I have a new found interest in and respect for the savings of cold-hard-cash for various reasons; it’s easier to sleep at night with a good cushion, you never know when emergency may strike and I have come to loathe micro-loans known as credit cards.
So this $100M Government initiative is right up my alley right? I mean, this is fiscal responsibility at its best, yes? We’ll use both sides of the paper for printing – technology that has never before been available. We’ll cancel a few phone lines, turn off our computer monitors when not in use, you’ve heard the news reports – hopefully.
Well, let’s take a look at this type of savings plan and what happens when the rubber meets the road for the average American.
The total outlay budget this year for our Federal Government is $3,107,000,000,000 (that is $3.107 Trillion), according to whitehouse.gov and the Office of Management and Budget’s page. Our aggressive $100M savings plan thus breaks out this way:
$100,000,000 savings/$3,107,000,000,000 outlay budget = .000032 or .0032% total savings
That’s right, our Federal Government is tightening the belt an astonishing .0032%.
Now, according to the Census Bureau, the median US Household Income (HHI) was $50,233 in 2007. Let’s say aggressively that income rose 5% in 2008 and 2009 bringing the median HHI to $55,382 at the end of this year. Assuming that the average American family also took it upon themselves to sacrificially save .0032% this year for the security of their future, each average American family would save annually:
$1.77
That’s planning for a solid future, being fiscally responsible with managing your household and truly, cutting back on your standard of living.
Now, in a similar manner the Federal Government, once again according to whitehouse.gov, is budgeting total receipts of $2,700,000,000,000 for a short fall of $407,000,000,000 to expenditures. The spending plan breaks out this way:
$407,000,000,000 deficit/$2,700,000,000,000 receipts = .1507 or 15.07% over spending
Now, when a country overspends, it has to borrow, either from another country (China) or has to mint more money (dilution of gold backed funds aka inflation and borrowing against money that has not yet been earned and taxes paid on those same earnings by my great-grandchildren). In other words, loans are needed to fill the gap.
Once again, let’s bring this down to real life and assume that the average American family is over spending their HHI by 15.07% or $8,307. The average American family now has choices, take out a loan(s), get more open credit or some type of combination of both. However, at some point in time that same family will run out of credit available to them, max out their monthly income to just paying loans and – - – shock, if they cannot up their income will most likely loose everything. We happen to be in this very case in this country. People and business have overspent, primarily with credit and we are no feeling those results nationwide.
To draw this all together, if the average American family were to spend like the Federal Government, we can quickly see the disastrous results. If that same American family, faced with liquidity issues were to decide to start saving like the Federal Government, the savings would only amount to $1.77 against their $8,307 yearly over-spending or .02%. Eventually the over expenditure would catch up and the family would be rendered insolvent.
I’ll let you draw your own conclusions on this. I just thought I’d share the truths of the Feds (all parties are at fault here) compared to the Average American Family.
