I subscribe to a monthly newsletter that gave me the idea for this post. It is a way for a householder to understand the “fiscal cliff,” and government debt, more clearly.
Consider these real numbers as reported for a recent year of the US government:
– US Tax revenue: $2,170,000,000,000
– Federal 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
Now remove 8 zeros and think of it as a household budget:
– Annual family income: $21,700
– Money the family spent: $38,200
– New debt on the credit card (s): $16,500
– Outstanding credit card balance:$142,710
– Total budget cuts so far: $385
Now it begins to make more sense. This household is in serious financial trouble.
Most people we know can’t comprehend numbers that large so they don’t truly understand how bad the finances of our countries are. The Dines Letter family example reduces the numbers to a magnitude where it is possible to grasp the problem.
Were folks to be paid 100% of their salaries in cash bills, then go to the tax table to pay income tax, then to the CPP table to pay CPP, then the EI table to pay EI premiums, then each of the other deductions (all in cash money) there would be a tax revolt. Governments know this.
I remember someone suggesting this same technique be used to teach children about finances. They suggest you bring home your whole paycheque, (what remains after deductions) in cash bills. Then lay it out in separate piles for the rent or mortgage, food, car payments and other essential expenses, so that the children understand the concept of financial obligations.
Their new iPhone must come after the rent is paid, the food is purchased, the dentist is paid for braces, allowances for clothing are set aside, house maintenance costs are met, etc. When children physically see that there is a very limited (or non-existent) pile of dollars remaining, they will begin to understand that money for elective purchases isn’t easy to find.
There are far too many families paying the mortgage with a line of credit and some paying only the minimum balance on their credit cards. Because of the debt at all levels of government PLUS that of an average family, this country is in deep trouble.
Mr. Dines has another way to look at the Debt Ceiling. He writes:
Let’s say, you come home from work and find there has been a sewer backup in your neighbourhood – – – and your home has sewage all the way up to your ceilings.
On a serious financial topic, with his usual twisted sense of humour, Mr. Dines asks:
“What do you think you should do? Raise the ceilings or remove the poop?”