If You Ran Your Finances Like the US Govt


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References

[1] Government Accountibility Office  -- Fiscal Year 2009 US Government Financial Report See Page 49 - Under Liabilities: Federal Debt Securities Held by the Public

[2] US Treasury -- Monthly US Treasury Statement through July 31, 2010 See Table 1 for FY2010 Receipts, Outlays and Deficit

[3] The 'Total' US Govt Debt is about 4 Trillion more than the 'Public' debt. However, the 'Total' debt includes money the government owes itself because it emptied the Social Security Trust fund and others. See the CNN article explaining this.

[4] Current Public Debt CalculationThe current US Public Debt is calculated by taking our public debt from 2009 ($7,583 Bln)[1], [3] and adding the amount borrowing so far this year as of July, 2010 ($1,169 Bln) [2].

[5] Interest Paid on National Debt Monthly US Treasury Statement through July 31, 2010 See Table 5 - Dept. of the Treasury - Total Interest on the Public Debt so far this year ($375 Bln))

[6] Est. Interest Payments on National Debt FY2010 - This would be interest paid so far this year, ($375 Bln)[5]) annualized to 12 months (375*12/10 = 450), divided by the public debt ($8,572 Bln[4])

[7] Your Unsecured Debt is calculated by figuring out how much debt would have that would give you the same DTI as the government at the same interest rate the government pays. This works out to be (monthly interest payment*12/interest rate)

[8] DebtGoal.Com -- Understanding Your Debt Health Ratios This page explains more the DTI ratio and has a chart showing your relative credit risk based it.

[9] Your Monthly Interest Payment if you were in the same financial sitation as the US Government is calculated by taking your total household monthly income and multiplying times the DTI. This is equivalent to your debt times the interest rate.

[10] Est. US Fed Govt Public Debt for FY2010 - This would be the amount borrowed this year, ($1169 Bln)[2]) annualized to 12 months (1169*12/10 = 1403), then added to our public debt figure from 2009 ($7583 Bln[1]) This gives a total of $1403+$7583= $8986 Bln

[11] Est. Govt Income for FY2010 - This would be the income earned this year, ( $1753 Bln) [2]) annualized to 12 months $1753*12/10 = $2104 Billion Dollars. The Congressional Budget Office uses a slighly different figure of $2175 billion [17]

[12] Interest Rate on the Debt - The approximate interest rate on the public debt is calculated by taking the total estimated interest payed on the national debt in FY2010 ($187 Bln [16])) and dividing it by the total estimated 2010 public debt, ($8986 Bln [16])

[13] The Debt to Income Ratio is defined as the total amount of money you are spending per month to pay interest on your debt, divided by the total household monthly income. However, the ratio will be the same if annual figures are used, since both the top and the bottom of the fraction are multiplied by twelve. This DTI was calculated by dividing the total govt interest on the national debt by the total government revenue from taxes and other sources.

[14] White House Office of Mgmt & Budget -- Total Outlays for Individuals by Cat. and Major Program 1940-2015. See total estimated payments for FY2010.

[15] White House Budget Director Web Article -- Peter Orszag, White House Budget Director Article about Waste, Fraud and Abuse of Federal Funds, Posted to the White House Website 18 June, 2010.

[16] Congressional Budget Office Budget Projections -- 10 Year Budget Projections Spreadsheet for years 2009 through 2020.

[17] Congressional Budget Office Budget Report -- The Budget and Economic Outlook: Fiscal Years 2010 to 2020

[18] Congressional Budget Office -- Budget Page Download the Budget Projections Spreadsheet[16] or PDF for their predictions on GDP and income growth through the year 2020

[19] US Dept of Commerce -- National Income and Product Accounts Table Historic GDP Growth Rate Tables

[20]FHA Wholesale Lending Document -- FAQ Question: "What is the Maximum DTI allowed?" Answer: "Guideline is 31/43%"
Keep in mind that this is the criteria for a home loan, which has collateral. Obviously government debt is not secured or backed by anything. An unsecured loan is a much bigger risk for a creditor, thus a .31 DTI is likely to be a conservative value to use as a guide to where creditors may start to avoid US Treasury securities.

[21]OMB Historical Data -- Table 7.1 Federal Debt at the End of Year: 1940-2015

[22] New York Times -- NYT news story on Greece Credit Downgrade from April 27, 2010 Some countries have higher public debt than Greece, such as Japan, which has a debt to GDP ration of almost 200 percent. However, Standard and Poor's has announced they may downgrade Japan's credit soon.

[23] IRS EITC website -- Total Earned Income Tax Credit Statistics. The EITC is a program to send checks to people with low incomes, as a negative tax. The IRS reports that in 2008, over 24 million people received an EITC check.

[24] Social Security Administration -- Social Security Program Statistics. The SSI administration reports that 58.5 million people received SSI benefits in July, 2010.

[25] USDA Supplemental Assistance Program -- Program Statistics data. The US Dept. of Agriculture reports that 33.5 million people received Supplemental Assistance in 2009.

[26] US Office of Personnel Management -- Federal Civilian Workforce Statistics In 2006, there were about 2.7 million federal workers receiving benefits.

[27] US Dept of Health and Human Servics -- Temporary Assistance for Needy Families and SSP In 2010, there were about 4.5 million families receiving assistance.

[28] US Dept of Labor -- Office of Unemployment Insurance In 2010, there were about 4.5 million unemployed people receiving federal benefits.

[29] Estimated Number of People Receiving Federal Benefits -- (in Millions) SSI: 58.5 [24] +  EITC: 24 [23] +  SNAP: 33.5 [25] +  TANF: 4.5 [27] +  UnEmp: 4.5 [28] +  Fed Retirement: 2.7 [26]  = 127.7 Million
Note that some individuals may receive more than one check, and therefore may be counted twice. In addition, there are numerous other benefits not counted here because the numbers are smaller, including education benefits, veteran's benefits, coal miner's black lung benefits, and so on.
US Population: 310 Million.[30]  Percentage Receiving Benefits = 127.7/310 = 41%

[30] US Census Bureau-- US and World Population Clock US Population is over 310 million people.

[31] White House Office of Management and Budget - Midsession Review of the Budget Web Page

[32] -- Calculations of US Govt Debt to Income The White House Midsession Review for FY2010 [31] Gives estimates for 2010's Debt( $9,199 Billion), Deficit ($1,417 Billion), receipts ($2,132 Billion) and outlays ($3,603 Billion) on page 20. The debt divided by the receipts is 9199/2132 = 4.31.

[33] -- Calculations of US Govt Overall Debt Interest Rate The White House Midsession Review for FY2010 [31] in Table S-4 on page 26 gives estimates for 2010's Net Interest on the Debt at $185 Billion dollars. The annual interest rate is then estimated to be 185/9199 = 2.01%

[34] -- Calculations of how big Grandma's Check is The White House Midsession Review for FY2010 [31] in Table S-4 on page 23 gives estimates for 2010's Manadory Spending on Entitlements for 2010 as $1,997 billion dollars, and the total spending is $3,547 billion. Thus, the cost of Social Security, Medicare, Medicaid, Temporary Assistance for Needy Families and others is 1997/3547 or 56.3% of the entire US Govt spending for 2010. This value for Grandma's check is calculated as your total household spending times 56.3%. The total spending would the total amount earned plus the amount borrowed. For example if you earned $6000, then you would borrow $3982. The total spending would be $6000 + $3982 = $9982. The monthly grandma check would therefore be $9982 * 0.563 = $5619.