The Debt Ceiling: Life at the Intersection of Metaphors and Mathematics (Part 2)

In case you missed part one of this series, enjoy the link below:

Previously on The Tank Says. . . . 

As we pointed out, the United States Federal government is borrowing (by my math; this varies by who rounds where etc.) 38 cents out of every dollar it is spending. For this part of the series, let's use the following logic to put this in real-life, micro level terms:

-Per Capita GDP is usually around $40,000.00; we'll consider this 36,000 for mathematical purposes.
-Monthly balanced annual budgeting = 36,000.00/12 = $3,000.00/month
-Applying Federal Government Style budgeting: 3,000*.62 = $1860.00, 3,000*.38= $1,140.00

So for our purposes; this household is burning through every cent of the 1860.00 they earn in cash (which in terms of gross income assuming a 160 hour work weeks is only 11.25/hour) then running up an additional 1,140.00 in borrowed funds (keeping with the household example; we'll consider this revolving debt such as Credit Cards or a HELOC). Current credit card debt in the United States (as of this writing) is approximately $800,189,000,000.000; which when divided by our population number of $311,384,344 gives us a value of approximately $2,569.78 in credit card debt per U.S. Citizen. For the sake of mathematics we will round this up to $3,000. All three credit bureaus consider carrying balances that are less than half the total limit = good credit score worthy; so lets double this number and say that our household credit card has a $6,000 limit. Now, finally lets finally multiply our $6,000 limit times four (as www,CreditCards.com lists that most American households have 3.5 cards per household. by doing this math; we now have our personal credit limit (aka our Debt Ceiling) at $24,000.

Now, let's just reset out household spending situation:
- We're budgeting to spend $36,000/year or $3,000/month
- We have enough cash to to spend $22,320/year or $1,860/month
- To make up the difference; we have to borrow $13,680/year or $1,140.00/month.
- The amount we can borrow is capped at $24,000.00

For our purposes, let's begin this budget with a starting debt of $0.00 (something that has never been true in the history of United States; BTW) and for mathematical purposes; we'll ignore the interest on the debt; as it is factored into our cash expenditures on the back end. (In other words, we have to make a minimum payment every month with Credit Card Debt; since we're in a zero sum situation with our cash expenditures; the two effectively cancel each other out in this example.)

So, we have $24,000.00 we can borrow and we are doing so at $1,140.00/month. Some 3rd grade math tells us that 24,000.00/1,140 = 21 months is the longest we can operate on these terms. The fancy-pants economics term for this is "unsustainable"; as in operating within this system cannot continue in perpetuity; and in fact will likely overheat and collapse upon itself.

Let's put this unsustainable system in terms of a lifetime:
- Average projected life expectancy in 2010 (per the most recent Census data) is 78 years of age.
- We'll deduct the first 22 years of life as "growing up" for a person who completes college.
- We'll also deduct the last 13 years of life as "Social Security/Medicaid/Medicare" golden parachute years.
-78-(22+13)=78-35= 43 "productive" years 
-43*12= 516 months; (21/516)*100 = 4.07%.

Bottom line: if a real person were to implement the same budgeting system that our Federal Government is currently using and current mathematical data and projections; it would be possible for a whopping 4% of their productive lives.

Operating under these terms now has us in a very real situation in terms of our Federal Budget. Essentially; what we're doing at the moment is consistently paying down our debts as tax revenues roll in to LITERALLY is to buy more time. In addition to doing so we're also constantly doing balance transfers across our 4 cards to keep everyone paid until we find someone to give us access to more borrowing power (imagine one or more credit cards giving us a credit limit increase) just to keep the lights on until we can really get serious about finding a better way. But that's a whole other story. . . .

(end of part two)