What the government is not

Found on Facebook:

‎”If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, & are $327,000 in credit card debt. They are currently proposing big spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand.” Dave Ramsey

I’ll say right now I don’t know who Dave Ramsey is and I don’t know if he even said that, but it’s useful only because I think it highlights the fallacy of how some perceive our nation and its debt.

First of all, our country is not like a family. It’s not like a company, or even a state. It’s something entirely different than all those things. And, because it’s the United States of America and the dollar is the reserve currency of the world, it’s not even like other countries. It is unique. The US government is the last ditch backstop for the entire world’s economy. When companies and consumers won’t spend, the nation has to in order to ensure money keeps flowing through the economy and people keep their jobs. The world is happy (no, really – they’re overjoyed) to loan us money to do that because we are the largest import and export market in the world. By far. If we seize up, so does everyone else.

Back to the family metaphor. Irresponsible borrowers are penalized with high interest rates and/or a lack of access to new credit. The equivalent to that for the US government is the treasury bill market where we sell our debt to the world. Currently, the yield on these is insanely low meaning a) there’s plenty of people lining up to buy them, and b) we could borrow a hell of a lot more if we wanted to. Plus, the rates are so cheap that the cost of doing so is ridiculously low by almost any measure.