July 29, 2011

My attempt at understanding the debt

One of the first stories I heard on the radio this morning when I embarked on long drive home was this piece from npr. That's right, Apple has more cash to play with than the Federal Government.

"Debtaggedon" is all over the news and most of the stories are focused on the fact that Republicans and Democrats can't agree and the apocalyptic effects a default would have on the global economy. If the US credit rating drops, interest rates will rise for loans for college, cars, homes, and home improvements. Government programs will be cut, which may mean that pothole that drives you crazy wont get fixed. And jobs may be even harder to find (is that possible?) 

Ok, enough of this threatening word vomit. Let's look at what Congress is doing. I chose these links for all my friends who aren't huge political junkies. The Washington Post did a fantastic job creating interactive charts and graphs so that people, who don't spend hours a day studying the budget (so uhh, 99% of the population) can make sense of things. Way to go, Washington Post!

First, let's see how we got into this mess:

Now that you know how we got there, find out why this week has caused such a Capitol Hill hullaballoo.  This link gives a day-by-day review of the drama and the ever-decreasing cash balance of the operating budget.

So what exactly is Congress proposing? This series of charts allows you to directly compare current policy with the Obama plan, fiscal commission recommendations, and the House GOP plan. They show what our deficit and revenues will look like through 2021.

Are things starting to make a little bit more sense now?

Since I haven't thrown in a China card in a few days, here's a doozy: Of the $14.3 trillion of US debt, China holds approximately $1.2 trillion -- or a quarter of all foreign investment in the US government. For years, the US has been like the reliable wealthy grandparents who always send out a hearty check for birthdays and holidays. Our treasury bonds are seen as the most secure and reliable investment in the world. So naturally a country with a super-booming economy like China would want to invest in something in which they know they'd get a return.  Oooops... Hopefully the US won't let China down too much, otherwise Walmart may need to stock its shelves with domestically produced goods, just like the good old days. 

(Check out this funny and educational Huffington Post article on the issue.)

For fear of getting over my head with an issue I'm still grappling to understand, I'll leave you with this: an interactive grocery list that allows you to pick and choose which bills you would pay and which ones you would ignore come Tuesday night. Choose wisely, you'd be surprised at how quickly $174 billion goes away. Like grandma always says, "don't spend it all in one place!" 

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