The FY2013 budget proposed by Pres. Barack Obama will increase the average U.S. household share of the federal debt to almost $200,000 by the year 2022, an amount likely to surpass the average household’s net worth over time, according to economic survey data and new projections released today by Senate Budget Committee Republicans.
Based on the numbers in Obama’s new budget proposal, 10 more years of planned deficit spending are projected to create a federal tax burden for the average American household of $195,000.
These new projections for accelerated debt expansion prompt a symbolic question with serious implications: If the average American family was required to cover their portion of the federal debt, would they be driven into bankruptcy based on their net worth?
The search for an answer to that question offers a sobering look at the degree to which taxpayers are heavily burdened by the federal government’s obligations.
The Federal Reserve collects information about household finances and the most recent data from 2009—in the wake of the climax of the banking and finance collapse of 2008—found the average U.S. household net worth to be $96,000. Also in 2009—the year of the first stimulus package—gross federal debt stood nearly $100,000 per household, a figure that has continued to grow while the economy continues to drag. If substitute the term “assets” for household net worth and “liabilities” for gross federal debt per household, another term emerges from the fiscal lexicon: Bankruptcy.
Since 2009, gross federal debt has continued increased along with spending, hence the warning from Republicans that the Obama administration’s newest plan for more deficit spending piles on a new layer of debt for future generations.
With the current household share of federal debt hovering near $130,000, and a projected acceleration of that debt load to $195,000, can American families build net worth fast enough in the next 10 years to keep from being ‘bankrupted’ by government debt? Recent history provides cause for skepticism.
Between 1998 and 2007—on average, a bullish 10-year period for average Americans—U.S. Census data shows that U.S. households experienced in an increase in net worth of almost 25 percent. If net worth grew were able to grow at that rate again, it would only rise to $120,000 for the average household by 2022, a figure that falls far short of the $195,000 debt figure.
In this way of looking at our debt, in order to get one step ahead of its share of the federal debt, an average U.S. household will need to double its net worth by 2022 if the Obama administration’s budget were to be authorized.
Congresswoman Cathy McMorris Rodgers (R-Wash.) described the potential ramifications of the Democrats’ tax and spend policies in the weekly Republican address this past Saturday:
If we keep on going like this, the consequences will be devastating. As we’ve learned from Greece and the European Union, no country can escape the costs of big government policies forever. The president’s budget isn’t a blueprint for America – it’s a roadmap to Greece.
[Watch the complete video of McMorris Rodgers’ address here.]
In an op-ed published in The Washington Post this weekend, Republican budget hawks Sen. Jeff Sessions (R-Ala.) and Rep. Paul Ryan (R-Wisc.) also argued for a sounder fiscal strategy and suggested there is bipartisan support for a better budget solution:
[We] refuse to accept the diminished future outlined by President Obama’s budget. A growing bipartisan consensus recognizes the core elements our country needs: responsible spending restraint; a repaired safety net; reforms that ensure real health and retirement security; and a simplified tax code oriented toward growth.