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This graphic is making the rounds on Facebook as an explanation for the United States Credit Rating Downgrade (August 2011). Is it accurate? Misleading? Please be as detailed as possible. For example, does it make sense to compare the U.S. Public Debt to the U.S. Federal Budget?
society
understand
Does the image that compares a simplified U.S. budget with a household budget fairly represent the current financial situation of the United States?
This graphic is making the rounds on Facebook as an explanation for the United States Credit Rating Downgrade (August 2011). Is it accurate? Misleading? Please be as detailed as possible. For example, does it make sense to compare the U.S. Public Debt to the U.S. Federal Budget?
societyunderstand
No, because of the Federal Reserve, causing perpetual accelerating growth, and continous devaluation of currency value.
Is the image that compares a simplified U.S. budget with a household budget an oversimplification, or a practical comparison?
Practical comparisation.
People have a misconstrued and misguided idea of presidents (and prime ministers), thinking that they can change the world. Well they can't! A president or prime minister can only do three things.
Presidents cannot do much, but we put them on a pedestal that they can change the world, when they really can't. (Maybe they want to trick us into thinking that they can do much more than they can.^_^)
So due to this question, we've wiped out number 1 and number 3, so all we are left with is budgeting money.
Now how does a politician know how to budget money? Well basically they generally divide it between welfare, public services, defence, transport, and debt. They have advisors who let them know how things are going, so they are not in the dark.
Their information works up the pyramid, from the councils to the departments, to the politicians. Now all the exchequer has to do, is choose which department needs more or less money than it had last year. It's as simple as that. Because they have special powers, they can increase taxes to reduce inflation and print more money to increase inflation, so lack of money isn't as much of an issue as people would normally think. Their job is easier than you think it is, minus the flak. Now all they have to do, is implement their policies after the budget, whatever that may be.
So with that said, managing a budget is much easier than you lot think it is, so the image in the question does a very good job at highlighting that to you. It just doesn't do a good job of explaining it.
So I'm going to agree with the pretense of the image. Doing a budget is simple.
There is a minimum and maximum amount you can spend on something, and the politician chooses that amount. If they can't, they just take that spending from other places, borrow, or tax more.