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Today on CNBC, commentator Rick Santelli presented the US Federal Budget as if it was your average American household. The conclusion was that the household is bankrupt. What's wrong with this math?
Family Income $ 23,100
Money Spent $ 36,140
New C.C. Debt $ 13,030
Outstanding Debt $151,140
Total Budget Cuts $ 385
The figures come from the US Debt Clock (here) and are taken from, in order, US Federal Tax Revenue, US Federal Spending, US Federal Budget Deficit, and US National Debt. Total Budget Cuts must have come from some other source.
Now, take a minute and ask yourself "What's missing from these numbers?" Think back to the last time you took out a loan. Unless you had a liar loan (stated income loan), the bank asked for a listing of your assets. On anything but Credit Card (C.C.) loans, you put those assets up as collateral to secure the loan.
Deficit Hawks such as Rick Santelli conveniently forget to include the assets of the United States when evaluating the country's credit worthiness. Think about the National Parks, the Federal highway System, all the buildings, property and vehicles owned by the Federal government, etc. Attempts to estimate that figure have been made (here) and the asset number is usually larger than the outstanding debt, meaning the country is solvent.
Current solvency does not mean that our country's debt level or it's projected growth rate is not problematic. It does mean that Santelli has left something important out of his presentation.
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