Saturday, March 16, 2013

Debt vs Deficit - For the Illiterate Among Us, specifically the Media and those holding office!

Seriously this is not at all complex but apparently it is very very confusing for some who have limited life experiences, were educated in the US public school system in the last 10 years, reporters and reporterettes, and those who work inside the Beltway around Washington DC.  I hear folks in this crowd screw this up every day.  Now I know most of you reading this fully get it but use this as my my gift to your liberal friends or simply idiots you run across who don't have a clue.  Particularly when they hit you with a reference from the White House web site, which claims that Obama has already cut the deficit by $2,500 billion dollars.  Or when you here the President himself say:

BTW my healthcare premium is about $12,000 per year so if my employer could reduce my health care premiums by 3000% per month, he would be able to pay me an additional $348,000 in health care reductions per-month.  And if he would do that I would gladly cover my own healthcare costs. 

Now I am not a guy who worries about whether Obama is a citizen, whether he is a Muslim,or whether voter fraud played a major role in his re-election, but I tell you it scares the hell out of me that this man's policies have significant influence over the world's economy.  The man is seriously a joke and an embarrassment to the Untied States and his family. 

But I digress, this was about debt and deficit.  But first a quick lesson just for Obama.  It is physically impossible to cut anything by more than 100%.  If you cut the cost of anything by 100% it is free.  If you cut it 100% more it is still free!  

Debt is what you owe to anyone you have borrowed money from for whatever reason.  Even if it is a good idea like saving some microbes in the darkest parts of the Amazon, providing meals for starving families, saving union jobs, or investing in your buddies "green" energy business so he can give you some campaign cash in return.  If you borrowed the money from someone to engage in your chosen  activity you better be able to pay the person, state, bank, government etc back over time with interest, or you will not be able to continue to spend at the same level and you will likely lose whatever assets you have accumulated over the years.  I have yet to find any banks, and very few friends, who will take the warm fuzzy feeling I got from saving the whales as payment for my debts.

Deficit is the difference between what you have to spend and what you actually spend.  If you make $370,000 per year but only make $250,000 per year you have a deficit of $120,000 per year.  To spend $120,000 more than you made that year you had to borrow$120,000 dollars to cover your deficit (unless of course had  sufficient savings in cash or investments to turn into cash).  No matter how you covered it, you had a Deficit in that year.  The US does not have any spare cash so the country has to barrow its deficit each year to make all its checks good.  

Deficits add to your debt!  Debt is the accumulation of your Deficits over time.

The US has approximately $16,500 billion dollars of DEBT.  Our deficit each year since the democrats took over the White House in 2007 has been $900 billion to $1,500 billion.  The total debt accumulated by the United States since its founding and the end of 2006, when the Democrats took over the Congress and the economy, was $8,507 billion.  At 9/30/2012 the debt had nearly doubled to over $16,100 billion.  See the numbers here.

Provided as public service to those who voted Democrat, think government spending creates jobs, or otherwise  thinks they know how to spend your money better than you do.

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