The US Budget Explained As a Family’s Household Budget

One problem with this chart is that it presents a snapshot in time and so you can't see how the various portions of the budget have changed.

So here is Jared Bernstein( * ), former member of President Obama's economic team explaining how the "Family Budget Not Equal to Government Budget" (http://jaredbernsteinblog.com/family-budget-not-equal-to-gov...)

Heading into work the other day, I heard a Congresswoman on the radio using a common argument that always sticks in my craw—or it would if I knew what a ‘craw’ was.

Here’s the gist: “The federal budget is just like a family budget, and we in government must tight our belts and live within our means just like families do.”

There are similarities which I’ll note below, but it’s almost always used as an argument for cutting everything to the bone right away, and in that sense it’s wrong.

First of all, it’s bass-akwards: when families are tightening their belts, the federal government is the one institution that can actually help the economy—and these belt-tightening families—by loosening its belt and running a deficit.

That deficit should be temporary and should come down when the private economy climbs up off the mat—which again tweaks the analogy: when families start to loosen, gov’t should eventually start to tighten (“eventually” because these transitions can be fragile and if gov’t tightens too soon, it can reverse the early gains–see UK).

But there’s another fundamental way in which this family budget analogy gets misused. Families borrow to make investments and to get over rough patches. They run deficits too. I went into pretty deep debt to finance college and grad school and I’m glad I did.

The whole credit system is based on the fact that if we had to pay cash-as-we-go for everything, we’d seriously underinvest. And that’s true for families and governments—and yes, you can overdo the borrowing thing. But to flip too far the other way is equally dangerous.

So, while it sounds good and has some merit, I’d use the “gov’t budget=family budget” argument with care and I’d discount those who want to use it as a hammer to insist on instant cuts.

( * ) Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.

Bernstein’s areas of expertise include federal and state economic and fiscal policies, income inequality and mobility, trends in employment and earnings, international comparisons, and the analysis of financial and housing markets.

Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C.

Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor.

Although I detest pie charts, these numbers do probably give us some perspective on just _how_ unbalanced our spending currently is.

Big numbers out of the scope or our everyday lives are difficult to fathom. Perhaps it would have been nicer to adjust the "income" to $40k or so, which is the US median household income.

I'd be more interested to see national budgets compared to other national budgets than to family budgets.

Nobody expects a family to pay for military R&D, and many expect their government to. We abide the state precisely because it takes on these responsibilities.

Very "tea party" centric pie chart. Who the hell sends over 60% of their income to taxes?! Talk about scare tactic. It should be closer to 0-25%, especially given how many people celebrate the annual April jackpot (aka. refund checks)

I look forward to "War on Terror explained as a pissing contest on primary school playground" and other nonsensical childish bullshit in support of utterly disproven ideas.

The one thing I'd add is The amount of revenue generated by the Top 10% of income earners. Using the household budget model it would be $6,835. (individual income tax is about 45% of federal revenue and the top 10% pay 70% of that). Too many people think we can solve all our problems with a modest increase on "the rich" when the truth is our hole is much deeper than that

(the top 10% is anyone over $113,000 which is why I put "the rich" in quotes)

More realistically, it's not "outstanding balance on the credit card", but "outstanding balance on the mortgage", or even less bad -- the interest rates paid by the federal government to borrow are absurdly low, largely due to the US Dollar's status as the global reserve currency.

If I could borrow an infinite amount for 1-4%, I could think of a lot of things which would produce vastly greater returns. Genuinely needed infrastructure, technical education (from infancy to technician, engineer, or scientist level) for anyone capable, science, ...

Now, the US doesn't actually spend borrowed money on that kind of stuff...