The Impact Of Our Federal Debt On Your Households Net Worth And Cash Flow
The Bad News: The Average U.S
The Bad News: The Average U.S. Household is Now Bankrupt (Really)
As I write this, our federal debt the sum of many years of annual budget deficits stands at $16.1 trillion, or about $135,000 per household*. (No, that is not a typo.) As noted in our e-booklet, Wealth is Good, Cash Flow is Better, the average U.S. households net worth in 2010 was $77,300 excluding this federal debt item.
While economists and politicians prefer to speak of the deficit in terms of abstract formulas and ratios like percentage of debt to GDP, I prefer to keep it simple and relevant to you, the individual. Adding the federal debt to the balance sheet would move the average U.S. households net worth into negative territory, to -$57,700.
The cost to the average household to pay just the interest on our federal debt
is equivalent to losing the opportunity to make at least one car payment
each month for the next 20 years.
This isnt an imaginary number. Its real and has to be repaid. In fact, we all do pay a tiny portion of it interest on the debt from our taxes. It currently accounts for 8% of our federal tax payments about $2,000 annually per household, or a negative monthly cash flow of -$165.
Interest payments on the federal debt are projected to more than double by 2030,** so the cost to each household for just the ongoing interest payments is equivalent to losing the opportunity to make one car payment each month for the next 20 years. So in a very real sense we can say the interest alone is costing each household a car.
To make matters worse, those interest payments dont even reduce the principal. Essentially, each household has a credit card balance of $135,000 on our Uncle Sam card nearly the cost of an average house! Were making minimum monthly payments equivalent to a car payment, yet the card balance never goes down. In fact it continues to grow rapidly. Clearly, its time for credit counseling.
So Whats The Governments Repayment Plan?
For a simple explanation of our governments response to the problem, a video entitled Government Debt Simplified *** by EngageAmerica does a great job. Heres a summary.
The government takes in $2.3 trillion a year in taxes but is spending $3.6 trillion, resulting in an additional $1.3 trillion in debt. Add this to our existing $14.8 trillion from prior years and we now have a total debt obligation of $16.1 trillion.
How much has Congress agreed to reduce this? By $21 billion, or 0.1%by next year.
Heres how EngageAmerica helps us put it in perspective: They drop 8 zeros from all the numbers. So, its like a family having annual income of $23,000 but spending $36,000. Thats another $13,000 each household owes just from this years budget shortfall. Tack it on to your existing unpaid Uncle Sam credit card balance of $135,000 and your new balance is $148,000.
And how much would you reduce your households $148,000 in credit card debt if we follow Congresss plan? By $210. Next year.
* www.usdebtclock.org
** Congressional Budget Office (CBO) Long Term Budget Outlook
*** http://www.youtube.com/watch?v=JMDtp-bII9Y
by: Keith Wheelan
House Removals- A Perfect Service At Cost Effective Rates! The Housing Market Is On The Upswing: How To Make Your Home Marketable Top-notch Sunroom Designs: Brightening Up The House Any Day Of The Week A Guide To Choosing The Right Kind Of Siding For Your House How To Achieve Your Dream House With A Reasonable Price Dlf Regal Gardens Sector 90 Gurgaon - Come House To Comfort Exactly How Do You Make Money In Your House Without Stress. Read This Post To See Exactly How ... A Mystery House In California Dog House Heaters Work In The Most Severe Weather Well-furnished Housing Apartments In Noida - Sky Garden It Was A Hard Struggle Between Duty And Inclination To Keep Woodhouse Quiet Until He Was Decently Pu Factors To Contemplate For New Household Builders In Central Florida Owning A House In Mohali No More A Dream