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Fiscal Cliff Simplified and put into Perspective

Discussion in 'The Okie Corral' started by Willfulone, Dec 31, 2012.

  1. Willfulone

    Willfulone CCA Corvette

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    Lesson # 1:

    * U.S. Tax revenue: $2,170,000,000,000
    * Fed budget: $3,820,000,000,000
    * New debt: $ 1,650,000,000,000
    * National debt: $14,271,000,000,000
    * Recent budget cuts: $ 38,500,000,000

    Let's now remove 8 zeros and pretend it's a household budget:


    * Annual family income: $21,700
    * Money the family spent: $38,200
    * New debt on the credit card: $16,500
    * Outstanding balance on the credit card: $142,710
    * Total budget cuts so far: $38.50

    Got It ?????

    OK now,

    Lesson # 2:

    Here's another way to look at the Debt Ceiling:

    Let's say, You come home from work and find
    there has been a sewer backup in your neighborhood....
    and your home has sewage all the way up to your ceilings.

    What do you think you should do ......

    Raise the ceilings,
    or
    Remove the crap?
     
  2. MarinePride

    MarinePride

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    Here's something else to remember:

    1. The national debt will never be paid off.
    2. The whole financial system is a pyramid scheme, mostly.
     

  3. DoubleWide

    DoubleWide

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    Move and let the new owner take care of it :tongueout:
     
  4. UtahIrishman

    UtahIrishman BLR Silver Member

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    I tried to explain this, this simply, to a guy at work who is supposedly financially wise. He about blew a gasket when I suggested raising our debt again was the wrong move. "It will ruin us financially" he said. How ironic.

    Take the hit and be done with it. We're only prolonging our pain.
     
  5. glock_collector

    glock_collector

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    Man, your depressing.....
     
  6. N20ntegra24

    N20ntegra24

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    LOL I like the change of 38.50. I am still lol over that it helped the idiot in the bay next to me understand extremely well.
     
  7. cowboywannabe

    cowboywannabe you savvy?

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    this is what happens when you elect a community organizer over a businessman.
     
  8. devildog2067

    devildog2067

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    But it's not. Pretending it's a household budget is an utterly false analogy.
     
  9. OctoberRust

    OctoberRust Anti-Federalist

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    Can you explain why the ops comparison is not as dire as he makes it seem, then?
     
  10. cowboywannabe

    cowboywannabe you savvy?

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    actually it shows how messed up our pretend economy is if you were to try to run your own life the same way.

    the difference is a person can not print more money nor extort more money from their employer, the federal government can.
     
  11. kensb2

    kensb2 pistol n00b

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    I think the point there is less that it's a household budget, or more the fact that most people can't fathom how much money $16T is. The most I've even been around was several million while I was deployed to Iraq. It's just easier to relate to $38k vs. $3.8T, etc.


    ETA: CW beat me to it!
     
    Last edited: Jan 2, 2013
  12. HKLovingIT

    HKLovingIT Resident Evil

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    Elaborate por favor.
     
  13. devildog2067

    devildog2067

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    I'm not saying that we're not in a deep hole. We certainly are.

    But this sort of talk is ridiculous.

    The fundamental reason that people buy American debt is that America makes stuff that people want to buy. That's the reason why so much trade is denominated in American dollars.

    Our deficit exists precisely because people think that the future productive capacity of the United States is a safe place to park their money. That's why the credit card part of the analogy doesn't make sense. Our federal deficit isn't a credit card--it's money that we lend out cheaper than the rate of inflation.

    The one part that does make sense is the part about budget cuts. We HAVE TO cut spending.

    The problem there is that the only ones that matter are the three big ones: Social Security, Medicare and defense. Welfare doesn't matter. Foreign aid doesn't matter. NPR doesn't matter. NASA doesn't matter. The budget items that matter are Social Security, Medicare and defense. Using the language of this post, cutting foreign aid is like trying to save $1000 by cutting $0.50 out of your budget.
     
  14. Dennis in MA

    Dennis in MA Get off my lawn

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    It's also a matter of perspective. The 16T of debt is an issue. . . at the current GDP. Make the GDP 10x what it is now and 32T of debt is of no concern. (Like when Clinton was presidente.)

    It's not the amount of debt that's an issue, it's the relation to how big our economy is. Right now, debt and GDP are at parity. Not good.

    To use a real-world example, let's say the household income (GDP) is $50,000 per year. I've got a low-interest personal loan for $10K and no other debt.

    I think we'll be in better shape come March 1. The Republicans pushed off the spending debate until the Debt Ceiling talks. The President wants to play hard-ball again. I think he'll have a VERY hard time this time. I can see the Republican party unifying over this one.
     
  15. Atomic Punk

    Atomic Punk

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    for just a sec i thought i was thinking devildog was off :tongueout: good points to add.
     
  16. cowboywannabe

    cowboywannabe you savvy?

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    if a business ran this way what do you think would happen to it? arent investments made in a business based on a business making stuff people want to buy so to speak?
     
  17. Dennis in MA

    Dennis in MA Get off my lawn

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    Uncle Sam can't sell stock in itself. It has to use the debt markets.
     
  18. devildog2067

    devildog2067

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    They do. All the time. Lots of business, including some of the biggest most profitable companies in America.

    A quick glance at the 2011 General Electric annual report shows that they have something like $11.5 billion corporate debt EXCLUDING the GE Credit Services business (which has more like 450 billion!). The total company net revenues were ~$14.5 billion. If you include the CS side, GE runs a D/E of something like 4.2--there's upwards of 4x more GE debt out there than there is GE stock.

    The consolidated statement of cash flows is about a hundred pages, but feel free to slog through it if you like.

    http://www.ge.com/sites/default/files/GE_AR11_EntireReport.pdf
     
  19. Berto

    Berto woo woo

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    The problem is we're hedging our debt against stuff we aren't making....and we spend a crapload too much $$$.
     
  20. cowboywannabe

    cowboywannabe you savvy?

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    thanks for the clarification and understanding.

    Berto, you are also correct, they are betting against stuff we are not making.