Sunday, July 31, 2011

Should Government Finances Be Run Like Household Finances?

How many times have we heard Republican politicians say we should run our country finances like family budgets?  Over and over again, we hear similar statements.  Really?  Should we?  Well, let's take a look at what things might be if we did run government finances like we run our household finances.

I've picked up a series of three very interesting graphs over at Illusion of Prosperity.  They go into a little more detail than I do.

Here is the first graph.

This is a graph of the growth of the GDP and Wages and Other Labor Income since 1952.  They track each other very closely, with Wages, etc. dropping more than GDP over the last couple of years.

Now, let's add Civilian Employment and Corporate Profit Before Taxes to the graph.

Corporate Profits kind of track along with GDP, Wages, and Civilian Employment bouncing between the two until Bush II came along in early the 2000s, then Corporate Profits soared, crashed, and are now soaring again.

Finally let's get to my point and add Federal Government Debt and  Household Debt.

WOW!  Household Debt kind of dwarfs everything else, including the Federal Government Debt.  Household Debt takes off in the early 1980s.  Thanks Ronny!  Then there is another jump in the rate of increase about the time GWBII comes along.  Thanks George!  By the time the economy crashes, Household Debt is about 4 times as big as the other items, including the Federal Government Debt.

So, when the Tea Party and the republicans say we should run government finances like we run our household finances, what they are really saying is that we should have about 4 times as much debt.  That means that they want us to be about 60 Trillion Dollars in debt.  And who do you think would get all that money?  Why the wealthy and the big corporations, of course. 

Once again, republicans are full of crap!  And while they may have interesting sound bites, their sound bites don't mean crap.  And if you don't look past their sound bites, you have crap for brains.


  1. Whatever happens tonight is not going to be pretty. Nor is it going to be advantageous for us mere mortals. The two choices are dismal at best and the outlook, the results down the line are disastrous for the economy and for the American people...but we elect them...and we have to live with their re-engineering of society.

    If there was ever a time to pray, and if prayers had any consequences...this would be one.


  2. The rightwads only want "government finances to be run like household finances" when it comes to spending on the infrastructure, public safety, public health or anything else that makes life better for the lowly masses.

    When it comes to pouring money into the Pentagon and the Prison Industrial Complex, these same deficit hawks suddenly change to "Hey, lookie there, we've got us a money tree in the backyard, and it's sprouting trillion dollar bills faster than we can spend them!"

  3. It's a strained/hackneyed analogy, Jerry, and they shouldn't be making it. I continue to maintain that we need a balanced (similar to what Mr. Obama was advocating before he caved) and gradual approach that includes revenues, entitlement reform, a scaling back on our internationalist approach to foreign policy, and, yes, God damn it, some good old fashioned prioritizing/shared sacrifice. But, hey, what in the hell do I know?

  4. The Republicans are tired of those who earn all the wealthy paying too much in tax on their earnings. That is the problem. We need to get grandma to pay 60,000.00 a year in tax on her earnings of 14,000.00 year. If we cannot make that happen, we are a socialist nation that only wants to cause the rich more pain.

  5. Will,
    There is a lot to be said for your approach. I am troubled by the fact that there are no revenue enhancements in the debt limit deal.

  6. Yes, John. The republicans want to take ALL of Grandma's money and let her die penniless.

  7. Grandma already spends all of her disposable income on food, heat and medicine. They want her to pay her fair share in taxes, which means a few meals per day and perhaps her heating two days out of every seven, and she will have to give up her heart medicine. It is only fair, they tell me, because everyone must pay: those who can easily afford it, those who can barely afford it and those who cannot afford it. It is the only fair thing. Grandma was going to die anyway. So long as everyone is paying their fair share, the tax burden is completely equal and just and fair.

  8. Revealing charts and a point well made.

    It's also interesting how business people generally favor fiscal austerity and shrinking government until it's small enough to drown in a bathtub, but have no problem with the country's Gargantuan trade deficits that have been draining our wealth for with cumulative impact since the early 1980s.

    Maybe we should tell business types and the rich, whether in business or not, that the country should live within its means, so obviously a balanced-trade amendment should be enacted and enforced.

    Betcha that would send the Walton clan and Bernie Marcus, founder and CEO of Home Depot, into paroxysms of apoplexy.

  9. What a very convoluted way to discredit a meme which is vulnerable to much more basic disproving.

    Anyone who incorrectly buys the idea that personal financial policy is comparable and generally applicable to government financial policy isn't going to be swayed by your nuanced and somewhat technical argument.

  10. Run it like a household budget? Ok, then in what household do you respond to mounting debts by having your pay cut, in the hopes that your employer will respond by hiring more of your family?

  11. Run government finances like a household? That's as convoluted as tax cuts to corporations will create jobs.
    What's wrong with the honest truth; we have to raise taxes to pay our bills.
    I guess Americans think it's ok to run deficits, they do in their household budgets.
    It's an irresponsible financial sickness based in greed.

  12. Just wanted to add a clarification.

    By the time the economy crashes, Household Debt is about 4 times as big as the other items, including the Federal Government Debt.

    The household debt wasn't 4 times as big. The growth of it was.

    The household debt and federal debt are now of roughly equal size now. The household debt just started from a much smaller number in 1952 (so it grew faster as a percentage).

    Thanks for posting this. :)

  13. Right, SM, Federal debt is not 4 times as large as household debt, but my point is if the federal debt grew at the same rate as household debt (we managed federal debt the same as we managed household debt), it would be 4 times as large as it is now.

  14. I mean, household debt is not 4 times as large as federal debt.

  15. Jerry Critter,

    I hear you. It is insane to think that the government should run its finances like the household sector.

    That's assuming that the payday loan industry doesn't start offering really good deals to our government of course.

    D'oh! ;)

  16. "It is insane to think that the government should run its finances like the household sector."

    It's equally insane to demand government vbe run like a business.

  17. Yes, government is unlike either a household or a business. People are familiar with households and businesses, so when you want to denigrate government, it is easy to hold up households and businesses as examples of how government should be run. But it is a false comparison.