The Gross Domestic Product, the Consumer Price Index, the National Debt, and even the Annual Deficit. What do all of these economic indicators really mean? Or does it really matter? Wouldn’t those in Washington tell us if things were really bad?
Sometimes we can get so wrapped up in the specifics of how we are doing compared to expectations that we can lose sight of the larger picture. Sure a lower number of first-time unemployment applications than expected sounds good, but that’s only a relative figure based upon our expectations. If we’d expected a lower number to start with, the same number of applications would have been considered bad news.
A Large Scale Problem
One of the problems with considering the state of the economy is its massively large scale. It’s hard to imagine a figure like $12 trillion. Just how much is $12 trillion? Is it really that different than $11 trillion? To someone making an income of say $75,000 annually, $12 trillion is most likely inconceivable. That’s why we compare it to other figures.
So let’s do that. Let’s see how the U.S. economy is doing by comparing it to the a family’s annual income and spending. (You may have seen something like this before. I searched the internet looking for the original source of the information so I could credit the originator, but couldn’t find it. Many web sites have very similar information.)
Here are some recent figures for the U.S. economy.
U.S. Tax revenue: $2,170,000,000,000
Federal 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
If you’re like me, it’s hard to interpret whether this is good or bad. The numbers are just too big to understand. So let’s remove 8 zeros from the figures (effectively dividing the numbers by 100 million) to see where that leaves us.
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
Recent budget cut: $385
Ask any 5th grader and he’ll tell you that this is crazy! It can’t continue for very long. Yet the “smart” people that we elected to office seem to think this is fine.
There are many reasons to prepare for an uncertain future, everything from the loss of a job or death in the family to an EMP that destroys life as we know it. Having seen this financial picture, though, I’d put a total economic collapse higher on the list than I once thought.
What do you think?