The U.S. Debt Problem Explained

November 21, 2011

Please note – the story below is one which we received in an email from a client. The numbers are not exact but they paint a pretty realistic picture of the U.S. Debt Problem. The Congress and Super Committee of 12 are trying to come up with budget cuts amounting to $1.2 trillion over 10 years. Their deadline is November 23^rd.

Most people find millions, billions and trillions difficult to comprehend.  Politicians are no exception.

The figures shown in ‘The U.S. Debt Problem Explained,’ reduced to a pretend household size, are alarming.  The conversion is, of course, arbitrary and very broad-brush.  Nevertheless the scaled-down figures give a much more comprehensive idea of the problems facing the U.S.

The U.S. Debt Problem Explained!
 

Here is why S&P downgraded the US credit rating:

·         US Tax revenue:   $2,170,000,000,000 (trillion)

·         Fed budget:   $3,820,000,000,000 (trillion)

·         Deficit & New debt:   $1,650,000,000,000 (trillion)

·         National debt:   $14,271,000,000,000 (trillion) â€“ before this year

·         Recent budget cut:   $38,500,000,000 (billion)

·         Proposed budget cuts by the Super Committee over 10 years:   $1,200,000,000 (trillion)

Now let’s remove 8 zeros and pretend it’s a household budget:

·         Annual family income:  $21,700

·         Money the family spent:  $38,200

·         New debt on the credit card:  $16,500

·         Outstanding balance on the credit card:  $142,710

·         Total budget cuts:  $385

·         Proposed budget cuts over 10 years:  $12,000 total

As you saw in the numbers above, a $1.2 trillion cut over 1 year would not prevent the debt from increasing. Over 10 years that only amounts to $120 billion per year!! How unreasonable! And it appears they won’t even be able to agree on that.

Let’s hope for a miracle.

Sincerely,

Edward J. Kohlhepp, CFP^®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP^®, MBA

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

Source: Anonymous