Are you in serious financial trouble when your debt is 4 times your annual income?

Question

In the US, our annual income (or tax revenue) is about $2,674,007,818,000 (2007 #'s).

Our Debt is quickly approaching 4 times this income at 10 Trillion dollars.

The classic financial model for mortgages was 28% of your annual income allocated to home payments for 30 years at a fixed rate. But, this debt ratio is closer to 35% of annual revenues.

What do we do?
1) Get another job (i.e. increase revenues via more taxes)?
2) Spend more to make more (i.e. invest in ourselves to increase productivity - e.g. Infrastructure projects like the Interstate system was)?
3) Reduce spending (i.e. cut programs like Defense, Nation Building, Social Security, Medicare, and government bailouts for disaters like Katrina or the banks)?
4) Your idea - which is?

Answer 1

Best Answer - Chosen by Asker

Well thankfully that's not the case for me personally, and I hope I never accrue so much debt or make so little money. As to the nation, we may be able to do better when Bush is out. He's the guy who spent about a trillion on the war and cut taxes at the same time. That'd be like me going on a spending spree and quitting my job at the same time: raise dept and cut income, both at the same time.

Asker's Rating:

Asker's Comment:

Your analogy is right on the money (pun intended).

Answer 2

I say we quit in a triumphant way, throw our tie at the boss, and walk out. I hear Antarctica is hiring....

Answer 3

legalize slavery

Answer 4

Increasing taxes will reduce consumer spending. As a result, the economy will slow down even more, and I don't think we want that.

I say a combo of two and three. We have to reduce the size of our federal programs and cut military spending. The military really doesn't need all that money. If it was put toward education instead, we'd have better-trained graduates who can produce better military technology, thus inadvertently making up for decreased military spending.

Personally, I prefer a smaller federal government by cutting all the excess programs. Our country was founded with the intention of keeping it small yet effective. Just like a bodybuilder, becoming too big and bulky can cause clumsiness and awkwardness.

After we cut spending in those areas, we instead save some money whilst investing in our education systems and bettering the lives of American here at home. We give too much foreign aid when there are people here at home who need help.

By bettering the lives of all Americans, we "clean out the house" if you will by getting rid of poverty and debt. With a clean house, people will work more effectively, and with a smaller government, money will be saved. Thus, we eventually eliminate debt with a stronger America than ever.

Answer 5

A reduction of spending will drastically halt and eventually stop the growing debt. The U.S has had a steady increase in tax revenue for at least 10-12 years. I believe in 2000 we actually had a balanced budget. Of course, 9-11 and our nations longest war/series of wars has skyrocketed spending. We also have increased spending in the mortgage market now that will continue to sink us deeper.

Our budget should never exceed the tax revenue from the prior year. If our federal government would follow that solution we would easily have an extra 100-300 billion dollars every year. Instead, our federal government has this tendency to take out tax revenue from the prior year and raise our expenditures by 300-750 billion dollars.

Therefore my idea is simply this:


We need new accountants. About 494 new accountants.

Answer 6

No more,middle of the night pay raises.
Cut Perks (like free vehicles)we drive our own to work
Cut their spending Budgets like we have to cut ours.
No eating out,car pool etc,etc,etc.

Answer 7

Yes you are in deep doo doo and so is the nation. That is what bankruptcy courts are for. As to the nation it must change its deficit spending or it also will come to the end of the road--sooner rather than later.