Sick of the Fiscal Cliff? Here's a New Way to Look at Itby Gerri Willis
There's a reason each night on our show we have a segment entitled “Back of the Envelope.” We try to explain in plain English some of the more complicated financial issues. No doubt the biggest issue today is the fiscal cliff.
Why is it important? What is so cataclysmic about our nation's finances that we need to implement monster tax increases and make draconian spending cuts?
If you want to understand the government and its problems -- take a look at these numbers:
First: Our nation’s tax revenues: $2.44T. And by the way, that figure is an estimate.
Then there's our spending: The federal budget is $3.54T -- not a good comparison.
Our new debt -- the deficit that we are expected to rack up this year: over $1 trillion.
And, oh by the way, our total national debt -- the sum that all of us and our heirs will have to pay off: $16.32 trillion.
Granted this is tough to get your arms around, trillions of dollars just seems way too big to understand.
Well, what if we imagined this debt represented just one American household? What would it look like then?
Well, if you ran your household, like the federal government runs itself, here's what you'd be looking at:
-- Annual family income would be $24,400
-- Spending would be $35,400
-- New debt on the credit card would be $10,900
-- And, you'd be on the hook on credit cards for $163,200
You’d be in big trouble. I’d call you insolvent a deadbeat.
Of course, you’re probably too smart to do something this stupid.
But our Capitol Hill is not.