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Frequent Contributor
Posts: 342
Registered: ‎04-21-2012

Put the federal cliff in perspective

So how much is the Fiscal Cliff deal that was recently worked out actually worth?  I know this isn't a complete & fair comparison -- for example, your family can't just print money like Bernake is doing, but it is an interesting perspective on the US debt situation.  The deal is a drop in the bucket and not a solution at all.  Tell the governement to get real and go back to work!  What woud a financial advisor tell this family to manage their situation?  Get another job?  Cut back on your spending by a 1/3?  That wouldn't even begin to make a dent in the debt, it would only cancel the deficeit and you still wouldn't be able to save for the kid's college fund or retire.  Heaven help you if you get sick and you don't have insurance!

 

Fiscal Cliff put in perspective: 
  
* U.S. Fed Revenue $    2,469,000,000,000
* Fed budget $    3,793,000,000,000
* New debt $    1,324,000,000,000
* National debt $  16,429,000,000,000
* Long term entitlement debt $  62,000,000,000,000
* Recent budget cuts $        38,500,000,000
  
Let's now remove 8 zeros and pretend it's a household budget: 
  
* Annual family income $             24,690
* Money the family spent $             37,930
* New debt on the credit card $             13,240
* Outstanding balance on the credit card $            164,290
* Long term entitlement debt (college fund, retirement fund, future health care) $            620,000
* Total budget cuts so far $                  385
Valued Contributor
Posts: 2,982
Registered: ‎02-09-2012

Re: Put the federal cliff in perspective

95% of the public are incapable of understanding this

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Valued Contributor
Posts: 1,115
Registered: ‎10-31-2011

Re: Put the federal cliff in perspective


Repo-ed wrote:

95% of the public are incapable of understanding this


BAHAHA so true!!!!

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Senior Contributor
Posts: 3,491
Registered: ‎07-25-2008

Re: Put the federal cliff in perspective

Households can't keep printing money.


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Frequent Contributor
Posts: 342
Registered: ‎04-21-2012

Re: Put the federal cliff in perspective

What kind of credit score would you give to this particular "family"?  Obviously they would score very poorly for their extreme credit limit and indebteness.  They are paying debts on time (for now) but what happens when the US hits the debt ceiling and stops paying their bills?  Current credit rating by S&P AA+.  Obviously there are limits to carrying this metaphor to all the details as a credit score does not have the same meaning as a credit rating.

Valued Contributor
Posts: 2,708
Registered: ‎10-16-2008

Re: Put the federal cliff in perspective

Oh, well...the "trillion dollar coin" will solve all of that, right?

 

Never thought the feds could come up with an epic version of "check kiting", but if you live long enough, I guess you see it all.

 

 

Frequent Contributor
Posts: 342
Registered: ‎04-21-2012

Re: Put the federal cliff in perspective

The idea behind the trillion dollar coin is not to actually pay with the coin but it would be a monetary slight-of-hand to sidestep the artificial debt ceiling limit law.  It doesn't actually create or pay down debt in and of itself.  If it did it would exactly the same as printing money which would devalue the dollar.  This is just a mechanism to get past another mechanism akin to passing another law to eliminate the first law.  At least that's my take on it.  :smileyhappy:

Valued Contributor
Posts: 2,708
Registered: ‎10-16-2008

Re: Put the federal cliff in perspective

I definitely understand the concept that, as long as the government does it, it's not "check kiting", it's just creative accounting.  Those other pesky laws need to be circumvented to attain proper fiscal management, don'tcha know.

 

 

Senior Contributor
Posts: 4,694
Registered: ‎02-23-2011

Re: Put the federal cliff in perspective

Big numbers!

 

Potential solution - float the currency, print more money, and allow for short term inflation.  Pay our creditors in less valued dollars.  Historically, this has worked amazingly well for nations who have gone into steep debt.

Frequent Contributor
Posts: 342
Registered: ‎04-21-2012

Re: Put the federal cliff in perspective

Yep.  Then your credit rating goes into the dumpster and the next thing you have is double digit interest rates and rapid inflation.  Devaluation of the dollar comes with issues of its own.  Zimbabwe, Argentina, Poland, Mexico, Weimar Germany....

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