Five at 8 – 2/2/10: The myth of the American family budget

1) If you listened to the gubernatorial candidates forums on MPR’s Midday yesterday, you heard a derivative of this point twice — The government must budget more like families, who have to live within their means. President Obama, in discussing his new red-ink federal budget proposal, made the same claim. It’s common. It’s also inaccurate in that it assumes families know something about budgeting and living within their means that the government does not.

Clearly, spending no more than you make is a great idea; it’s just not one whose time has come to the American family. The median family income in Minnesota, for example, is about $66,000, according to the Census Bureau. Most of that is spent. The average household saves only 5 percent of its income; not enough to pay off debt.

Average credit card debt for household last year was $8,329, or 12.6 percent of income. 13.9 percent of a family’s income goes toward servicing their credit card debt, according to creditcards.com. And more than 1 out of 10 households have more debt than total income. And that’s just credit card debt.

Throw in mortgages (that often are worth more than a home’s value), cars, and the average student loan debt per child ($23,000) and it’s clear American families are living in a sea of red ink in the long run, with the hope that the money will appear. Most of the time, it does, but the notion that American families square a dollar earned with a dollar spent at the end of every month is incorrect.

On the other hand, it’s true most Americans don’t buy a new home every year; they just finance the big promise they made a few years ago. But debt is debt.

The latest federal budget proposal from the White House is $3.8 trillion, with a deficit of about half that. That’s probably not that far off from the American family. Neither is a picture of good financial stewardship.

Discuss.

2) Robert Krulwich is, unquestionably, a genius. But even he couldn’t mask the real reason why time seems to speed up as we get older. Sure, he kept saying “nobody really knows,” but it sure sounded like “because your old and your brain is in the process of checking out.” Listen to the entire piece. If you have time.

The comments attached to the story are priceless and insightful. For example:


when you are two days old a single day is half your life.

when you are one year old a single day is one/three hundred and sixty-fifth of your life.

when you are fifty years old a single day is… well, you get the idea.

this is why time goes faster as you age.

but, the older you grow, the wiser you should be getting.

you should definitely be wise enough to live by the old adage: make every moment precious; it could well be your last.

… and…


Time’s percieved speed is relative to how long you’ve lived. It’s easy math to see at two years old a year is half your life, and at 80 one year is an eightieth.

Now, the (scary!) interesting part is to find out the perceptual “middle age”. Let’s say that I felt that a year was really the length of a year at age X: The formula for the year’s percieved length is (x * 1/(age)). If I live to 90, I’ll have have a sum of 9.55x “perceptual” years. I lived half of them by when I turned 8. With a life expectancy of 60 years (4.38x total “perceptual”), you’ve experienced half your time by age 6 1/2.

Meanwhile, research out today shows older people need less sleep. Or we just think we’ve gotten the same amount as the whippersnappers but time is moving faster.

More fun with demographics: Saints fans are smarter than Colts fans.

3) A Minnesota moment:

parents_nite.jpg

Before last night’s girl’s basketball game in Wrenshall, the players brought flowers for their parents, who were introduced as the players were.

4) Is there a real and significant difference between the salary potential of those who graduate from college and those who don’t? Not really, the Wall St. Journal reports.


Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says.

5) I admit that I once thought if I were in a free-falling elevator, I would simply jump up just before it crashed. So it’s no wonder I’ve wondered whether it’s possible to fall 35,000 feet and live to tell about it. Yes, it is. But only if you read this article in Popular Mechanics and are very, very lucky.


Depending on your size and weight, and factors such as air density, your speed at that moment will be about 120 mph–and you’ll get there after a surprisingly brief bit of falling: just 1500 feet, about the same height as Chicago’s Sears (now Willis) Tower. Equal speed means you hit the ground with equal force. The difference is the clock. Body meets Windy City sidewalk in 12 seconds. From an airplane’s cruising altitude, you’ll have almost enough time to read this entire article.

Bonus: What’s in a name for gubernatorial hopefuls. Eric Ostermeier examines the role a name plays:


A Smart Politics analysis of Minnesota’s 64 gubernatorial races finds that those candidates with more unusual letters (those scoring higher points in Scrabble) and those with longer names win at nearly twice the rate as their closest opponent.

In total, 41 of the governors elected to the Gopher State have first and last names with higher Scrabble scores than their opponents, or a 64.1 percent rate of victory.

It’s probably a mere coincidence that in the highest-scoring Scrabble game ever, Scamster was one of the big point-getters.

TODAY’S QUESTION

Minnesotans will gather tonight in political caucuses around the state. Participants will elect delegates to party conventions and vote in a straw poll for governor. Observers predict a low turnout. What would make you more likely to attend your caucus?

WHAT WE’RE DOING

Midmorning (9-11 a.m.) – First hour: The U.S. Supreme Court’s recent decision that opens the political process to more campaign donations from corporations. That’s the subject of hearings on Capitol Hill. Some Democrats, including President Obama think the decision went too far in altering campaign finance law. But does campaign cash really influence how politicians act once in office?

Second hour: Recently released statistics show that, after years of decline, the teen pregnancy rate in the U.S. rose by more than 3% in 2006. The increase is leading some teen pregnancy prevention advocates to call for more creative efforts to address the issue.

Midday (11 a.m. – 1 p.m.) – First hour: On precinct caucus day, Minnesota’s three major political party chairs — DFL Chair Brian Melendez, Republican Tony Sutton and IP chair Jack Uldrich.

Second hour: Stephanie Curtis talks about the Academy Award nominations.

Talk of the Nation (1-3 p.m.) – First hour: Child trafficking in Haiti.

Second hour: What’s next for “No Child Left Behind”?

All Things Considered (3-6:30 p.m.) - North Star Foods has announced it will not rebuild the processing plant that burned down in April. What will this news mean for the town’s largest private employer and the 250 workers that worked there? MPR’s Elizabeth Baier will report.

NPR profiles Andrew Breitbart, who works from his basement (why are so many bloggers working in their basement?), but he wields an outsize influence in the world of online conservative media. The blogger created a series of news Web sites designed to take on what he says is the smothering leftist influence of the federal government, Hollywood, and the media.

  • Neil

    Moreover, families don’t only try to cut spending when times are tough, many of them try to raise more revenue too by getting a 2nd job. Or they go further into debt and put stuff on credit. In fact, I think the government already does a great job budgeting like a family.

  • Bob Collins

    Of course the other thing to remember is there are few scenarios in which a family cuts one of its own loose to fend for themselves. Quite often, parents will do without something in order to pass it on to their young. There’s a family sensibility that comes with the family analogy.

  • Joanna

    I am so sick of this fake analogy. Tim Pawlenty is not my dad doling out an allowance! And what kind of family lets its dependent children got hungry or sleep in the streets?

  • Beth

    I have long wondered why people complain so loudly about the government when they spend the same way.

    Totally agree with this piece.

  • http://www.greatdiv.com Charlie Quimby

    I hadn’t heard Krullwich for awhile before yesterday’s aging bit. Did he always talk with such fake incredulity about the obvious, or am I just getting older?

  • bsimon

    “Is there a real and significant difference between the salary potential of those who graduate from college and those who don’t? Not really… Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in report he wrote last year.”

    The way I read that, the $280K is net – after opportunity cost of going to college, plus the tuition costs. So it seems to me the math clearly supports going to college, if you can figure out how to spend the extra 7 grand a year that college nets you ($280K / 40 years). Call me greedy, but that seems like a worthwhile payback to me; if median family income is $66K that works out to $33K per adult. For that individual a jump to $40K is an enormous payback for going to college – over 20% higher salary. Maybe $280K extra over 40 years doesn’t seem like much to the average reader of the Wall Street Journal. I suspect Main Street types feel differently.

  • Keith

    Glad to see the conversation about politician’s fondness for the family budget analogy. Something that’s always bothered me about it is the failure of ANY politician to recognize the nature of “the family’s” income.

    The implied assumption is always that the breadwinners are salaried, that is, they make a fixed amount each year. But for the analogy to work with the state or federal budgets, you’d have to assume the breadwinners were commissioned sales people, in that they earn a percentage of total economic activity. When times are good, they make more, when times are bad, they make less. That changes the conclusions you draw, but I guess clarification isn’t what politicians are after.

  • kennedy

    There is another significant difference between family finace and government finance. Families borrow from a bank. The bank wants it’s money paid back and doesn’t use it’s financial position over the family to influence it’s behavior.

    Our government borrows from other countries with China being a significant lender. Being in debt to another country puts us at a political disadvantage in negotiations. Other countries can, and do, use their financial advantage to apply pressure and affect our behavior.

  • Jamie

    I’m glad to see that bad analogy is being challenged. Republicans used to be the only ones who used it — it’s the cheap, easy, without-depth kind of thing they often use in the marketing of their ideas. I was dismayed to hear Obama use it. Not surprised, though, given some of his rightward leanings, and given his use of some typical Republican tactics in his election campaign last year.

  • http://www.growthandjustice.org Dane Smith

    Excellent point Bob, and we blogged on it at growthandjustice.org. Lots more fun could be had debunking the idea that all “family” or private-sector spending is normal and good, while all or most public spending is bad or lacking in value. Let’s count up private spending on: alcohol and drugs, gambling, unnecessary travel, eating out, other luxury items, the latest useless electronic gadgetry, cable TV and endless entertainment expense, and pets. Governments spend little or nothing on all those frivolities, wasting its money instead on national defense, economic and health security for seniors, daily education for a fourth of the population at any given time, and an enormously important public works infrastructure that makes business itself and unnecesssary travel possible. OK, I’m sorry I put pets in there. Pets are good and necessary.