associating upward inclination with altitude gain. However, he distorted the forces acting on the wings and caused the place to accelerate downward. The correct action, unintuitively, would be to angle down and restore air flow and lift, eventually leveling out and climbing again. The pilots were confused at the gauges and how it was "supposed to work." By the time they had figured it out they were too close to the ground to attempt the correct nose down maneuver. Out of fear and instinct, the copilot pulled back on the yoke, nosing up, for the little remaining distance to the surface of the Atlantic Ocean.

As a passenger, we can speculate what might be going on in the cockpit and assess options such as bailing in a parachute or fastening our seatbelts and ducking our heads. Fortunately, that difficult decision won't plague us for long bc it soon won't matter, the inevitable outcome will be upon those who remain.

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