CHAOS IN LONDON, WILL IT COME HERE ?

The money is running out in Britain. When the money runs out, riots are what you get. If you hand feed a voracious wild animal, don’t expect gratitude for the handout or understanding when the food is gone.

When the growth rate of spending exceeds the growth rate of income the money will run out. It is not an opinion or philosophical point of view; its just arithmetic. When the only solutions the arithmetic allows, require drastic reductions in government largesse, there comes a point when the only choices are riots now or greater riots later. Here in America we are on the cusp of such a fulcrum point.

Here at Random Thots we have come up with a simple table that gets rid of all those zeros and provides some perspective we can understand. All the government figures are for the year 2010. We took a hypothetical family and gave them an income of 80,000 dollars. Then we calculated the proportion our family’s income was to the federal government’s total tax and other revenue. Finally, we applied the same proportion to other government figures like debt and total spending. Here is what we got.

Federal Revenues (billions)  2,217      Family income (dollars)        80,000
Federal spending                        4,472     Family spending would be   161,371
Federal debt                                13,561      Family debt would be           489,346
Annual interest                                414      Family equivalent                    14,940

Can you assure me the money will not run out? Can you assure me there will not be riots in the streets, right here in River City?

Addendum
You can relate other government financial figures for 2010 to an 80,000 dollar income by multiplying the federal number as expressed in billions by 36.0858. Actually 36 is close enough for government work.

We chose accrual accounting for the federal spending in the table. Accrual accounting records an expense when an obligation is incurred; cash accounting ignores the expense until the day it is paid. Under cash accounting federal spending was about 2,780 B and which would equate to 100,389 for the family, a much lower number, but also a much less realistic one.

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