Keep Calm and Pay More Taxes

Federal vs Household Budgets

I saw the following message about federal vs household budgets floating around Facebook like crazy during the election when the federal budget was popular to talk about.  With the fiscal cliff stuff going on, I’ve seen it resurface.

<The Message>

* U.S. 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 cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $38.50

</The Message>

I’m not really sure how to take the message.  I think when people post it, they mean one of two things:

  1. I want to pay more taxes!
  2. I want my benefits cut!
Keep Calm and Pay (More) Taxes
Ok, maybe they don’t mean that.  But maybe they mean:
  1. I want others (especially the rich) to pay more taxes!
  2. I want other people’s benefits to be cut!
Actually, that’s probably not it either.  Most likely it’s along the lines of:
  1. I want a stable government I can feel confident in
  2. I don’t want so much of my tax dollars going to pay interest on debt
Sure, there are other reasons, but I think you get the picture.  Regardless of the laudable goals that people have when posting the catchy statement, I want to talk about the reality of actually getting there.  Unfortunately, there’s going to be some sort of cost to get there, and most people don’t want to pay the price themselves.
The simple levers to pull (whether or not you think they’re right) are to either raise taxes (increase revenue,) cut benefits (decrease costs,) or both.
Budget Cuts ahead for Federal vs Household Budgets
Few of the people I have talked to that want to raise taxes focus on themselves very much, it’s always supposed to come out of someone else’s wallet, usually under the ugly banner of “fairness.”  
Few of the people I have talked to that want to cut benefits can identify very clearly what they are, and the few benefits that get mentioned are seldom benefits that they receive themselves.
Sometimes people will try a third strategy, such as closing undefined loopholes (which is another way of either raising taxes or cutting benefits,) or reducing wasteful spending.  That’s great, but again, we need more specificity.  Decreasing wasteful spending would solve lots and lots of problems in the world, but it’s obviously easier said than done.
So my point: if you want to post that catchy little budget deal, go ahead, but pay us the respect of being specific on what you want to do to fix it.  You don’t need to have all the details (even the politicians and economists seem hazy on lots of the details,) but saying “we spend more than we take in” to the casual Facebook user is only a mediocre step that with relatively little effort, could spark more meaningful dialogue.

If you aren’t sure what you think, Boston Consulting Group (BCG) recently came out with an interesting article on what should be done.
Always feel free to post comments, especially criticisms or rebuttles.  I learn well from a counterpoint, and learning is one of my primary focuses of this blog.

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  1. Todd 1 January, 2013 at 13:16 Reply

    Nice post and nice BCG paper. They said a lot of the things I have being ranting about for years. That wasn’t a prideful statement at all.

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