Home Meme-Killer Meme Killer Episode 5 Part 2: Why the Hell Would You Think...

Meme Killer Episode 5 Part 2: Why the Hell Would You Think Of America’s Debt As Your Family Budget?


Imagine it’s 2008 and you’re the head of the typical, mythical, average American household of four. You’re making $25,240 a year, and you owe just $50,952 on your mortgage. You’re young, your debt is fairly low, you’re doing great! So well, in fact, that you’re going to take out an equity loan for $4,586 so you can fix that leak in the roof before it gets any worse. But then business turns down at the shop, and the boss cuts your Friday shift. Sure, you get long weekends from here on out, but there goes a fifth of your paycheck. And then your spouse tells you that your father-in-law (who has some chronic health problems) is moving in. Now you have a household of five, and your expenses are going to go up accordingly.
Think of America's Debt As Your Family Budget
This meme, which wants to pretend that our nation’s budget is comparable to a household budget, doesn’t want you to think five long years back, all the way to 2008, and what happened near the end of that year (and certainly not about who was president then).
If you lose your income, you might go into debt. If your expenses unexpectedly increase, you might go into debt. Like we talked about last time, if you’re expecting to live forever (like a government does) and your income (in the long run) is expected to always increase, having some debt isn’t a big problem. To be responsible, a government should aim to have a fairly stable ratio of debt to gross domestic product (GDP). But when the worst economic calamity in a century rolls through, you might possibly see a spike in that ratio. For this meme to work, it has to hope that you can’t remember all the way back to 2008, and what happened near the end of that year.
When households across America took a huge hit to their income in 2008, their income tax burden went down. That means the government’s “income” also took a huge hit. But the government also provides unemployment benefits, as well as Temporary Assistance for Needy Families (TANF, also known as welfare), and funds the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps). When households across America need help making ends meet, these programs pay out more money. That means the government’s “expenses” also jumped up. And that’s the entire point of these programs and of our progressive tax structure: in bad times, they automatically provide help to the needy. And the government shoulders the debt.
Whoever made this meme doesn’t want you to think like that. They want you to look at the high “expenses” as a permanent, ever-growing, socialist give-away. They want you to look at the low “income” as the poor (never the rich) not paying their share. They don’t want you to know that this is a temporary, albeit massive, blip. They don’t want you to know that the deficit–each year’s new debt–peaked (to keep this at the household-scale) at $14,127 in 2009, and has grown smaller every year since.
And that’s another thing: all the numbers on this thing are wrong. They hide it behind that “estimate” asterisk, but the real “income” number in 2011 was $23,035 (not $21,737). And the real “expenses” number was $36,031 (not $38,188). That makes the real “new debt” number $12,996 (not $16,451). They moved each part almost $2,000 in whichever direction would make it look worse.
But the biggest lie is the number at the bottom. Besides the fact that, based on the interest rates the government can get, you should think of it as “mortgage” rather than “credit card” debt, the $142,000 is only possible if you think that moving, say, $46,000 of your own money from your savings account to your checking account counts as having a $46,000 debt. A debt you owe… yourself. The actual amount of debt held by the public in 2011 was (again, staying with the household scale) about $96,000.
Now, that number is almost double what it was in 2008, but, interestingly, it’s not costing us more. So yes, while our “mortgage” has gone up dramatically, the interest rate we pay on it has dropped just as dramatically. And if you look closely at rates, you could argue that the government should have even more debt. Which is where we’ll go next time.
Tax Policy Center