Southern Man

Tuesday, April 19, 2011

About Those Spending Cuts...

Adapted from this post at Philip Greenspun's blog...
The breadwinners of a family of four earned $65,100 last year. They have good jobs; their income has typically increased by four or five percent every year for the last several decades. However, they're not very good money managers; they're hundreds of thousands of dollars in debt and interest payments on that debt consumes more than a tenth of their income. Furthermore, they've promised their kids hundreds of thousands of dollars in future payments. Unfortunately, this year was more of the same; they actually spent $114,600 and had to borrow $49,500 on those already overextended credit cards to make up the difference between their spending and their income.

So this family decides to make "draconian cuts" in their spending next year - to the tune of $1100. And that will make everything all right.
Your homework essay questions are:
Can this continue indefinitely?
Will this family be able to meet their future obligations?
Will this family ever be out of debt?
The short answers are no, no, and no. But try to get anyone in DC to believe that. As Larry Correia says in his increasingly famous tax day rant (dutifully linked from this Southern Man post), expecting Congress to save money is like expecting a crack whore to save crack.

Hard times are coming, folks. Get ready.


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