Simple, right?
I want to believe this is conceptually accurate but I’m not sure.
Let’s add a few wrinkles about this family to figure out how it got itself into this situation and what it needs to get out of the situation. After all, things were going pretty good fiscally when Bill Clinton left office. What happened?
- Dad recently took a couple massive voluntary pay cuts totalling $1,350 per year and $350 per year.1 He could get that income back any time he wanted to—but he doesn’t feel like it.
- Mom and dad have had prolonged and expensive cocaine habits, which cost something like $1,400 a year. Fortunately, Dad has recently kicked his eight-year cocaine habit, so there should be some savings there. Mom’s habit has been going strong since 2001, but she swears she’s totally going to stop in 2012. We don’t believe her.
- Recently Billy (their kid) was bought himself a $10 rock—but it doesn’t seem to have resulted in an addiction. He paid for it with his allowance.2
- Around 2007, dad took an involuntary pay cut of somewhere around $5,000 per year.3
- Dad’s taking some classes in hopes of getting a pay increase in the future. This costs something like $3,000 per year.4
- Health insurance costs are going up pretty dramatically for everybody. Since 2000, premiums have essentially doubled, costing the family another $5,000 per year.5
- The family has been making credit card payments this whole time and spends about $3,000 per year in interest.
- Despite the reduced income, expenses have remained static or increased. The mortgage and car payments don’t go down just because your income drops.
The path to fixing the problem is pretty simple. First, dad needs to put in some overtime to bring in more money. It’s not fun—but we’ve got to do something. Mom probably needs to work more too. Second, they’ve got to get rid of the cocaine entirely. Third, they need to look at other ways to cut back.
Practically speaking, this means letting the Bush tax cuts expire, ending a couple wars, spending what it takes to keep the lights on, and considering other ways to make income match expenses.
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Bush tax cuts averaged something like $170 billion per year in reduced revenue, according to the original estimates ↩
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Libya. ↩
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The recession was terrible for income—which was terrible for income taxes. Revenue dropped by around 500 billion per year. Some of that has recovered. ↩
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Stimlus spending front loads costs. ↩
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This is just increases in healthcare costs for medicaid, medicaid, VA, etc.. The healthcare bill, thus far, is still going to decrease the deficit. (In the family analogy, it’s sort of like a kid getting extra needed medical care but taking a part time job to cover it. ↩
