There are two charts in today’s post that show the dire financial state that America currently finds itself in. When i saw these my first thought was how could this be right?, we all have a family budget don’t we? (if you don’t you should) and its a pretty simple exercise. Firstly you work out how much money you are going to earn in a year, this includes your wage, maybe some investment income and perhaps some (dare I say it) “Middle Class Welfare”. From that most people deduct their home loan repayments, basic food, clothing and utilities, with the surplus then left to fund ‘discretionary’ items that are dependant on your circumstances.
That is why when I saw the chart below, I couldn’t quite believe what I was seeing.
So in 2010, The U.S earned income of $2.2T, but spent $3.5T, with the difference financed by borrowings (we have seen the chart before on who lends them money with it mainly being their own citizens). The spending graph breaks out the ‘entitlement’ programs being broadly unemployment benefits, age pensions and our equivalent of Medicare which make up just under 60% of all expenses. Now the reason that this is highlighted is due to the second chart.
This chart shows the current long term underfunded benefits for those 3 areas going forward. That is, the amount of money that they have already committed to pay out but haven’t yet set aside. So why is this chart in here?. Well if you add up their current plus unfunded liabilities for these items, by 2025 these entitlements, plus interest payable on the money they have borrowed to fund current shortfalls will by 100% of all revenue.
They will have no money left for defence or the funding of anything else…….lets hope you can manage your budget better than America