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News & ArtsFriday, December 16, 2011
Economy The Dangers of Simplifying
Posted by Charles Mudede on Fri, Dec 16, 2011 at 3:50 PM
An image doing the rounds contains this information:
I love it when complex things are simplified so that we can all understand.United States Tax Revenue: $2,170,000,000,000
fed budget: $3,820,000,000,000
New debt: $1,650,000,000,000
National debt $14,271,000,000,000
Recent budget cut: $38,500,000,000
Now remove 8 zeros and pretend it's a household budget
Annual Family Income: $21,700
Money the Family spent $38,200
New Debt of the credit card $16,500
Outstanding balance on credit $142,710
Total Budge cuts which politicians are proud about: $385
Stop the insanity now. Vote them out and demand a balanced budget.
This kind of thinking may be fine for rural types who have nothing better to do than pray, go to church, buy guns, set traps, and tip cows. But it's completely useless information if you live in the real and very social world. Despite the root meaning of the word "economy," a state economy is not the same as a home economy. To give you one example. Who owns America's national debt—the pictured equivalent of a household's credit card debt?
Hong Kong: $121.9 billion (0.9 percent)
Caribbean banking centers: $148.3 (1 percent)
Taiwan: $153.4 billion (1.1 percent)
Brazil: $211.4 billion (1.5 percent)
Oil exporting countries: $229.8 billion (1.6 percent)
Mutual funds: $300.5 billion (2 percent)
Commercial banks: $301.8 billion (2.1 percent)
State, local and federal retirement funds: $320.9 billion (2.2 percent)
Money market mutual funds: $337.7 billion (2.4 percent)
United Kingdom: $346.5 billion (2.4 percent)
Private pension funds: $504.7 billion (3.5 percent)
State and local governments: $506.1 billion (3.5 percent)
Japan: $912.4 billion (6.4 percent)
U.S. households: $959.4 billion (6.6 percent)
China: $1.16 trillion (8 percent)
The U.S. Treasury: $1.63 trillion (11.3 percent)
Social Security trust fund: $2.67 trillion (19 percent)
So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.
See, it's so simple. I'm going to call my credit cards and tell 'em they only own a third of my debt. I own the rest. You know what that means? My family owes my family. Hee haw! That'll learn 'em.
Meanwhile...
Who says American salaries are stagnating. After two years of lower pay packages, chief executives at the nation's major companies enjoyed a 36.5% jump in pay last year, according to a leading survey of CEO compensation.The average pay hike is for the top executive at each of the Standard & Poor 500 companies, according to GMI, the research group formerly known as the Corporate Library. A broader survey of CEO pay at 3,000 companies posted an average 27% increase.
Not only that...
The most lucrative sector for CEO pay was health care, which included three of the nine top-paid executives, including the two most lucrative packages:
Yes, cow tipping is a myth.
1
That "useless" information is going to rock the world of the urban moocher class.
Your Humanist Socialist Liberal Welfare State is collapsing.
make book on it.......
Your Humanist Socialist Liberal Welfare State is collapsing.
make book on it.......
2
A breakdown of where all that "household" spending is going might be illuminating, too. Something like, what, half of it(?) is going to daddy's gun collection, and then there's the constant stream of "loans" to gambling-addicted Uncle Wally.
3
I would also tell this family "you have another source of income you're just leaving on the table, fool" (i.e., raise taxes on the rich back to Reagan levels).
4
If my household could borrow at below inflation rates (effectively negative interest), my budget would look like that, too.
5
It's apples and oranges in the first comparison. Tax revenues have nothing in common with a single household income. Total income for the US was 14.7 billion dollars in 2010. As a country we've agreed to buy 3.8 billion dollars worth of goods and services as a collective effort. However, we've only allocated 2.2 billion in funds to pay for it, which is just stupid, if not criminal. By way of analogy, the family income would be $147,000, but they've decided to spend only $21,000 of it on the $38,000 worth of stuff they've already bought. It's time to garnish some wages.
6
a state economy is not the same as a home economy
Said this many times, myself. It's not just hicks, there are plenty of financially ignorant liberals here on SLOG who don't get this, either.
Also, not all debt is the same. Borrowing money to grow a business is very different than borrowing money to buy a vacation to Hawaii, for example.
And that's not to mention interest. When your creditor is charging you 19% per month like some credit cards, you need to pay that shit back as soon as you can. If they're charging you 1% annually as with some t-bills, you can (and should) take your time.
Said this many times, myself. It's not just hicks, there are plenty of financially ignorant liberals here on SLOG who don't get this, either.
Also, not all debt is the same. Borrowing money to grow a business is very different than borrowing money to buy a vacation to Hawaii, for example.
And that's not to mention interest. When your creditor is charging you 19% per month like some credit cards, you need to pay that shit back as soon as you can. If they're charging you 1% annually as with some t-bills, you can (and should) take your time.
7
Most families in the situation this chart is in would be looking for extra income. Instead we listen to Uncle Grover who tells us we should demand a paycut for ourselves so the boss can get a new BMW. And Uncle Newt's drinking buddies buys guns on our credit cards and sets us up with contractors that rob us blind.
8
"..rural types who have nothing better to do than pray, go to church, buy guns, set traps, and tip cows."
Charles, your blatant prejudice here is really annoying.
When the subject was New Jersey, and it was pointed out to you how dumb it was for you to make assumptions about a place where you'd never been, you actually agreed with the commentariat.
It would be really awesome if you could do the same thing with your notion of 'rural' and 'country people.'
You are stereotyping every bit as much as the Sarah Palins of this world, only from the other direction. I KNOW you're not that stupid. Please stop posting as if you are. Thanks.
Charles, your blatant prejudice here is really annoying.
When the subject was New Jersey, and it was pointed out to you how dumb it was for you to make assumptions about a place where you'd never been, you actually agreed with the commentariat.
It would be really awesome if you could do the same thing with your notion of 'rural' and 'country people.'
You are stereotyping every bit as much as the Sarah Palins of this world, only from the other direction. I KNOW you're not that stupid. Please stop posting as if you are. Thanks.
10
If you'll only build a trench crossing your property and water lines and perhaps through the living room for the chemicals we need to move, we'll let you not put money into your retirement account.
What that shows me is that the 38.5 billion cuts stated are minimal and thus unnecessary.
What that shows me is that the 38.5 billion cuts stated are minimal and thus unnecessary.
11
"What we need to do instead is embark on a massive investment program—as we did, virtually by accident, 80 years ago—that will increase our productivity for years to come, and will also increase employment now. This public investment, and the resultant restoration in G.D.P., increases the returns to private investment. Public investments could be directed at improving the quality of life and real productivity—unlike the private-sector investments in financial innovations, which turned out to be more akin to financial weapons of mass destruction."
Joseph Stiglitz The Book of Jobs in Vanity Fair.
Joseph Stiglitz The Book of Jobs in Vanity Fair.
12
Family households can't print their own money. This analogy is utterly childish in its oversimplification.
13
@12
Anyone can print money. It's just a matter of getting anyone to use it. "Federal laws prohibit making coins, but not bills." explanation and picture of three dollar REAL bill featuring William Burroughs that circulated in Lawrence, KS.
Anyone can print money. It's just a matter of getting anyone to use it. "Federal laws prohibit making coins, but not bills." explanation and picture of three dollar REAL bill featuring William Burroughs that circulated in Lawrence, KS.
14
@8, certain elements of those stereotypes may be offensive but the central point that when your world is small you don't really understand complexity or learn to empathize with people who are significantly different from you is nonetheless entirely true.
15
@14 - True, but that's a generalization that can be applied to many groups of people, in many different walks of life, all over the country, rural and urban alike.
Charles, on the other hand, insists that simply by the fact of someone not living in an urban area, they have nothing better to do than pray, go to church, buy guns, set traps, and tip cows. I'm suggesting that Charles actually knows nothing about people who live outside of urban areas, and he's engaging in intellectually dishonest over-generalization.
It's annoying, and weakens every point he tries to make in this arena.
Charles, on the other hand, insists that simply by the fact of someone not living in an urban area, they have nothing better to do than pray, go to church, buy guns, set traps, and tip cows. I'm suggesting that Charles actually knows nothing about people who live outside of urban areas, and he's engaging in intellectually dishonest over-generalization.
It's annoying, and weakens every point he tries to make in this arena.
16
Thank you Charles. I've been trying to explain that to several of my friends lately; that national debt, even though it *can* be harmful to the economy, isn't such a specter. Remember when it was cool to buy U.S. bonds? Yeah, that's all the debt is.
17
The people who don't understand the difference between personal finances and macroeconomics are the same people who refuse to come to terms with institutional racism. That is to say most white Americans.
18
Good Evening Charles,
Fair enough. There are "dangers in simplifying". On the other hand, there is a danger in science rendering something so complex that the common man can't understand it. Is it any wonder that some of those same "rural types" have a contempt for the Ivory Tower? That's not an excuse for them not to try to understand. But, scientists and their defenders could attempt to make concepts like your example more clear. Rural types live in a very real & social world. It's just not the same real & social world you live in.
Fair enough. There are "dangers in simplifying". On the other hand, there is a danger in science rendering something so complex that the common man can't understand it. Is it any wonder that some of those same "rural types" have a contempt for the Ivory Tower? That's not an excuse for them not to try to understand. But, scientists and their defenders could attempt to make concepts like your example more clear. Rural types live in a very real & social world. It's just not the same real & social world you live in.
19
@18- There is only one real world. It is a matter of how much of it you understand and how much complexity (and therefor mental work) you are willing to grasp. I think Charles's casual dismissal of rural people (not just American rural people but for the entire world) is rooted in his desire not to be seen as some African hick but as a sophisticated, urban intellectual citizen of the world. His own over-simplification, that urban people are sophisticated and rural people simple.
The example of this chain email: The majority of people who see and forward it are urban or suburban, not rural. Charles invokes the specter of the hayseed because the hayseed because in his 19th century view of things the clerk is supposed to be more sophisticated than the farmer.
The example of this chain email: The majority of people who see and forward it are urban or suburban, not rural. Charles invokes the specter of the hayseed because the hayseed because in his 19th century view of things the clerk is supposed to be more sophisticated than the farmer.
20
Some of those ignorant rural types may have moved back to the country after spending time in, and being less than impressed by, your vaunted big cities.
21
When I saw this "household" budget, my first thought was that the family needed to increase their income.
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