Long time away. I had a holiday where I thought I might do more posting on the blog, but in fact did none. So a real holiday.

Lots has happened, however, although not a lot of new things but noise on our Carbon Tax here in Australia, so I thought I might have a bit of a rant on something one of my low-tax, government-is-bad, simple-answer friends. People love sending me this stuff, possibly just to set me off. Here’s the forward, spelling intact:

“This is a great example of Micawberan Threory! Even I can understand this… This below states the USA financial position succinctly: U.S. Tax revenue: $2,170,000,000,000 . Fed budget: $3,820,000,000,000 . New debt: $ 1,650,000,000,000 . National debt: $14,271,000,000,000 . Recent budget cut: $ 38,500,000,000 Now just remove 8 zeros and pretend it is a household budget: . Annual family income: $21,700 . Money the family spent: $38,200 . New debt on the credit card: $16,500 . Outstanding balance on the credit card: $142,710 . Total budget cuts: $385. Now THAT is not a pretty picture is it?”

Yes, a fairly interesting, if distorted view of things based on simplistic view of a country as a family. I suppose that is Micawber’s forte. However, let’s look at the analogy more accurately given that paradigm. If the US was a family then its income would be $14.2 trillion, or $142,000 in the example above.

If a family had an income of $142,000 per annum, and they only artificially allowed themselves to have a maximum debt limit of that much, then pretty much they would always be renting and never own their own place. A standard middle income mortgagee in the USA is allowed to have a debt load for a mortgage that is 28% of its income after tax, excluding all other credit cards and personal debt. So, if the US was a family and went to get a loan on a new house and wanted to rent out the old one to Mexicans that have moved into the neighbourhood, they would easily get a new loan under FHA rules there from a bank (say a Chinese owned one) at a good government guaranteed rate (currently 2% for long term bonds) for a maximum capital cost of $2,030,000, assuming they put 10% down.

So, they don’t look like that bad a debtor at present really, do they?

Does the US have a credit card problem? Yes undoubtedly. If you think the government is bad, you should look at personal debt.

Does the US need to have an honest conversation with itself about taxes and entitlements? Also, definitely. But keep in mind that taxes as a % of GDP have NEVER been lower since records have been kept, before you start privatising social security, medicare or medicaid. You can go ahead and eliminate all those programs if you want, from my perspective, and I would be OK (even if I still lived there), but then you should also prepare to live with the consequences, and examine the lives of people in the US society in the period 1885 through 1920 and see if that is really where you want to go back to.

The truth is, if the US eliminated its optional foreign wars and eliminated the Bush tax cuts, it would be in surplus just barely, and then should talk about the viability of entitlements

But instead, it ran itself down in front of the world and the corrupt credit ratings agencies (that only a couple of years ago were triple A rating shitty CBOs), tarnished its reputation as a good financial risk, and spawned simplistic evaluations like the proposition above.