This Analogy Doesn’t Exactly Fit
You’ve probably seen the graphics using a family budget as an analogy for federal spending. Well, the Washington Post has an interesting take on that.
The analogy, as presented by the Heritage Foundation, goes like this:
— The median family income in the United States is $52,000 . . .
— If they spent money like the federal government, they would spend $64,000 a year . . .
— Which would mean they would put $12,000 on credit cards every year . . .
— Despite already being $312,000 in debt.
It’s a powerful comparison, and one that brings federal spending into sharp focus. Clearly, this is not a sustainable economic model. But, as the Washington Post points out, it’s also not truly accurate. The Post decides to call our typical family the Smiths, and they raise the following points:
— The Smiths would spend 20 percent of their budget, or $12,800 each year, on an arsenal of guns, tanks and drones to defend their house against threats or to invade the occasional neighbor over lawn-pesticide disputes and access to the gas station.
— The Smiths would spend another third of their income financing retirement and health care for Grandma and Grandpa. Part of that would have been prepaid by money that Grandma and Grandpa socked away while they were working, but some of it would be paid for by the parents and kids who are chipping in.
— Actually, come to think of it, the Smiths spend nearly half their money — 43 percent — operating a massive insurance conglomerate whose main beneficiaries are family members.
— The Smiths, by the way, own their own printing press. For whatever reason, it’s totally legal for them to print more money, although they have to be selective about this. This makes it very unlikely that they’d ever default.
There are some other comparisons, as well, leading to this conclusion about the federal spending/single family analogy: “The U.S. federal government really does resemble your typical money-printing family that owns lots of tanks, operates a giant insurance conglomerate, can borrow money at extremely low rates, and is assumed to be immortal.”