America

What The Federal Budget Would Look Like If It Were A Household

Putting the federal budget in perspective is always difficult. First because $1 trillion doesn't mean much to most people. The financial author and radio host Dave Ramsey took the the numbers from the federal budget and imagines what it would look like as a household budget:

The federal government will take in $2.173 trillion in 2011. That's their income, and it sounds pretty good. Until, that is, you factor in that the federal government will spend $3.818 trillion during the year. So, just like many families, the government's outgo exceeds their income — to the tune of $1.645 trillion in overspending. That's called the deficit. Altogether, the government has $14.2 trillion in debt.

What would happen if John Q. Public and his wife called my show with these kinds of numbers? Here's how their financial situation would stack up:

If their household income was $55,000 per year, they'd actually be spending $96,500 — $41,500 more than they made! That means they're spending 175% of their annual income! So, in 2011 they'd add $41,500 of debt to their current credit card debt of $366,000!

At the Atlantic, Megan McArdle warns there are, of course, problems with the analogy, beginning with the fact that the U.S. government pays a much lower interest on its debt than the typical American consumer. "On the other hand," she writes, "the mathematics of debt don't vary wildly from place to place."

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