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US Budget

Orphia Nay

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Orphia Nay
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Is tax the only income the US government has?

I came across an image on Facebook today, and this is the text:

"The budget explained in simple English

I love it when complex things are simplified so that we can all understand.

United States Tax revenue: $2,170,000,000,000
Fed 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

Now, remove 8 zeros and pretend it’s a household budget.

Annual family income: $21,700
Money the family spent: $38,200
New debt on the credit card: $16,500
Outstanding balance on credit card: $142,710
Total budget cuts which some politicians are proud about: $385

Stop the insanity now. Vote them out and demand a balanced budget."​
<end quote>
======================

This raises a lot of questions, but the one I want to ask is, is tax the only income the US government has?
 
I recall a number of analysts saying that trying to compare government budgeting to family budgeting was stupid, but I can't recall all the reasons.
 
lionking said:
I recall a number of analysts saying that trying to compare government budgeting to family budgeting was stupid, but I can't recall all the reasons.
Click to expand...

If for no other reason than using that analogy, raising taxes (household income) while lowering expenses (debt) would be the smartest thing imaginable.

Funny how few people are really advocating that.
 
Orphia Nay said:
Is tax the only income the US government has?

I came across an image on Facebook today, and this is the text:

"The budget explained in simple English

I love it when complex things are simplified so that we can all understand.

United States Tax revenue: $2,170,000,000,000
Fed 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

Now, remove 8 zeros and pretend it’s a household budget.

Annual family income: $21,700
Money the family spent: $38,200
New debt on the credit card: $16,500
Outstanding balance on credit card: $142,710
Total budget cuts which some politicians are proud about: $385

Stop the insanity now. Vote them out and demand a balanced budget."​
<end quote>
======================

This raises a lot of questions, but the one I want to ask is, is tax the only income the US government has?
Click to expand...

Taxes, and bonds, which are borrowing against future tax revenues. That's it unless you want to include the little narco-arms deal bartering that occassionally pops up on the radar. (actually there are a handful of other minor income sources that in toto add up to ~couple hundred billion a year, but this is a pittance compared to income taxes, payroll taxes etc.,).
 
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Orphia Nay said:
Is tax the only income the US government has?
Click to expand...
Yes, pretty much. See infographic.

Things like fees (such as infrastructure usage charges, or the charge for getting a passport) are sometimes considered non-tax revenue but they aren't really, and they are not usually a significant chunk. Also state-owned or state-acquired businesses sometimes generate profits (such as a nationalised bank that was rescued) but I think you would always find those off-budget.
 
lionking said:
I recall a number of analysts saying that trying to compare government budgeting to family budgeting was stupid, but I can't recall all the reasons.
Click to expand...
The best reason IMO is that automatic stabilisers, and Keynsian discretionary spending are by design counter-cyclical mechanisms. Meaning that government is intended (through these two things) to be increasing its net spending simultaneous with private net saving. Hence slogans like "The government should tighten its belt because that is what households are all having to do and we're all in this together" are wrong headed.

Outside business cycles the argument that spending that is persistently higher than revenue will result in persistent growth in indebtedness is, of course, reality.
 
lionking said:
I recall a number of analysts saying that trying to compare government budgeting to family budgeting was stupid, but I can't recall all the reasons.
Click to expand...

The main reason is that households can't print money.
They also can't issue treasury bonds, that are essentialy risk free since governments can print money.
 
Taxes are probably more than 95% of government revenue.

There's also something called signorage. I might be spelling that wrong.
 
Francesca R said:
The best reason IMO is that automatic stabilisers, and Keynsian discretionary spending are by design counter-cyclical mechanisms. Meaning that government is intended (through these two things) to be increasing its net spending simultaneous with private net saving. Hence slogans like "The government should tighten its belt because that is what households are all having to do and we're all in this together" are wrong headed.

Outside business cycles the argument that spending that is persistently higher than revenue will result in persistent growth in indebtedness is, of course, reality.
Click to expand...

That isn't a perfect answer, but it is good. Those seem to be the the product of why a government budget is different from a household budget.


Here is what I would say is the answer. Debt in a household is to smooth consumption by paying for current consumption with future (likely higher) incomes. Debt for a government links the costs of projects today, to future generations that will experience the benefits of the project.
 
That relegates "legitimate debt" to stuff like infrastructure investment that private agents would not or could not do by themselves.

If you thought that was the only purpose of public debt then you must regard almost all current and historic borrowing by the US as unjustifiable.
 
WildCat said:
Risk-free for who? Infation is certainly a risk for purchasers of the bonds.
Click to expand...

Which he can cover by demanding a higher interest rate.
But a default is only possible if t he Issuer wants to default. (And up until this spring that was unthinkable)
 
lionking said:
I recall a number of analysts saying that trying to compare government budgeting to family budgeting was stupid, but I can't recall all the reasons.
Click to expand...

Families don't provide for the general welfare and the common defense, for one thing.
 
Orphia Nay said:
This raises a lot of questions, but the one I want to ask is, is tax the only income the US government has?
Click to expand...

Various fees, fines, and so on also provide revenue. (The public airwaves, for example, used by private businesses pay the government when the wavelengths are auctioned off. Lumber companies working in national forests pay something to the federal government, and so on.)

ETA: And I'm not sure how the sale of debt securities is counted. It's debt in the long term, but immediately, when someone buys a treasury bond, the government takes in money.
 
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Francesca R said:
That relegates "legitimate debt" to stuff like infrastructure investment that private agents would not or could not do by themselves.

If you thought that was the only purpose of public debt then you must regard almost all current and historic borrowing by the US as unjustifiable.
Click to expand...

I think my definition covers all spending that isn't rent seeking.
 
The simplistic assumption is that families or nations should never spend a penny more that they earn in any one year. But a smart family will use credit to it's advantage. Most of us have taken on debt to purchase a home. Many of us borrowed money to attend collage, taking on debt and paying it back later when our degree allowed us to earn a higher salary.

The economy of a nation is more complicated than family finances because government spending feeds back into the general economy. Money spent on government projects creates jobs and profits in the private economy, enhancing economic growth. A growing economy in turn provides more tax revenue for the government.

Forcing government to cut back during an economic downturn simply results in a bigger downturn and slower recovery.
 
Kestrel said:
The simplistic assumption is that families or nations should never spend a penny more that they earn in any one year. But a smart family will use credit to it's advantage. Most of us have taken on debt to purchase a home. Many of us borrowed money to attend collage, taking on debt and paying it back later when our degree allowed us to earn a higher salary.

The economy of a nation is more complicated than family finances because government spending feeds back into the general economy. Money spent on government projects creates jobs and profits in the private economy, enhancing economic growth. A growing economy in turn provides more tax revenue for the government.

Forcing government to cut back during an economic downturn simply results in a bigger downturn and slower recovery.
Click to expand...

You've got a nice collection of statements here that "might be true sometimes, and sometimes might not be true, and sometimes are irrelevant, and sometimes incorrectly attribute cause and effect".

Need to do better than that.
 
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