What if we ran the government like the average household?

So you want to run the Federal Government like the typical American household. After all why should the Federal Government get to run up huge debt and not pay it off? In the recent debt commission report Erskine Bowles stated that “This Debt is like a Cancer”. With all due respect to Mr. Bowles the problem here is not the debt but the solutions or rather the lack thereof.

Setting that aside for the moment, let’s assume that this narrative is correct. We can then show that the typical US household owns a home and with the purchase of the house the average American takes on a large amount of debt. If we consider our current debt of around $14.1 trillion and our current revenue of around $2.16 trillion in terms of the standard mortgage and salary respectively, we could take out a 30 year mortgage at the current interest rate and pay it off at $63.7 billion a month. This would put our payments at around 35% of revenue or “monthly salary”. If Republicans had been as concerned about National Debt when they were in control of both the Legislative and Executive branches of the government as they are now, we could have cut our national mortgage nearly in half with a monthly payment of only $33.5 billion. Instead, over their six years in control, they increased spending by over 48% while only increasing revenue by around 18% leading to a 50% increase in our national debt over 6 years and doubling it in less than 9 years.
Regardless, as a household our current national debt is a completely manageable number since it fits in the standard 30 year fixed mortgage model. What are not manageable in this scenario are our current spending habits. To pay off our current national mortgage (national debt) in 30 years we need to spend around $764 billion a year on the debt. Unfortunately our mandatory spending only leaves us with only $315 billion available to pay our national mortgage. This means even if we cut all of our discretionary spending which includes things like Defense, Homeland Security, Education, Health and Human services, Transportation, and Veterans Affairs, we would still come up $449 billion a year short of making or mortgage payment.

While Republicans walked into office claiming that we needed to have an adult conversation, the programs that they are offering to cut and the money these cuts would “save” is putting us on the fast track to foreclosure. This is also true of the President’s proposal. Any serious conversations would include huge cuts to Defense spending, changes in the Social Security system, cost controls for health care, and an increase in taxes. The only other possible solution is to increase GDP and unfortunately busting unions, redefining the word rape, and scaling back the family medical leave act, do nothing to improve the economy or reduce unemployment, but these are the legislative priorities that Republicans have presented so far.

Luckily governments don’t have to act like households since that line of thinking is exactly the opposite of how government spending works for the public good. The best model of government spending requires that a government spends money in a bear market and increases taxes to stock the rainy day fund during a bull market. We should be focusing on long term deficits and economic growth since the current obsession with deficits is short sighted and will only further exasperate the economic issues that currently plague this country. But that doesn’t seem to stop huge segments of the population from fighting against their own best interests.