According to a 2006 report from the U.S. Census Bureau, the median family income in the United States of America is $56,194. Monthly, that works out to be $4,682.83 in gross income per family. That’s $4,682.83 for everything from a mortgage or rent payment to educational costs to food for the kids.
A family that finds a way to spend less than that $4,682.83 per month on essentials might have some room for fun stuff; putting some of that money away, before or after allowing for some family fun, will allow for financial security and freedom in years to come. A family that spends more than that $4,682.83 per month, however, will quickly find themselves on the road to financial ruin. This much is obvious, or so you would think.
If the federal government were an average American family, pulling in $4,682.83 per month, last month that federal “family” spent $38,399.23. At that pace, the federal “family” will have spent $460,790.80 by year’s end. That’s $460,790.80 in spending, and only $56,194 in income.
Financial ruin? Try financial catastrophe.
Unfortunately, this is exactly what awaits our nation as a whole. According to the U.S. Treasury’s final statement for the month of March, the federal government received $128.179 billion in net federal tax revenue while paying out a total of $1.0528 trillion in federal expenses. As the folks at CNSNews pointed out in an attention-grabbing headline, dividing the net federal tax revenue into the federal expenses reveals that, in March, the U.S. Government Spent More Than Eight Times its Monthly Revenue.
Erskine Bowles, co-chair of the Obama administration’s National Commission on Fiscal Responsibility, was quoted by CNSNews as being “really concerned.”
“I’m really concerned,” Bowles told the committee last month. “I think we face the most predictable economic crisis in history. A lot of us sitting in this room didn’t see this last crisis as it came upon us. But this one is really easy to see. The fiscal path we are on today is simply not sustainable.
“This debt and these deficits that we are incurring on an annual basis are like a cancer and they are truly going to destroy this country from within unless we have the common sense to do something about it,” said Bowles.
“I used to say that I got into this thing for my grandchildren,” Bowles said. “I have eight grandchildren under five years old. I’ll have one more in a week. And my life is wonderful and it is wild. But this problem is going to happen long before my grandchildren grow up.
“This problem is going to happen, like the former chairman of the Fed said, or the Moody’s said, this is a problem we’re going to have to face up,” he said. “It may be two years, you know, maybe a little less, maybe a little more. But if our bankers over there in Asia begin to believe that we’re not going to be solid on our debt, that we’re not going to be able to meet our obligations, just stop and think for a minute what happens if they just stop buying our debt.
“What happens to interest rates?” asked Bowles. “And what happens to the U.S. economy? The markets will absolutely devastate us if we don’t step up to this problem. The problem is real, the solutions are painful, and we have to act.”
This morning, I caught Jason Chaffetz, the freshman GOP Congressman from Utah, on Fox & Friends. I was scrambling to make coffee (sleep, with a newborn in the house, is causing me to run through my coffee stores like Charlie Sheen through a briefcase of cocaine), dress a four-year-old, put on cowboy boots, transfer some money between paltry savings and paltry checking, and shovel a peanut butter-covered english muffin into my mouth, but I’m pretty sure I heard Rep. Chaffetz put his foot down when it comes to the ongoing debate over budget cuts on Capitol Hill.
The highlights from that interview: Republicans were elected on the promise of cutting $100 billion from the budget. President Barack Obama and the Democrats want to cut nothing. House Majority Leader John Boehner has compromised at this point on $65 billion in cuts. His Democrat counterparts are claiming that a deal has been made, and $33 billion will be excised from the budget. Congressman Chaffetz said that under no circumstances would $33 billion be enough. “The federal government is spending $4 billion each day,” Chaffetz said, noting further that the more freshman Republicans involved in the budget cutting process, the better.
I happen to agree with another freshman Republican making waves in Washington. On February 7, Sen. Rand Paul wrote in The Wall Street Journal that he could cut $500 billion and still keep 85 percent of government funding — without touching Social Security or Medicare. For details as to where the cuts would be made, read the op-ed by clicking HERE. For those who believe that it cannot or should not be done, read the following excerpt:
For those who take issue with any of the spending cuts I have proposed, I have two requests:
First, if you believe a particular program should be exempt from these cuts, I challenge you to find another place in the budget where the same amount can feasibly be cut and we can replace it.
Second, consider this: Is any particular program, whatever its merits, worth borrowing billions of dollars from foreign nations to finance programs that could be administered better at the state and local level, or even taken over by the private sector?
A real discussion about the budget must begin now—our economy cannot wait any longer. For 19 months, unemployment has hovered over 9%. After a nearly $1 trillion government stimulus and $2 trillion in Federal Reserve stimulus, the Washington establishment still believes that we can solve this problem with more federal spending and the printing of more money.
That’s ridiculous, and the American people have had enough.
Cutting $100 billion is a start. Cutting any less–ANY less–is downright laughable. The way I look at it, as we are motoring toward a government shutdown and each political party is positing why the other party wants it more, I challenge you to tell me why a government shutdown would be a bad thing. Essential government services would be maintained; it’s the rampant frivolity is what would stop.
Look at it this way — if a typical American family finds that it is spending $33,716.40 more than it is taking in, it’s time to cut up the credit cards, start selling things, and find any way possible to increase revenue. A complete and total shutdown is the ONLY solution.
Following that shutdown, the next step would be to sit down, make some difficult decisions, and set forth a brand new budget that begins the slow road back to solvency. Thankfully, Wisconsin Congressman Paul Ryan will be rolling out a 2012 budget tomorrow. Politico has some highlights:
Ryan will roll out a blueprint Tuesday that could slash up to $6 trillion in the next 10 years from spending, reforms and cuts entitlements, and overhauls sections of the tax code. Never mind that Ryan’s ambitious vision has no chance of passing the Democratic Senate — the 2012 budget is likely to provide Republicans with a measure of unity they’ve been lacking as they try to wrap up work on the stalled 2011 spending plan.
The Republican budget is expected to include several major proposals: reduction of the corporate tax rate to 25 percent; elimination of corporate tax loopholes; spending cuts with enforceable caps; reforms to “save critical health and retirement programs”; health reform that “repeals and defunds the president’s health care law”; and a promise to restore “America’s exceptional promise,” according to GOP aides, lawmakers and a draft summary of the budget.
Sources said Ryan plans to lower spending below 2008 levels, a dramatic cutback. There was discussion about lowering to 2006 levels, but that won’t make it into the budget. Those huge cuts were suggested in January by Republican Study Committee Chairman Jim Jordan (R-Ohio) but received little support at the time.
Other plans include block grants for Medicaid, a proposal that many governors of both parties prefer, as it shifts control to the states. Those on Medicare would get to choose among competing private insurance plans — which advocates have described as “premium support.” The budget is also expected to kill funding for the health care law, likely by stopping the expansion of Medicaid and subsidies for private health insurance.
As Politico points out, the plan has little to no chance of passing a Senate held by Democrats and run by Senate Majority Leader Harry Reid. However, unveiling the plan allows for Republicans to point out not only that the Democrats made the purely political decision to refrain from issuing budget at all out of concerns for any effect on last year’s mid-term elections, but to get on the record showing that they are aware of our nation’s tenuous financial condition, and prepared to make the hard decisions and sacrifices necessary to reverse the momentum and halt the inevitable catastrophe.
I like what Jason Chaffetz had to say about involving more GOP freshmen in the process. Freshmen representatives are inherently more in touch with the constituency they themselves were a part of only a year ago, and moving forward in the right direction will require an understanding of what American families are facing, and what American families are capable of.
For now, cutting the cards and shutting down the spending factory might be a good start. Let’s stop approaching the looming shutdown as though it is somehow a bad thing.