The Budget - Quick Crummey Explanation

By George:

The US Government is currently going through the "Budget Battle" pitting the Republicans against the Democrats, with President Obama stirring the pot.

Lots of people have been offering explanations of the Billions and Trillions and Debt Ceilings etc.. Ordinary people listening to these explanations tend to glaze over and walk away without any better idea of what is happening.

Great news for all those who really want to understand what the heck is going on.

If you listened to todays's Joe Crummey Show on WABC, you got an explanation that brought it home to you. No big words, no grandiose Politi-speak, no obfuscation, just a simple family scenario. You can get the Podcast of this show at The Joe Crummey Show, Friday 4-8. However, there is no need for that, since I will give you Joe's explanation right here.

Your Household Budget
Let's say that you and your spouse run your household and have a weekly budget. Your budget has weekly expenses of $100, which means that your family spends $100 every week. The problem is, that your income (the salary you bring home) is only $50. So every week when you bring home your paycheck of $50, you have to borrow $50 to have money to live on for the week. Luckily you have a credit card and you charge $50 weekly to your card, knowing in the back of your mind you know that you have a $500 limit on your CreditCard.

Government Budget
The Government spends money (has expenses), but the income is only half of what their expenses are. So the Government now "borrows" the rest of the money they need for their expenses (on their ChineseMastersCard?), while in the background the "Debt Ceiling" (the CreditCard Limit) looms closer.

Your Household Budget
Your spouse comes to you and tells you that it is high time to cut back on the expenses to try to balance the budget, and proposes cutting the weekly expenses by $1.50. You agree to cutting expenses, but only want to cut 50 cents weekly. Hmmm... Does this sound like a solution?

Government Budget
Enter the Republicans (TEA Party?), who demand that the Government reduce the expenses so we have a chance to get out from under the debt. They demand a reduction equivalent to the $1.50 of the previous paragraph. The Democrats on the other hand want a smaller reduction, equivalent to the 50 cents of the previous paragraph. Hmmm... Does this sound like a solution?

Your Household Budget
You cut your weekly spending down to $99, but you're coming close to your CreditCard limit. What do you do? Increase your Credit Limit, or reduce your spending meaningfully?

Government Budget
Government cuts the expenses by a nominal amount agreed upon, but the "Debt Limit" is looming closer. What do you do? Increase the "Debt Ceiling", or reduce the spending meaningfully?

So for those who have gotten lost in the Budget Battle, now you can understand what it is all about. So are you happy?

Oh I can hear my Lib friends yelling (will someone shut Harry up!) that there is a solution that I haven't put into the explanation. I didn't put in the possibility of raising the money by taxing the citizens and confiscating money from the RICH. I'll answer that comment by pointing you to a video that will put this in perspective.

Meanwhile, what do you think?