Federal Budget 101

I used to feel like I was kind of in the know - it didn't take much being in a newsroom for hours and hours every day. But, now that my newsroom is my home (the mall, the grocery store, and Target) I feel like the only things I'm in the know about have to do with Linley and Yo Gabba Gabba.

My point is - it can be hard to stay up on the things that are happening outside our little lives. I don't watch the news as much as I thought I would. I don't read the newspaper, and I'm lucky if I check a news website once a week. The information is out there - everywhere we look ... television, internet, our smart phones - but absorbing it - well, that can be a different story.

I'm grateful for the little tidbits of current events I pick up on throughout the day - and I'm feel especially lucky to get emails, almost on a daily basis from my Dad. The emails can be lots of things - they're usually articles from a magazine or newspaper - and they are usually something he thinks will teach us something, or help broaden our perspective.

A week or so ago, as lawmakers dealt with the debt ceiling fiasco he sent me this - and it helped put the situation into terms I could understand. I thought I'd share ...

Federal Budget 101

The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is so we created a breakdown of federal spending in simple terms. Let's put the 2011 federal budget into perspective:

• U.S. income: $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 cut: $ 38,500,000,000 (about 1 percent of the budget)

It helps to think about these numbers in terms that we can relate to. Let's remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.
 

• Total annual income for the Jones family: $21,700 
• Amount of money the Jones family spent: $38,200  
• Amount of new debt added to the credit card: $16,500  
• Outstanding balance on the credit card: $142,710
• Amount cut from the budget: $385

So in effect last month Congress, or in this example the Jones family, sat down at the kitchen table and agreed to cut $385 from its annual budget. What family would cut $385 of spending in order to solve $16,500 in deficit spending?

It is a start, although hardly a solution.

Now after years of this, the Jones family has $142,710 of debt on its credit card (which is the equivalent of the national debt).

You would think the Jones family would recognize and address this situation, but it does not. Neither does Congress.

The root of the debt problem is that the voters typically do not send people to Congress to save money. They are sent there to bring home the bacon to their own home state.

To effect budget change, we need to change the job description and give Congress new marching orders.

It is awfully hard (but not impossible) to reverse course and tell the government to stop borrowing money from our children and spending it now.

In effect, what we have is a reverse mortgage on the country. The problem is that the voters have become addicted to the money. Moreover, the American voters are still in the denial stage, and do not want to face the possibility of going into rehab.

By: DAVID THOMAS
Chief Executive Officer
Equitas Capital Advisors LLC