What if Families Spent Like the Government?

By Sadie Bass

Jan 26, 2010 4:49pm

ABC's Betsy Stark reports from New York: What does it mean to run a budget deficit of $1.4 trillion?  One way to understand it is to imagine that kind of deficit spending in the context of the average American household.  If the typical family did what the government is doing, and spent 62 percent more than it earns, it would be spending $81,502 on income of $50,303, running an annual deficit of $31,199.  In fact, the typical family now saves 4.7 percent of its income, which means the average household is socking away about $2300 of the $50K it is earning.  So American families would seem to be far more fiscally conservative than the American government.  Context, however, is always important.  In better times, American consumers got into enormous trouble by spending more than they earn.  Now, in tough times, they are going through a painful de-leveraging process, which explains the improvement in the savings rate. The federal government, by contrast, has ballooned its spending to make up for the collapse in consumer and business spending after the economy imploded at the end of last year.  And the U.S. is not alone here: governments all over the world have blown up their deficits this year to keep their economies afloat.

You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus