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It is always good to keep things in context and perspective. Dave Ramsey is a family debt consultant and radio talk show host (The Great Recovery). As an entrepreneur, you’re tasked with keeping your costs down so you can make a profit rather than going deeper into debt. While most VCs (Venture Capitalists) and Angel investors invest in businesses, it is their money that they have earned and want to invest to earn more. It’s not about taking on debt, it’s about making more income. It’s about how much can you make for doing a service to your fellow man, whether it’s from a product or service that people want.

The win/win is when both parties get a benefit from a business transaction. When one or the other loses, it’s not good for business or the customer. And when an entrepreneur takes on debt, it lessens business growth, especially if the interest rate is high, and which our government spending and borrowing does affect business and economic growth.

So, here is Dave’s view of the US government and its spending habits if we allow it to continue:

“If the US Government was a family, they would be making $55,000 a year, they spend $96,500 a year, & are $366,000 in credit card debt. What’s the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. It works the same way for the government. You can’t borrow your way out of debt, whether you’re a typical American family or the entire U.S. government. At some point, you’ve got to say, “Enough is enough!” and make the hard cuts necessary to win over the long haul.” – Dave Ramsey (Update – Here’s the source of the quote. There’s a post going around the internet that gave different figures, I researched for Dave’s quote and updated the figures to reflect this comments, even though it’s not the accuracy of the figures, but the principle of the figures that are alarming. Ed.)

Now Dave puts things into the right frame of mind for the average American.

If you want to know our national numbers, check out US Debt Clock and see where we are now. We’ve almost reached the point where our national debt will overtake our national assets. National debt: $14.5 Trillion. National Tax Revenue: $2.2 Trillion. Federal Spending: $3.6 Trillion.

Wouldn’t you agree?

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If the average US family were the US Government — 11 Comments

  1. Can someone explain where he gets these figures from?
    I assumed:
    “would be making $58,000 a year” meant US Federal Tax revenue,
    “they spend $75,000 a year” meant US federal spending, and
    “$327,000 in credit card debt” meant the US national Debt.

    But if that was the case it would be more like $30,000 / $50,000 / $146,000 respectively.

    I dont understand

  2. Abe, the federal govt takes in in revenue around $2.2 T bucks a year, we’re spending #3.6 T a year, and we’re $14.6 T in debt. You can find the “real time” numbers here http://www.usdebtclock.org/ All you need to do is find an average paycheck, or take your own paycheck, and use it as a percentage of the figures of the US to give you a perspective of what you’d be in debt for. A simple calculation is we’ve got 7 times the debt of our income, so take $30,000 times 7 and you’d get $210,000. If your income is $30,000 you’re spending $48,000 (61% over your income, or seen as 161%). Now the key point, this is “credit card” debt. You’d NEVER get a house mortgage with an income of $30,000, more like $70-90,000 at the most. Does this help any? So you see, if you have a debt of $210,000, who would be the fool for lending someone that amount with that income? Not many, but we’ve been “banking” on our “credit” far too long.

  3. His math is wrong!!! Seriously. Govt spending (3.6) to revenue (2.2) is 1.636 ratio. If you take his 58,000 and increase by same 1.636 ratio, you get spending of $94,900 NOT $75,000.

    • Well, take a look at his numbers on his web site with the link I provided. Regardless of how accurate or inaccurate his numbers are, the principle, WE’RE SPENDING TOO MUCH, is the issue and no one should do this, especially our government because we’re the one left with the bills, not our politicians.

  4. But, let’s beware of analogies that are not always accurate, and overly simplifying the complexity that is government. The U.S. Government, like most businesses has had a ‘line of credit’ since it’s very inception. Debt relative to GDP wise we are still not in the ‘dire straights’ that many countries are in.
    As Mayor Bloomberg (I) of New York wisely points out, we need to invest in order to create jobs which in turn creates the tax revenue that can fuel an economic recovery. This is exactly the wrong time to be introducing unwise spending cuts, or fueling debt mania…as the rating agencies and, most importantly the stock markets, are reflecting again today.

    • Sharon, thanks for your comments. While I agree that investment needs to happen, the questions are: Who is the “we” and where does the investment come from? Taxes? Our federal and state governments spending needs to be cut (especially the Department of Education) and let the businesses pick up the slack and let an ROI, not just throwing money at the problem, be our guiding accountable results. I just got done watching “Waiting for Superman” about our educational system (http://www.waitingforsuperman.com). Shameful that our “investment” money (yours and my taxes, with New York spending $100 Million/year paying teacher full salary waiting to be fired) is being wasted, whereas Kipp Academy (http://www.kipp.org/) is blowing away ALL of our current educational myths with their great ROI results. This is the new model.

      Bottom line: Regardless of how much we’re in debt, good financial discipline is more important and this analogy is a good illustration of our problems: We’re spending TOO MUCH! We need to take away our politician’s credit card, taxes, because our Federal govt causing all of this. It is actually the right time to cut spending. Why? Because those that are not willing to change with the changes need to go. Look at Apple, they’ve got no debt and $76 Billion in the bank. Why can’t our government do this? It can, but our more progressive/socialistic/liberal ones think that spending is the issue, it’s not. And Kipp Academy proves it. The market just reflects that this WH administration and Congress is out of touch with America.

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