Simple analysis of the US Federal budget and financial position - economystified.blogspot.com

[economystified]

Read complete post at: http://economystified.blogspot.com/2011/12/2012-us-federal-budget-part-1-of-2.html

The Federal Government's budget has become a really hot
issue these last few years - I feel more so than usual. Between
Occupy Wall Street, the Tea Party, the Debt Ceiling Crisis, and the
presidential hopefuls' high profile economic/taxation reform talking
points, opinions on our government’s spending habits are suddenly
quite en vogue.

But the debate is a hard one to follow as long as "The
Budget" remains the ephemeral, alluded-to-only entity that it often
is. We hear a lot of numbers and percents thrown around. But without
a good handle on those figure’s context, their "informativeness” is
completely lost.

Let's say that you and I go out into the world and manage
to find a guy who has never in his life heard of the “The Federal
Government of the United States” (lucky fella).

Now imagine us giving him a copy of the Fed’s expense
reports, receipts, spending plans, bank statements and
budget...information JUST on its spending habits. "The money trail."

If we then were to ask the guy to look over all the
financial activity of this "Federal Government of the United States"
thingy and take a guess as to what that entity does…what would he say?

Well, looking only at the money trail, he could conclude
that the US’s Federal Government only does five things:

1) Provides for the elderly and the disabled
2) Provides for those whose incomes are too low
3) Runs a military
4) Pays back money that it already owes
5) "Other duties as needed"

Yup. That's it. Just 5 things.

And how much does it cost to get these 5 things done?
$3.648 trillion.

So in FY 2012, the US Federal Government will need appx.
$3.6 trillion to do all the things Congress wants it to do in FY 2012.

And how does a government raise $3.6 trillion? Two
avenues exist: collecting taxes, and borrowing money.

In 2012, around $2.627 trillion will be collected in taxes
from all American citizens and businesses (I say "around" because the
exact amount of tax revenue the US government will collect in any
given year is never completely known beforehand)...

Continue reading at: http://economystified.blogspot.com/2011/12/2012-us-federal-budget-part-1-of-2.html