US National Debt Crisis Simplified

[accadacca]

[stefan]

... and the super committee is charged with determining -- by thanksgiving -- at least another $12,000-$15,000 to cut over the next 10 years.

obama's jobs act would require that number to be pushed to $17,000-$20,000


(note: the government isn't remotely like a household but household numbers ARE easier to look at)

[Sombeech]

(note: the government isn't remotely like a household)

This is true, the household usually stops spending so much when they don't have the income

Government's concept? Get more income! (Taxes)

[stefan]

This is true, the household usually stops spending so much when they don't have the income

as if most people ever pay for a house, a car, etc. in full

[Iceaxe]

This is true, the household usually stops spending so much when they don't have the income

I was thinking the exact same thing.

Using household numbers the government is nearly 7 years in debt (it would take 7 years to pay off the debt if you spent on nothing else). I'm guessing the avarage US household is less than 4 years in debt. Based on some simple math.... The average Utah household averages $57,000 a year (in todays SLTrib) and probably carries a debt load of around $200,000, which includes their morgage (pure guess).

as if most people ever pay for a house, a car, etc. in full

FWIW: I haven't put anything on credit in over 25 years. if we can't pay cash we don't need it. I decide long ago that I wasn't going to pay interest... that's a suckers bet.... maybe they should let me run the government.... YMMV...

My favorite line from the movie Days of Thunder, which I use on all salesmen: Don't want one, don't need one, couldn't afford it if I did... I wish some of our congressmen would use that approach.

[stefan]

FWIW: I haven't put anything on credit in over 25 years. if we can't pay cash we don't need it.

sweet!

i haven't said that the gov't and the people don't need to worry about the gov't's finances, however, the gov't, businesses, and households are all different beasts for a variety of different reasons. comparing them is like comparing apples and oranges and pineapples. when it's okay to hold debt and how to pay it off can be different for each, but regardless managing debt is clearly important.

[uintahiker]

FWIW: I haven't put anything on credit in over 25 years.

I take a similar, but different approach. I've got the card, but I put everything I can on it. I fully pay it off each month, but then once a year I get a nice little rewards check.

[Iceaxe]

I take a similar, but different approach. I've got the card, but I put everything I can on it. I fully pay it off each month, but then once a year I get a nice little rewards check.

Some might argue its just simantics..... but I don't consider it credit until you pay interest.... It's almost impossiable to live in todays society without being able to put things on the card (hotel reservations, gas, airfare, ect.). But if you are not paying interest on the card its not really credit.

And I prefer a credit card over a debit card because a credit cards offers a LOT more protection over a debit card.

[Iceaxe]

however, the gov't, businesses, and households are all different beasts for a variety of different reasons. comparing them is like comparing apples and oranges and pineapples.

I don't see it that way.... you keep spending more than you take in and it will end badly.... That seems pretty simple to me....

[stefan]

I don't see it that way.... you keep spending more than you take in and it will end badly.... That seems pretty simple to me....

well, you clipped out my comment about managing debt which can address the issue you're referring to.

the gov't's massive WWII debt was paid down, so incurring debt does not imply ending badly.

managing debt badly can clearly end badly. i think this is what most people are worried about especially when there is no transparent plan and it only seems to be getting worse (esp. when our officials cannot agree on how to manage the debt).

saying that the gov't and a household are apples and oranges means that how debt is managed well or badly can be different in each case and direct comparisons may be problematic. (obviously, it doesn't mean that both can't be managed badly.)

[Iceaxe]

saying that the gov't and a household are apples and oranges means that how debt is managed well or badly can be different in each case and direct comparisons may be problematic. (obviously, it doesn't mean that both can't be managed badly.)

....but.... to believe as you do I'd have to agree that there is such a thing as "good financial debt".... and I don't..... if you have debt you have already failed at managing your debt....

[CarpeyBiggs]

....but.... to believe as you do I'd have to agree that there is such a thing as "good financial debt".... and I don't..... if you have debt you have already failed at managing your debt....

so you bought your house in cash? what about your college education? all your cars? your company has zero debt? how much money did your father leave you?

[Sombeech]

uh, this thread isn't about having zero debt, it's about deficit. Spending more than you earn.

Who's house debt isn't broken down into monthly payments?

[Scott P]

Agree with much of what Sombeech says, but concerning the following:

Government's concept? Get more income! (Taxes)

Taxes are actually lower now than they have been in many, many decades. Only about half of Americans owed any Federal Income Taxes at all last year. Many people even get back more than they pay. Taxes get cut, but spending increases. Wages are actually going down now too and many people are out of work.

Almost 2/3 of our taxes go to Military, Social Security and Medicare/Medicaid. Even things like infrastructure and Education are a drop in the bucket.

I'm not suggesting what to cut, but only pointing out where most of the budget actually goes.

Also, concerning personal debt, I agree with Shane. Other than a reasonable house, people should stay out of debt. A lot of the blame for the economy should lie on the American people as well.

[Iceaxe]

so you bought your house in cash? what about your college education? all your cars? your company has zero debt? how much money did your father leave you?

I said I was credit free the past 25 years.... I didn't say I was always credit free....

Not that its any of your business... but because this might help others... I did some serious studing on living debt free and managing money when I was about 25 and it totally change my outlook on money and money management. I didn't follow a particular recipe exactly, but it gave me a strong foundation of what managing money was really about. This is also how my father and mother live so maybe it was easier for me being brought up that way.

My first house had a $50,000 mortgage. It was paid for in 5 years... and that was the last time I paid interest on anything...

College I paid for as I went, working full time. For a time I worked for a company that paid for part of my collage, but I never borrowed. My full time job the other part of the time was racing motorcycles professionally.

Cars - always paid cash for every car I ever bought. That was something I learned from my father. He was a believer in if you have to buy a car on credit you need to buy a cheaper car. He was also a big believer in buy new cars over used, they are cheaper in the long run because you get to own them for 2 or 3 years and not drop a dime into them.

Always paid cash for race cars, boats, motorcycles.... this is the one place I think people make a big mistake, putting toys on credit is insane (at least in my book).

"Compound Interest - The Most Powerful Force in the Universe" Albert Einstein

All my business are run the same as my personal life, zero debt.... never borrowed a penny... if you have to borrow you don't need it....

My father and mother left me nothing... they are both still alive.

And I can't say I haven't been lucky along the way..... but that just brings up anther thought I strongly believe in.... Luck is when preparation meets opportunity.

My lifestyle is not for everyone, but it works great for me.

"People are not poor because they don't have money.... people are poor because they don't know how to manage money." -Iceaxe

[stefan]

....but.... to believe as you do I'd have to agree that there is such a thing as "good financial debt".... and I don't..... if you have debt you have already failed at managing your debt....

now we're talking value judgements and that's fine. others want the freedom to choose.

(note I share a number of your views on debt, fwiw, but saying no debt ever for anyone is an extreme point of view)

[stefan]

uh, this thread isn't about having zero debt, it's about deficit. Spending more than you earn.

the thread originally was about simplifying the numbers of the national debt ... of course where it goes depends on each person who posts. isn't that the bogley way?

Who's house debt isn't broken down into monthly payments?

assuming you'll have income to continue those payments? what if you lose your job? what if you get a pay cut?

also the gov makes its payments on time. one issue is that it takes out loans to make those payments and it takes out loans to spend more.

i understand what you're saying with the spending (and revenue is also part of the issue if the economy fluctuates and changes the income of the people or if you cut taxes).

but there are many different points of view on the benefits and detriments of the government taking on debt. so it's fine if folks want to hold value judgments about this, but certainly not everyone's gonna see eye-to-eye about it (iceaxe, politicians, economists, and the 14th amendment included). though how much debt can be handled is a very real question at the moment.

if you don't believe/want the gov't to run deficits, then i certainly accept your point of view, but i think the argument that the gov't should act like you think a household should act is problematic since they are quite different.

[Scott P]

others want the freedom to choose.

That's an interesting statement, however, the more debt an individual has, the less freedom an individual has. Once a debt is aquired, an individual looses the freedom of what to do with his/her money. Personal debt is almost always a bondange rather than a freedom.

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Anyway, it can be said that right now there are at least some advantages (and disadvantages too) to government debt. Here are two advantages that could be good examples.

1. We are getting roads now 30-40% cheaper (roads are actually built by private contractors, not State or Federal Governments) than we did only three years ago. Unless interest paid on the debt is 30-40%, building/repairing things like roads can be a good investment.

2. Government debt (savings bonds) allow a place for you to put your money safe that is stable. Ten year bonds are currently at 2.15% and 30 year bonds are at 3.75%. It is true that rates aren't that good now (from an investment point of view) when compared to what they have been in the past, but it's still better (percentage wise) than putting your money in the bank and more stable than putting money into the stock market (PS, I'm not saying not to put money in the bank or stock market).

[Sombeech]

That's an interesting statement, however, the more debt an individual has, the less freedom an individual has. Once a debt is aquired, an individual looses the freedom of what to do with his/her money. Personal debt is almost always a bondange rather than a freedom.

^ ^ ^

Quoted For Truth

[Iceaxe]

(note I share a number of your views on debt, fwiw, but saying no debt ever for anyone is an extreme point of view)

FWIW: I don't believe is no debt ever.... sometimes life throws you a curve and and debt becomes a nessasary evil. Just get it paid off ASAP.