Making the U.S. budget problem as simple as one's family finances: How significant are the present cuts?

This is at the heart of the economic quagmire we're in.  

You don't have to be a financial genius to know that the relationship between public and private finances is closely related, each with the other.  The more taxes one pays, the less money there is for the individual to spend privately.  In a consumer-driven economy, that trade-off is very important, for it points to the inter-dependence of public and private finances.  

In effect, what the government does affects consumers--and their standard of living, the rate of employment, etc.  And in turn, the more money spent by a populace in a consumer-driven economy. the healthier the economic climate for all [including government and the revenue government needs and seeks].  

Hence the need to pay attention to what current and future government economics are that affect the finances of consumers and the health of a free-enterprise economy.  I recently received a simple break-down analysis of the immediate budget plan for the federal government that translate the issues into family-size, easy to understand terms.  My CFO friend sent me the following breakdown...

Here's what Congress just decided to to.

The U.S. Congress sets a federal budget every year in the trillions of dollars, so let's put the 2011 federal budget into perspective:

The total U.S. income is $2,170,000,000,000.  Here's the break-down for the national budget, national debt [new and existing] and the recent budget cuts:

* Federal budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)

Here's what the Joneses decided to do.

However, these are figures are so enormous, it is hard for any of us to very adequately comprehend what all of this means.  Hence, it helps to think about these numbers in terms that we can relate to.   Therefore, let's remove eight zeros from each of these numbers and pretend that what we're dealing with is the household budget for a fictitious family, say, the Jones:

Total annual income for the Jones family: $21,700
* Amount of money the Jones family will spend: $38,200
* Amount of new debt the Joneses will add to credit cards: $16,500
* The outstanding balance on the family credit cards: $142,710

But like the recent debt-ceiling budget deal in Washington, DC, the Joneses decided it was time to cut some of their profligate spending.  So the amount they plan to cut from their family budget [to be comparable to the debt-ceiling budget deal] would be this number: $385.  No, this is not a typo...the correct amount to make the proper calculation is a mere $385.

Can the point be made any more obvious?

This amounts to a very small step to balancing the deficit and debt problems for both the Joneses as well as the U.S.  It's certainly in the right direction, but, obviously, very insufficient in terms of fixing the economic ills that plague creditors and taxpayers alike.

If this doesn't rivet the attention of every American, I don't know what would.  
_______________________________________________________________

Follow Keith's biz blog on Twitter for updates and see more of what he's reading about on his Facebook Page. If you are inclined, you can write him at kmurray@bryant.edu.